DGLY Digital Ally Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024.

 

or

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________.
Commission File Number: 001-33899

 

Digital Ally, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada		20-0064269
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

14001 Marshall Drive, Lenexa, KS 66215

(Address of principal executive offices) (Zip Code)

 

(913) 814-7774

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of exchange on which registered
Common stock, $0.001 par value per share		DGLY		The Nasdaq Capital Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes ☐ No ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of Exchange Act.

 

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

Class		Outstanding at December 27, 2024
Common Stock, $0.001 par value per share		5,531,469

 

 

 

FORM 10-Q

DIGITAL ALLY, INC.

SEPTEMBER 30, 2024

 

TABLE OF CONTENTS		Page(s)
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets – September 30, 2024 (Unaudited) and December 31, 2023		3
Condensed Consolidated Statements of Operations for the Three and Nine months Ended September 30, 2024 and 2023 (Unaudited)		4
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three and Nine months Ended September 30, 2024 and 2023 (Unaudited)		5
Condensed Consolidated Statements of Cash Flows for the Nine months Ended September 30, 2024 and 2023 (Unaudited)		6
Notes to the Condensed Consolidated Financial Statements (Unaudited)		7-37
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		38-65
Item 3. Quantitative and Qualitative Disclosures About Market Risk.		66
Item 4. Controls and Procedures.		66
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.		67
Item 1A. Risk Factors.		67
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		67
Item 3. Defaults Upon Senior Securities		67
Item 4. Mine Safety Disclosures		67
Item 5. Other Information.		67
Item 6. Exhibits.		68
SIGNATURES		69

 

 

PART I – FINANCIAL INFORMATION

 

Item 1 – Financial Statements.

 

DIGITAL ALLY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2024 AND DECEMBER 31, 2023

 

		September 30, 2024 (Unaudited)				December 31, 2023
Assets
Current assets:
Cash and cash equivalents		$	415,131			$	680,549
Accounts receivable – trade, net of $176,227 allowance – September 30, 2024 and $200,668 – December 31, 2023			1,593,622				1,584,662
Other receivables, net of $25,000 allowance – September 30, 2024 and $5,000 – December 31, 2023			3,659,913				3,107,634
Inventories, net			2,325,118				3,845,281
Prepaid expenses			6,325,183				6,366,368
Total current assets			14,318,967				15,584,494
Property, plant, and equipment, net			444,603				7,283,702
Goodwill and other intangible assets, net			11,150,545				16,510,422
Operating lease right of use assets, net			515,538				1,053,159
Other assets			5,833,516				6,597,032
Total assets		$	32,263,169			$	47,028,809
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable		$	12,247,613			$	10,732,089
Accrued expenses			3,596,680				3,269,330
Current portion of operating lease obligations			82,974				279,538
Contract liabilities – current portion			4,068,578				2,937,168
Notes payable – related party – current portion			2,800,000				2,700,000
Debt obligations – current portion			3,438,910				1,260,513
Warrant derivative liabilities			1,266,073				1,369,738
Income taxes payable			—				61
Total current liabilities			27,500,828				22,548,437
Long-term liabilities:
Debt obligations – long term			141,949				4,853,237
Operating lease obligation – long term			432,563				827,836
Contract liabilities – long term			6,625,694				7,340,459
Lease Deposit			10,445				10,445
Total liabilities			34,711,479				35,580,414
Commitments and contingencies			-				-
Stockholders’ Equity (Deficit):
Preferred stock, $0.001 par value per share; 10,000,000 shares authorized; none issued or outstanding at September 30, 2024 and December 31, 2023			—				—
Common stock, $0.001 par value per share; 200,000,000 shares authorized; shares issued: 4,025,092 shares issued – September 30, 2024 and 2,800,752 shares issued – December 31, 2023			4,025				2,801
Additional paid in capital			128,967,685				128,441,083
Noncontrolling interest in consolidated subsidiary			(1,265,852	)			673,292
Accumulated deficit			(130,154,168	)			(117,668,781	)
Total stockholders’ equity (deficit)			(2,448,310	)			11,448,395
Total liabilities and stockholders’ equity (deficit)		$	32,263,169			$	47,028,809

 

See Notes to the Unaudited Condensed Consolidated Financial Statements.

 

 

DIGITAL ALLY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2024 AND 2023

(unaudited)

 

		2024				2023				2024				2023
		For the three months ended September 30,								For the nine months ended September 30,
		2024				2023				2024				2023
Revenue:
Product		$	803,945			$	2,095,237			$	4,577,392			$	7,626,706
Service and other			3,247,766				4,242,462				10,619,905				14,687,813
Total revenue			4,051,711				6,337,699				15,197,297				22,314,519
Cost of revenue:
Product			547,562				2,587,750				5,534,209				7,108,366
Service and other			1,764,175				2,523,800				6,159,284				9,698,175
Total cost of revenue			2,311,737				5,111,550				11,693,493				16,806,541
Gross profit			1,739,974				1,226,149				3,503,804				5,507,978
Selling, general and administrative expenses:
Research and development expense			210,818				564,146				1,244,060				2,039,361
Selling, advertising and promotional expense			414,727				1,932,982				1,902,489				5,885,097
General and administrative expense			3,666,728				3,877,064				10,462,747				13,845,074
Goodwill and intangible asset impairment charge			4,830,000				—				4,830,000				—
Total selling, general and administrative expenses			9,122,273				6,374,192				18,439,296				21,769,532
Operating loss			(7,382,299	)			(5,148,043	)			(14,935,492	)			(16,261,554	)
Other income (expense):
Interest income			13,775				12,986				63,064				84,071
Interest expense			(771,846	)			(959,898	)			(2,505,536	)			(2,480,947	)
Other income (expense)			8,920				25,394				66,966				76,180
Loss on accrual for legal settlement			—				—				—				(1,792,308	)
Loss on conversion of convertible note			—				—				—				(93,386	)
Change in fair value of warrant derivative liabilities			2,530,675				1,863,326				2,178,965				1,803,560
Change in fair value of contingent consideration promissory notes			—				19,888				—				177,909
Gain on extinguishment of liabilities			9,385				507,304				691,730				507,304
Loss on extinguishment of debt			(310,505	)							(379,332	)
Gain on sale of intangibles			—				—				5,582				—
Gain on sale of property, plant and equipment			431,183				—				389,522				—
Total other income (expense)			1,911,587				1,469,000				510,961				(1,717,617	)
Income (loss) before income tax benefit			(5,470,712	)			(3,679,043	)			(14,424,531	)			(17,979,171	)
Income tax benefit			—				—				—				—
Net loss			(5,470,712	)			(3,679,043	)			(14,424,531	)			(17,979,171	)
Net (income) loss attributable to noncontrolling interests of consolidated subsidiary			2,000,206				(29,630	)			1,939,143				(228,624	)
Net loss attributable to common stockholders		$	(3,470,506	)		$	(3,708,673	)		$	(12,485,388	)		$	(18,207,795	)
Net loss per share information:
Basic		$	(0.91	)		$	(1.32	)		$	(3.90	)		$	(6.55	)
Diluted		$	(0.91	)		$	(1.32	)		$	(3.90	)		$	(6.55	)
Weighted average shares outstanding:
Basic			3,820,860				2,800,752				3,204,495				2,779,530
Diluted			3,820,860				2,800,752				3,204,495				2,779,530

 

See Notes to the Unaudited Condensed Consolidated Financial Statements.

 

 

DIGITAL ALLY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(Unaudited)

 

		Shares				Amount				Capital				Subsidiary				Deficit				Total
		Common Stock								Additional Paid In				Noncontrolling interest in consolidated				Accumulated
		Shares				Amount				Capital				Subsidiary				Deficit				Total
Balance, December 31, 2022			2,720,170			$	2,721			$	127,869,342			$	448,694			$	(91,980,234	)		$	36,340,523
Stock-based compensation			—				—				114,848				—				—				114,848
Restricted common stock grant			35,000				35				(35	)			—				—				—
Issuance due to rounding from reverse stock split			54				—				—								—				—
Net loss			—				—				—				126,239				(6,105,818	)			(5,979,579	)
Balance, March 31, 2023			2,755,224				2,756				127,984,155				574,933				(98,086,052	)			30,475,792
Stock-based compensation			—				—				179,483				—				—				179,483
Restricted common stock forfeitures			(3,625	)			(4	)			4				—				—				—
Issuance due to rounding from reverse stock split			24,153				24				(24	)			—				—				—
Conversion of convertible note into common stock			25,000				25				119,725				—				—				119,750
Net loss			—				—				—				72,755				(8,393,304	)			(8,320,549	)
Balance, June 30, 2023			2,800,752				2,801				128,283,343				647,688				(106,479,356	)			22,454,476
Stock-based compensation			—				—				84,586				—				—				84,586
Net loss			—				—				—				29,630				(3,708,673	)			(3,679,043	)
Balance, September 30, 2023			2,800,752			$	2,801			$	128,367,929			$	677,318			$	(110,188,029	)		$	18,860,019
Balance, December 31, 2023			2,800,752			$	2,801			$	128,441,083			$	673,292			$	(117,668,781	)		$	11,448,395
Stock-based compensation			—				—				40,695				—				—				40,695
Restricted common stock grant			80,197				80				(80	)			—				—				—
Restricted common stock forfeitures			(1,125	)			(1	)			1				—				—				—
Net loss			—				—				—				(12,248	)			(3,931,020	)			(3,943,268	)
Balance, March 31, 2024			2,879,824				2,880				128,481,699				661,044				(121,599,801	)			7,545,822
Stock-based compensation			—				—				60,772				—				—				60,772
Sale of common stock and pre-funded warrants, net of offering costs			622,211				622				2,528,826				—				—				2,529,448
Fair value of warrants issued along with sale of common stock			—				—				(2,075,300	)			—				—				(2,075,300	)
Net loss			—				—				—				73,310				(5,083,861	)			(5,010,551	)
Balance, June 30, 2024			3,502,035				3,502				128,995,997				734,354				(126,683,662	)			3,050,191
Balance			3,502,035				3,502				128,995,997				734,354				(126,683,662	)			3,050,191
Stock-based compensation			—				—				(27,789	)			—				—				(27,789	)
Issuance of common stock upon exercise of prefunded warrants			573,004				573				(573	)			—				—				—
Restricted common stock forfeitures			(49,947	)			(50	)			50				—				—				—
Net loss			—				—				—				(2,000,206	)			(3,470,506	)			(5,470,712	)
Balance, September 30, 2024			4,025,092			$	4,025			$	128,967,685			$	(1,265,852	)		$	(130,154,168	)		$	(2,448,310	)
Balance			4,025,092			$	4,025			$	128,967,685			$	(1,265,852	)		$	(130,154,168	)		$	(2,448,310	)

 

See Notes to the Unaudited Condensed Consolidated Financial Statements.

 

 

DIGITAL ALLY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(Unaudited)

 

		2024				2023
		For the nine months ended September 30,
		2024				2023
Cash Flows From Operating Activities:
Net loss		$	(14,424,531	)		$	(17,979,171	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization			1,578,246				1,656,627
Gain on sale of property, plant and equipment			(389,522	)			—
Gain on sale on intangible			(5,582	)			—
Goodwill and intangible asset impairment charge			4,830,000				—
Stock-based compensation			73,678				378,917
Amortization of debt issuance costs			1,792,040				576,380
Gain on extinguishment of liabilities			(691,730	)			(507,304	)
Loss on extinguishment of debt			379,332				—
Change in fair value of warrant derivative liabilities			(2,178,965	)			(1,803,560	)
Convertible debt discount amortization			—				1,887,273
Loss on conversion of debt			—				93,386
Provision for inventory obsolescence			(476,441	)			(918,571	)
Provision for doubtful accounts receivable			(24,441	)			47,931
Allowance for doubtful lease reserve			20,000				5,000
Change in fair value of contingent consideration promissory note			—				(177,909	)
Change in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable – trade			(809,519	)			(26,605	)
Other receivable			(572,279	)			1,453,710
Inventories			2,037,604				2,563,198
Prepaid expenses			379,583				1,142,798
Operating lease right of use assets			114,017				285,667
Other assets			628,416				(1,477,391	)
Increase (decrease) in:
Accounts payable			3,053,399				3,619,557
Accrued expenses			303,335				1,713,623
Accrued expenses-related party			290,101				3,478
Income taxes payable			(61	)			(17,544	)
Lease deposit			—				10,445
Operating lease obligations			(121,348	)			(285,667	)
Contract liabilities			128,645				1,913,574
Net cash used in operating activities			(4,086,023	)			(5,842,158	)
Cash Flows from Investing Activities:
Purchases of property, plant and equipment			(23,821	)			(86,348	)
Purchase of intangible assets			(136,056	)			(110,893	)
Cash paid for acquisition of Country Stampede			(514,432	)			—
Proceeds from sale of intangible asset			90,535				—
Proceeds from sale of land and building			425,653				—
Proceeds from sale of property, plant and equipment			550,644				—
Net cash provided by (used in) investing activities			392,523				(197,241	)
Cash Flows from Financing Activities:
Proceeds – Merchant Advances – Video Solutions Segment			1,144,000				—
Proceeds – Merchant Advances – Entertainment Segment			1,308,837				—
Net proceeds of equity offering with detachable warrants			2,194,745				—
Net proceeds of convertible debt with detachable warrants			—				2,640,000
Proceeds – Commercial Extension of Credit – Entertainment Segment			1,175,000				1,224,577
Payments on Commercial Extension of Credit – Entertainment Segment			(162,928	)			(1,156,441	)
Payments on Merchant Advances – Video Solutions Segment			(1,382,500	)			—
Net proceeds of related party note payable			100,000				2,325,000
Payments on Merchant Advances – Entertainment Segment			(855,749	)			—
Principal payment on EIDL loan			(2,453	)			—
Principal payment on contingent consideration promissory notes			(188,470	)			(318,105	)
Net cash provided by financing activities			3,330,482				4,715,031
Net decrease in cash, cash equivalents, and restricted cash			(363,018	)			(1,324,368	)
Cash, cash equivalents, beginning of period			778,149				3,532,199
Cash, cash equivalents, end of period		$	415,131			$	2,207,831
Supplemental disclosures of cash flow information:
Cash payments for interest		$	429,002			$	26,220
Cash payments for income taxes		$	8,006			$	9,447
Supplemental disclosures of non-cash investing and financing activities:
Commercial extension of credit repaid through accrued revenue – Entertainment segment		$	825,000			$	—
ROU and lease liability recorded on extension (termination) of lease		$	470,489			$	538,056
Conversion of convertible notes payable into common stock		$	—			$	119,750
Fair value of warrants issued with sale of shares		$	2,075,300			$	—
Assets acquired in business acquisitions		$	605,000			$	—
Liabilities assumed in the business acquisition		$	288,000			$	—
Goodwill acquired in business acquisitions		$	225,959			$	—
Adjustments of accounts payable with the sale proceeds of property, plant and equipment		$	549,356			$	—
Reduction in proceeds from sale of building for loan, prepaid rent, and other accrued expenses		$	5,474,347			$	—
Payments to vendors directly from proceeds of sale of common stock		$	334,703			$	—
Issuance of common stock upon exercise of re-funded warrants		$	573				—
Restricted common stock grant		$	80			$	35
Reverse stock split rounding issuances		$	—			$	24
Restricted common stock forfeitures		$	51			$	4
Debt discount on convertible note		$	—			$	3,000,000

 

See Notes to the Unaudited Condensed Consolidated Financial Statements.

 

 

DIGITAL ALLY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Operations:

 

Digital Ally, Inc. was originally incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc. and had no operations until 2004. On November 30, 2004, Vegas Petra, Inc. entered into a Plan of Merger with Digital Ally, Inc., at which time the merged entity was renamed Digital Ally, Inc. (such merged entity, the “Predecessor Registrant”).

 

On August 23, 2022 (the “Effective Time”), the Predecessor Registrant merged with and into its wholly owned subsidiary, DGLY Subsidiary Inc., a Nevada corporation (the “Registrant”), pursuant to an agreement and plan of merger, dated as of August 23, 2022 (the “Merger Agreement”), between the Predecessor Registrant and the Registrant, with the Registrant as the surviving corporation in the merger (such transaction, the “Merger”). At the Effective Time, Articles of Merger were filed with the Secretary of State of the State of Nevada, pursuant to which the Registrant was renamed “Digital Ally, Inc.” and, by operation of law, succeeded to the assets, continued the business and assumed the rights and obligations of the Predecessor Registrant immediately prior to the Merger. Under the Nevada Revised Statutes, shareholder approval was not required in connection with the Merger Agreement or the transactions contemplated thereby.

 

At the Effective Time, pursuant to the Merger Agreement, (i) each outstanding share of Predecessor Registrant’s common stock, par value $0.001 per share (the “Predecessor Common Stock”) automatically converted into one share of common stock, par value $0.001 per share, of the Registrant (“Registrant Common Stock”), (ii) each outstanding option, right or warrant to acquire shares of Predecessor Common Stock converted into an option, right or warrant, as applicable, to acquire an equal number of shares of Registrant Common Stock under the same terms and conditions as the original options, rights or warrants, and (iii) the directors and executive officers of the Predecessor Registrant were appointed as directors and executive officers, as applicable, of the Registrant, each to serve in the same capacity and for the same term as such person served with the Predecessor Registrant immediately before the Merger.

 

The business of the Registrant, Digital Ally, Inc. (with its wholly-owned subsidiaries, Digital Ally International, Inc., Shield Products, LLC, Digital Ally Healthcare, LLC (“Digital Ally Healthcare”), TicketSmarter, Inc. (“TicketSmarter”), Worldwide Reinsurance, Ltd., Digital Connect, Inc., BirdVu Jets, Inc., Kustom 440, Inc. (“Kustom 440”), Kustom Entertainment, Inc., 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 Ticketing Segment. 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 Revenue Cycle Management Segment provides working capital and back-office services to a variety of healthcare organizations throughout the country, as a monthly service fee. The Entertainment Segment acts as an intermediary between ticket buyers and sellers within our secondary ticketing platform, ticketsmarter.com, and we also acquire tickets from primary sellers to then sell through various platforms. The 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. Such required segment information is included in Note 14.

 

Business Combination

 

In June 2023, the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Clover Leaf Capital Corp., a Delaware corporation (Nasdaq: CLOE) (“Clover Leaf”), CL Merger Sub, Inc., a Nevada corporation and a wholly owned subsidiary of Clover Leaf (“Merger Sub”), Yntegra Capital Investments LLC, a Delaware limited liability company, in the capacity as the representative from and after the Effective Time (as defined in the Merger Agreement) for the stockholders of Clover Leaf in accordance with the terms and conditions of the Merger Agreement, and Kustom Entertainment, Inc., a Nevada corporation, a wholly owned subsidiary of the Company, with a focus and mission to own and produce events, festivals, and entertainment alongside its evolving primary and secondary ticketing technologies (“Kustom”). Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein upon the consummation of the transactions contemplated by the Merger Agreement (the “Closing”), Merger Sub will merge with and into Kustom, with Kustom continuing as the surviving corporation in the Merger and a wholly owned subsidiary of Clover Leaf. Upon the Closing which is subject to the approval of Clover Leaf’s shareholders and the satisfaction or waiver of certain other customary closing conditions, the common stock of the combined company was expected to be listed on the Nasdaq under a mutually agreed new ticker symbol that reflects the name “Kustom Entertainment”.

 

On November 8, 2024, Clover Leaf and Kustom mutually agreed to terminate their previously announced Merger Agreement and Plan of Merger effective as of November 7, 2024 by entering into a mutual termination and release agreement among the parties. The parties released each other of all obligations related to the Merger Agreement.

 

7

 

Basis of Presentation:

 

The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine-month period ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

 

The balance sheet as of December 31, 2023 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements.

 

For further information, refer to the audited consolidated financial statements and footnotes included in the Company’s annual report on Form 10-K for the year ended December 31, 2023.

 

Liquidity and Going Concern

 

During the second quarter of 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This update provided U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. Under this standard, the Company is required to evaluate whether there is substantial doubt about its ability to continue as a going concern each reporting period, including interim periods. In evaluating the Company’s ability to continue as a going concern, management considered the conditions and events that could raise substantial doubt about the Company’s ability to continue as a going concern within 12 months after the Company’s financial statements were issued (December 30, 2024). Management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and the Company’s obligations due before December 30, 2025.

 

The Company has experienced net losses and cash outflows from operating activities since inception. For the nine months ended September 30, 2024, the Company had a net loss attributable to common stockholders of $12,485,388, net cash used in operating activities of $4,086,023, $392,523 provided by investing activities and $3,330,482 provided by financing activities. The Company will have to restore positive operating cash flows and profitability over the next year and/or raise additional capital to fund its operational plans, meet its customary payment obligations and otherwise execute its business plan. There can be no assurance that it will be successful in restoring positive cash flows and profitability, or that it can raise additional financing when needed, and obtain it on terms acceptable or favorable to the Company.

 

The Company is pursuing a significant capital raise to provide funding for its short and long-term liquidity needs. The Company has implemented an enhanced quality control program to detect and correct product issues before they result in significant rework expenditures affecting its gross margins and has seen progress in that regard. The Company has also implemented a marketing and advertisement reduction plan for its entertainment segment, which will focus on reducing and alleviating current obligations from its media marketing agreements and place a hold on entering into any new agreements. The Company believes that its quality control, cost-cutting initiatives, and new product introduction will eventually restore positive operating cash flows and profitability, although it can offer no assurances in this regard.

 

Management has evaluated the significance of the conditions described above in relation to the Company’s ability to meet its obligations and concluded that, without additional funding, the Company will not have sufficient funds to meet its obligations within one year from the date the unaudited condensed consolidated financial statements were issued. Such factors raise substantial doubt about the Company’s ability to sustain operations for at least one year from the issuance of these financial statements. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

8

 

Basis of Consolidation:

 

The accompanying financial statements include the consolidated accounts of Digital Ally, its wholly-owned subsidiaries, Digital Ally International, Inc., Shield Products, LLC, Digital Ally Healthcare, LLC, TicketSmarter, Inc., Worldwide Reinsurance, Ltd., Digital Connect, Inc., BirdVu Jets, Inc., Kustom 440, Inc., and its majority-owned subsidiary Nobility Healthcare, LLC. All intercompany balances and transactions have been eliminated during consolidation.

  

The Company formed Digital Ally International, Inc. during August 2009 to facilitate the export sales of its products. The Company formed Shield Products, LLC in May 2020 to facilitate the sales of its Shield™ line of disinfectant/cleanser products and ThermoVu™ line of temperature monitoring equipment. The Company formed Nobility Healthcare, LLC (“Nobility Healthcare”) in June 2021 to facilitate the operations of its revenue cycle management solutions and back-office services for healthcare organizations. The Company formed TicketSmarter, Inc. upon its acquisition of Goody Tickets, LLC and TicketSmarter, LLC, to facilitate its global ticketing operations. The Company formed Worldwide Reinsurance Ltd., which is a captive insurance company domiciled in Bermuda. It will provide primarily liability insurance coverage to the Company for which insurance may not be currently available or economically feasible in today’s insurance marketplace. The Company formed Kustom 440, Inc. in 2022 to create unique entertainment experiences directly for consumers.

 

Fair Value of Financial Instruments:

 

The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and subordinated notes payable approximate fair value because of the short-term nature of these items.

 

Revenue Recognition:

 

The Company applies the provisions of Accounting Standards Codification (ASC) 606-10, Revenue from Contracts with Customers, and all related appropriate guidance. The Company recognizes revenue under the core principle to depict the transfer of control to its customers in an amount reflecting the consideration to which it expects to be entitled. In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

 

The Company has two different revenue streams, product and service, represented through its three segments. The Company reports all revenues on a gross basis, other than service revenues from the Company’s entertainment and revenue cycle management segments, Revenues generated by all segments are reported net of sales taxes.

 

Video Solutions

 

The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with the customer. In situation where sales are to a distributor, the Company had concluded its contracts are with the distributor as the Company holds a contract bearing enforceable rights and obligations only with the distributor. As part of its consideration for the contract, the Company evaluates certain factors including the customers’ ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which it expects to be entitled. As the Company’s standard payment terms are less than one year, it has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on its relative standalone selling price. The product price as specified on the purchase order is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances. Revenue is recognized when control of the product is transferred to the customer (i.e. when the Company’s performance obligations is satisfied), which typically occurs at shipment. Further in determining whether control has been transferred, the Company considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer. Customers do not have a right to return the product other than for warranty reasons for which they would only receive repair services or replacement products. The Company has also elected the practical expedient under ASC 340-40-25-4 to expense commissions for product sales when incurred as the amortization period of the commission asset the Company would have otherwise recognized is less than one year.

 

9

 

Service and other revenue is comprised of revenues from extended warranties, repair services, cloud revenue and software revenue. Revenue is recognized upon shipment of the product and acceptance of the service or materials by the end customer for repair services. Revenue for extended warranty, cloud service or other software-based products is over the term of the contract warranty or service period. A time-elapsed method is used to measure progress because the Company transfers control evenly over the contractual period. Accordingly, the fixed consideration related to these revenues is generally recognized on a straight-line basis over the contract term, as long as the other revenue recognition criteria have been met.

 

The Company’s multiple performance obligations may include future in-car or body-worn camera devices to be delivered at defined points within a multi-year contract, and in those arrangements, the Company allocates total arrangement consideration over the life of the multi-year contract to future deliverables using management’s best estimate of selling price.

 

Revenue Cycle Management

 

The Company reports revenue cycle management revenues on a net basis, as its primary source of revenue is its end-to-end service fees which is generally determined as a percentage of the invoice amounts collected. These service fees are reported as revenue monthly upon completion of the Company’s performance obligation to provide the agreed upon service.

 

Entertainment

 

The Company reports ticketing revenue on a gross or net basis based on management’s assessment of whether the Company is acting as a principal or agent in the transaction. The determination is based upon the evaluation of control over the event ticket, including the right to sell the ticket, prior to its transfer to the ticket buyer.

 

The Company sells tickets held in inventory, which consists of one performance obligation, being to transfer control of an event ticket to the buyer upon confirmation of the order. The Company acts as the principal in these transactions as the ticket is owned by the Company at the time of sale, therefore controlling the ticket prior to transferring to the customer. In these transactions, revenue is recorded on a gross basis based on the value of the ticket and is recognized when an order is confirmed. Payment is typically due upon delivery of the ticket.

 

The Company also acts as an intermediary between buyers and sellers through online secondary marketplace. Revenues derived from this marketplace primarily consist of service fees from ticketing operations, and consists of one primary performance obligation, which is facilitating the transaction between the buyer and seller, being satisfied at the time the order has been confirmed. As the Company does not control the ticket prior to the transfer, the Company acts as an agent in these transactions. Revenue is recognized on a net basis, net of the amount due to the seller when an order is confirmed, the seller is then obligated to deliver the tickets to the buyer per the seller’s listing. Payment is due at the time of sale.

 

10

 

Other

 

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract and are reported separately as current liabilities and non-current liabilities in the Consolidated Balance Sheets. Such amounts consist of extended warranty contracts, prepaid cloud services and prepaid installation services and are generally recognized as the respective performance obligations are satisfied. During the nine months ended September 30, 2024, the Company recognized revenue of $2.0 million related to its contract liabilities. Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract and are reported separately as current liabilities and non-current liabilities in the Consolidated Balance Sheets. Such amounts consist of extended warranty contracts, prepaid cloud services and prepaid installation services and are generally recognized as the respective performance obligations are satisfied. Total contract liabilities consist of the following:

 SCHEDULE OF CONTRACT LIABILITIES 

		September 30, 2024
		December 31, 2023				Additions/ Reclass				Recognized Revenue				September 30, 2024
Contract liabilities, current		$	2,937,168			$	1,689,038			$	(557,628	)		$	4,068,578
Contract liabilities, non-current			7,340,459				761,421				(1,476,186	)			6,625,694
		$	10,277,627			$	2,450,459			$	(2,033,814	)		$	10,694,272

 

		September 30, 2023
		December 31, 2022				Additions/ Reclass				Recognized Revenue				September 30, 2023
Contract liabilities, current		$	2,154,874			$	2,133,969			$	(1,536,860	)		$	2,751,983
Contract liabilities, non-current			5,818,082				1,943,313				(626,848	)			7,134,547
		$	7,972,956			$	4,077,282			$	(2,163,708	)		$	9,886,530

 

Sales returns and allowances aggregated $86,370 and $117,713 for the nine months ended September 30, 2024 and September 30, 2023, respectively. Obligations for estimated sales returns and allowances are recognized at the time of sales on an accrual basis. The accrual is determined based upon historical return rates adjusted for known changes in key variables affecting these return rates.

  

Use of Estimates:

 

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management utilizes various other estimates, including but not limited to determining the estimated lives of long-lived assets, determining the potential impairment of long-lived assets, the fair value of warrants, options, the recognition of revenue, inventory valuation reserve, fair value of assets and liabilities acquired in a business combination, incremental borrowing rate on leases, the valuation allowance for deferred tax assets and other legal claims and contingencies. The results of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period that they are determined to be necessary.

 

Cash and cash equivalents:

 

Cash and cash equivalents include funds on hand, in bank and short-term investments with original maturities of ninety (90) days or less. 

 

The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At September 30, 2024 and December 31, 2023, the uninsured balance amounted to $0 and $29,700, respectively.

 

Restricted Cash:

 

Restricted cash of $-0- and $97,600 was included in other assets as of September 30, 2024 and December 31, 2023, respectively. Restricted cash consists of bank deposits that collateralize a debt obligation. Such debt obligation was paid off as of September 30, 2024.

 

11

 

Accounts Receivable:

 

Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a weekly basis. The Company determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions.

 

Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than thirty (30) days beyond terms. No interest is charged on overdue trade receivables.

 

Goodwill and Other Intangibles:

 

Goodwill - In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations, using the acquisition method of accounting. The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill. In accordance with ASC 350, Intangibles - Goodwill and Other, the Company assesses goodwill for impairment annually as of December 31st, and more frequently if events and circumstances indicate that goodwill might be impaired.

 

Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill.

 

Traditionally, goodwill impairment testing is a two-step process. Step one involves comparing the fair value of the reporting units to its carrying amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating an implied fair value of goodwill. The Company has adopted ASU 2017-04 which simplifies subsequent goodwill measurement by eliminating step two from the goodwill impairment test. As a result, the Company compares the fair value of a reporting unit with its respective carrying value and recognized an impairment charge for the amount by which the carrying amount exceeded the reporting unit’s fair value.

 

The Company determines the fair value of its reporting units using a weighting of the income and market valuation approaches. The income approach applies a fair value methodology to each reporting unit based on discounted cash flows. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. Under the market approach, we estimate the fair value based on multiples of comparable public companies and precedent transactions. Significant estimates in the market approach include: identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting unit.

 

Long-lived and Other Intangible Assets - The Company periodically assesses potential impairments of its long-lived assets in accordance with the provisions of ASC 360, Accounting for the Impairment or Disposal of Long-lived Assets. An impairment review is performed whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The Company groups its assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of the other assets and liabilities. The Company has determined that the lowest level for which identifiable cash flows are available is the operating segment level.

 

Factors considered by the Company include, but are not limited to, significant underperformance relative to historical or projected operating results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative industry or economic trends. When the carrying value of a long-lived asset may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company estimates the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future undiscounted cash flows and eventual disposition is less than the carrying amount of the asset, the Company recognizes an impairment loss. An impairment loss is reflected as the amount by which the carrying amount of the asset exceeds the fair value of the asset, based on the fair value if available, or discounted cash flows, if fair value is not available. The Company assessed potential impairments of its long-lived assets as of December 31, 2023 and concluded that there was no impairment. Subsequent to completing our 2023 annual impairment test, no events or changes in circumstances were noted that required an interim goodwill impairment test until the three months ended September 30, 2024, when events occurred that we considered triggering events.

 

During the third fiscal quarter of 2024, management determined that triggering events had occurred resulting from the additional decline in demand for our services, prolonged economic uncertainty, the split-off transaction did not occur when and as expected and a further decrease in our stock price. Therefore, we performed an interim impairment test as of September 30, 2024. Refer to NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS for additional details on the interim impairment test, valuation methodologies, and inputs used in the fair value measurements.

 

12

 

Intangible assets include deferred patent costs, license agreements, trademarks and trade names. Legal expenses incurred in preparation of patent application have been deferred and will be amortized over the useful life of granted patents. Costs incurred in preparation of applications that are not granted will be charged to expense at that time. The Company has entered into several sublicense agreements under which it has been assigned the exclusive rights to certain licensed materials used in its products. These sublicense agreements generally require upfront payments to obtain the exclusive rights to such material. The Company capitalizes the upfront payments as intangible assets and amortizes such costs over their estimated useful life on a straight-line method.

 

Segment Reporting

 

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. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. The Company’s three operating segments are Video Solutions, Revenue Cycle Management, and Entertainment, each of which has specific personnel responsible for that business and reports to the CODM. Corporate expenses capture the Company’s corporate administrative activities and are also to be reported in the segment information.

 

Contingent Consideration

 

In circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of the acquisition date. The Company remeasures this liability each reporting period and records changes in the fair value through the consolidated statement of operations.

 

Non-Controlling Interests

 

Non-controlling interests in the Company’s Consolidated Financial Statements represent the interest in subsidiaries held by our venture partner. The venture partner holds a noncontrolling interest in the Company’s consolidated subsidiary Nobility Healthcare, LLC. Since the Company consolidates the financial statements of all wholly-owned and majority owned subsidiaries, the noncontrolling owners’ share of each subsidiary’s results of operations are deducted and reported as net income or loss attributable to noncontrolling interest in the Consolidated Statements of Operations.

 

New Accounting Standards

 

In November 2023, the FASB issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

 

13

 

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

 

NOTE 2. INVENTORIES

 

Inventories consisted of the following at September 30, 2024 and December 31, 2023:

SCHEDULE OF INVENTORIES 

		September 30, 2024				December 31, 2023
Raw material and component parts– video solutions segment		$	2,638,063			$	3,044,653
Work-in-process– video solutions segment			11,565				20,396
Finished goods – video solutions segment			3,533,839				4,623,489
Finished goods – entertainment segment			364,641				699,204
Subtotal			6,548,108				8,387,742
Reserve for excess and obsolete inventory– video solutions segment			(4,144,749	)			(4,355,666	)
Reserve for excess and obsolete inventory – entertainment segment			(78,241	)			(186,795	)
Total inventories		$	2,325,118			$	3,845,281

 

NOTE 3. DEBT OBLIGATIONS

 

Debt obligations is comprised of the following:

SCHEDULE OF DEBT OBLIGATIONS 

		September 30, 2024				December 31, 2023
Economic injury disaster loan (EIDL)		$	145,328			$	147,781
Contingent consideration promissory note – Nobility Healthcare Division Acquisition			—				129,651
Contingent consideration promissory note – Nobility Healthcare Division Acquisition			—				58,819
Revolving Loan Agreement			—				4,880,000
Commercial Extension of Credit- Entertainment Segment			295,000				87,928
Merchant Advances – Video Solutions Segment			2,091,500				1,350,000
Merchant Advances – Entertainment Segment			1,364,986				—
Unamortized debt issuance costs			(315,955	)			(540,429	)
Debt obligations			3,580,859				6,113,750
Less: current maturities of debt obligations			3,438,910				1,260,513
Debt obligations, long-term		$	141,949			$	4,853,237

 

14

 

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

SCHEDULE OF MATURITY OF DEBT OBLIGATIONS 

		September 30, 2024
2024 (October 1, 2024 to December 31, 2024)		$	3,436,363
2025			3,412
2026			3,542
2027			3,677
2028 and thereafter			133,865
Total		$	3,580,859

 

2020 Small Business Administration Notes.

 

On May 12, 2020, the Company received $150,000 in loan funding from the SBA under the Economic Injury Disaster Loan (“EIDL”) program administered by the SBA, which program was expanded pursuant to the recently enacted CARES Act. The EIDL is evidenced by a secured promissory note, dated May 8, 2020, in the original principal amount of $150,000 with the SBA, the lender.

 

Under the terms of the note issued under the EIDL program, interest accrues on the outstanding principal at the rate of 3.75% per annum. The term of such note is thirty years, though it may be payable sooner upon an event of default under such note. Monthly principal and interest payments began in November 2022, after being deferred for thirty months after the date of disbursement and total $731 per month thereafter. Such note may be prepaid in part or in full, at any time, without penalty. The Company granted the SBA a continuing interest in and to any and all collateral, including but not limited to tangible and intangible personal property.

 

The Company made principal payments of $2,453 during the nine months ended September 30, 2024 and recorded interest expense of $1,368 and $4,126 for the three and nine months ended September 30, 2024.

 

Contingent Consideration Promissory Notes

 

On June 30, 2021, Nobility Healthcare, a subsidiary of the Company, issued a contingent consideration promissory note (the “June Contingent Note”) in connection with a stock purchase agreement between Nobility Healthcare and a private company (the “June Seller”) of $350,000. The June Contingent Note has a three-year term and bears interest at a rate of 3.00% per annum. Quarterly principal and interest payments are deferred for nine months and is due in equal quarterly installments on the seventh business day of each quarter. The principal amount of the June Contingent Note is subject to an earn-out adjustment, being the difference between $975,000 (the “June Projected Revenue”) and the cash basis revenue (the “June Measurement Period Revenue”) collected by the June Seller in its normal course of business from the clients existing on June 30, 2021, during the period from October 1, 2021 through September 30, 2022 (the “June Measurement Period”) measured on a quarterly basis and annualized as of the relevant period. If the June Measurement Period Revenue is less than the June Projected Revenue, such amount will be subtracted from the principal balance of this June Contingent Note on a dollar-for-dollar basis. If the June Measurement Period Revenue is more than the June Projected Revenue, such amount will be added to the principal balance of this June Contingent Note on a dollar-for-dollar basis. In no event will the principal balance of this June Contingent Note become a negative number. The maximum downward earn-out adjustment to the principal balance will be a reduction to zero. There are no limits to the increases to the principal balance of the June Contingent Note as a result of the earn-out adjustments.

 

The June Contingent Note is considered to be additional purchase price; therefore, the estimated fair value of the contingent liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the acquisition with subsequent changes in fair value recorded as a gain or loss in the Consolidated Statements of Operations. Management recorded the contingent consideration promissory note at its estimated fair value of $350,000 at the acquisition date. Total principal payments, since inception, on this contingent consideration promissory note totalled $290,073. The estimated fair value of the June Contingent Note at September 30, 2024 is $-0-, representing a reduction in its estimated fair value of $58,819 as compared to its estimated fair value as of December 31, 2023. This reduction only relates to the principal payments made for the nine months ended September 30, 2024. Therefore, the Company recorded no gain or loss in the Consolidated Statements of Operations for the nine months ended September 30, 2024.

 

On August 31, 2021, Nobility Healthcare, issued another contingent consideration promissory note (the “August Contingent Payment Note”) in connection with a stock purchase agreement between Nobility Healthcare and a private company (the “August Sellers”) of $650,000. The August Contingent Payment Note has a three-year term and bears interest at a rate of 3.00% per annum. Quarterly principal and interest payments are deferred for nine months and is due in equal quarterly installments on the seventh business day of each quarter. The principal amount of the August Contingent Payment Note is subject to an earn-out adjustment, being the difference between the $3,000,000 (the “August Projected Revenue”) and the cash basis revenue (the “August Measurement Period Revenue”) collected by the August Sellers in its normal course of business from the clients existing on September 1, 2021, during the period from December 1, 2021 through November 30, 2022 (the “August Measurement Period”) measured on a quarterly basis and annualized as of the relevant period. If the August Measurement Period Revenue is less than the August Projected Revenue, such amount will be subtracted from the principal balance of this August Contingent Payment Note on a dollar-for-dollar basis. If the August Measurement Period Revenue is more than the August Projected Revenue, such amount will be added to the principal balance of this August Contingent Payment Note on a dollar-for-dollar basis. In no event will the principal balance of this August Contingent Payment Note become a negative number. The maximum downward earn-out adjustment to the principal balance will be to zero. There are no limits to the increases to the principal balance of the August Contingent Payment Note as a result of the earn-out adjustments.

 

15

 

The August Contingent Payment Note is considered to be additional purchase price, therefore the estimated fair value of the contingent liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the acquisition. Management has recorded the contingent consideration promissory note at its estimated fair value of $650,000 at the acquisition date. Principal payments, since its inception, on this contingent consideration promissory note totalled $681,907. The estimated fair value of the August Contingent Note at September 30, 2024 is $-0-, representing a decrease in its estimated fair value of $129,651 as compared to is estimated fair value as of December 31, 2023. This reduction only relates to the principal payments made for the nine months ended September 30, 2024. Therefore, the Company recorded no gain or loss in the Consolidated Statements of Operations for the nine months ended September 30, 2024.

  

2023 Commercial Extension of Credit

 

On February 23, 2023, the Company’s Entertainment segment entered into an extension of credit in the form of a loan to use in marketing and operating its business in accordance with the Private Label Agreement previously entered into with the Lender. The Lender agreed to extend, subject to the conditions hereof, and Borrower agreed to take, a Loan for Principal Sum of $1,000,000.

 

The Lender retains 25% of each remittance owed to Borrower under the terms of the Private Label Agreement. Such remittances includes regular weekly remittances and any additional incentive payments to which the Borrower may be entitled. The 25% withholding of the Borrower’s applicable remittance is deemed a “Payment” under the terms of this Note, and Payments shall continue until the earlier of (i) repayment of the Principal Sum, accrued Interest, and a fee of $35,000 or (ii) expiration of the Private Label Agreement on December 31, 2023.

 

During the nine months ended September 30, 2024, the Entertainment segment Company’s Entertainment segment repaid the outstanding principal of $87,928 and did not renew this agreement.

 

2024 Commercial Extension of Credit

 

On January 22, 2024, the Company’s Entertainment segment entered into an extension of credit in the form of a loan to use in marketing and operating its business in accordance with the Ticket Solution Agreement. The Lender, Ticket Evolution, Inc., agreed to extend, subject to the conditions hereof, and Borrower agreed to take, an advance for a sum of $75,000 with monthly advances of $100,000.

 

The advances made are recoupable from client service fees with no more than $25,000 being recouped in any one week. The total advances received for the nine months ended September 30, 2024 were $975,000 and payments made totalled $900,000. The outstanding balance as of September 30, 2024 was $75,000.

 

On August 7, 2024 and as amended on September 25, 2024, the Company’s Entertainment segment entered into an extension of credit (the “Agreement”) with Vegas Tickets in the form of a prepayment for the rights to acquire certain Major League Baseball and National Football League playoff and season tickets. Vegas Tickets agreed to advance, subject to the conditions of the Agreement, and the Company’s Entertainment segment agreed to take, an advance for a sum of $200,000. Under the Agreement, the Company’s Entertainment segment has the right to reacquire the tickets for a cash amount of $220,000 by November 1, 2024. The repurchase date was extended to December 1, 2024 by an amendment dated October 31, 2024.

 

The Company’s Entertainment segment intends to repurchase the tickets and has recorded the cash repurchase obligation amount of $220,000 as the outstanding extension of credit balance as of September 30, 2024, with $20,000 of such amount recorded as interest expense during the three and nine months ended September 30, 2024.

 

Convertible Note

 

On April 5, 2023, the Company entered into and consummated the initial closing (the “First Closing”) of the transactions contemplated by a Securities Purchase Agreement, dated as of April 5, 2023 (the “Purchase Agreement”), between the Company and certain investors (the “Purchasers”).

 

At the First Closing, the Company issued and sold to the Purchasers Senior Secured Convertible Notes in the aggregate original principal amount of $3,000,000 (the “Notes”) and warrants (the “Warrants”). The Purchase Agreement provided for a ten percent (10%) original interest discount resulting in gross proceeds to the Company of $2,700,000. No interest accrues under the Notes. The Warrants are exercisable for an aggregate 1,125,000 shares comprised of 375,000 warrants at an exercise price of $5.50 per share of the Company’s common stock, par value $0.001 (the “Common Stock”), 375,000 warrants at an exercise price of $6.50 per share of Common Stock, and 375,000 warrants at an exercise price of $7.50 per share of Common Stock.

 

16

 

Subject to certain conditions, within 18 months from the effectiveness date and while the Notes remain outstanding, the Purchasers have the right to require the Company to consummate a second closing of up to an additional $3,000,000 of Notes (the “Second Notes”) and Warrants on the same terms and conditions as the First Closing, except that the Second Notes may be subordinate to a mortgage on the Company’s headquarters building (the “Bank Mortgage”).

 

The Notes are convertible into shares of Common Stock at the election of the Purchasers at any time at a fixed conversion price of $5.00 (the “Conversion Price”) per share of Common Stock. The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for, Common Stock at a price below the then-applicable Conversion Price (subject to certain exceptions). Subject to certain conditions, including certain equity conditions, the Company may redeem some or all of the then outstanding principal amount of the Note for cash in an amount equal to 110% of the outstanding principal amount of the Notes (the “Optional Redemption Amount”). In addition, the Purchasers may, at their option, demand repayment at the Optional Redemption Amount upon five (5) business days’ written notice following (i) the closing by the Company of the Bank Mortgage, or (ii) a sale by the Company of Common Stock or Common Stock equivalents.

 

The Notes rank senior to all outstanding and future indebtedness of the Company and its subsidiaries, and are secured by substantially all of the Company’s assets, as evidenced by (i) a security agreement entered into at the Closing, (ii) a trademark security agreement entered into at the Closing, (iii) a patent security agreement entered into at the Closing, (iv) a guaranty executed by all direct and indirect subsidiaries of the Company pursuant to which each of them has agreed to guaranty the obligations of the Company under the Notes, and (v) a mortgage on the Company’s headquarters building in favor of the Purchasers.

 

Also at the Closing, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Purchasers. Pursuant to the terms of the Registration Rights Agreement, the Company has agreed to prepare and file with the SEC within the 10th business day following the First Closing (the “Filing Date”) a registration statement covering the resale of the shares of Common Stock issuable upon conversion of the Notes and exercise of the Warrants, and to use its best efforts to cause such Registration Statement to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”), as promptly as possible, but in any event no later than 45 days following the Filing Date (the “Effectiveness Date”). If the Registration Statement is not filed by the Filing Date or is not declared effective by the Effectiveness Date, or under certain other circumstances described in the Registration Rights Agreement, then the Company shall be obligated to pay, as partial liquidated damages, to each Purchaser an amount in cash equal to 2% of the original principal amount of the Notes each month until the applicable event giving rise to such payments is cured. If the Company fails to pay any partial liquidated damages in full within seven days after the date payable, the Company will pay interest thereon at a rate of 10% per annum.

 

The Company recognized the full warrant derivative value, with the remaining amount being allocated to the debt obligation. As the warrant derivative value exceeded the net proceeds from the issuance, the excess amount is recognized as a loss on the date of the issue date. Thus, the Company recorded a loss of $576,380 as an interest expense on the date of issuance relating to the Notes. The following is the assumptions used in calculating the estimated grant-date fair value of the detachable warrants to purchase common stock granted in connection with the Notes:

SCHEDULE OF WARRANT TO PURCHASE COMMON STOCK GRANTED 

		Terms at April 5, 2023 (issuance date)
Volatility – range			106.0	%
Risk-free rate			3.36	%
Dividend			0	%
Remaining contractual term			5.0 years
Exercise price		$	5.50 – 7.50
Common stock issuable under the warrants			1,125,000

 

17

 

On June 2, 2023, the Purchasers elected to convert $125,000 principal, at the fixed price of $5.00 per share of common stock, 25,000 shares valued at $119,750. The loss on conversion of convertible note into common shares, of $93,386, was recorded during the period.

 

On October 26, 2023, the Company entered into a Revolving Loan Agreement of which a portion of the net proceeds were used to repay the principal amount of the Convertible debt. The warrants associated with the convertible debt remain outstanding.

 

Revolving Loan Agreement

 

On October 26, 2023, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) by and between the Company, Digital Ally Healthcare, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Digital Ally Healthcare” and, together with the Company, the “Borrower”), and Kompass Kapital Funding, LLC, a Kansas limited liability company (“Kompass”). In connection with the Loan Agreement, on October 26, 2023, the Company entered into a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing (the “Mortgage”) by and between the Company, as grantor, and Kompass, as grantee, and issued a Revolving Note (the “Revolving Note”) to Kompass. The gross proceeds to the Company were $4,880,000 before repaying those certain Senior Secured Convertible Notes issued on April 5, 2023 in the aggregate amount of $3,162,500 and paying customary fees and expenses.

 

Pursuant to the Loan Agreement, Kompass agreed to make revolving loans (the “Revolving Loans”) available to the Borrower as the Borrower may from time to time request until, but not including, October 26, 2025, and in such amounts as the Borrower may from time to time request, provided, however, that the aggregate principal balance of the Revolving Loans outstanding at any time shall not exceed the lesser of $4,880,000 or an amount equal to eighty percent of the value of the mortgaged property, which consists of the real property owned by the Company having an address of 14001 Marshall Drive, Lenexa, KS 66215 (the “Mortgaged Property”). Under the Loan Agreement, the Revolving Loans made by Kompass may be repaid and, subject to customary terms and conditions, borrowed again up to, but not including October 26, 2025, unless the Revolving Loans are otherwise accelerated, terminated or extended as provided in the Loan Agreement. The Revolving Loans shall be used by the Borrower for the purpose of working capital and to retire existing debt. Under the Loan Agreement, the Borrower is required to provide written notice to Kompass prior to creating, assuming or incurring any debt or becoming liable, whether as endorser, guarantor, surety or otherwise, for any debt or obligation of any other party. While obligations remain outstanding under the Loan Agreement, the Borrower is required to maintain a minimum balance of $97,600 in a reserve account (the “Capital Reserve Account”). Under the Loan Agreement, the Borrower is prohibited from creating, assuming, incurring or suffering or permitting to exist any lien of any kind or character upon the collateral, which consists of the Mortgaged Property and the Company’s interest in the Capital Reserve Account. The Loan Agreement contains customary covenants, representations and warranties by the Borrower.

 

Pursuant to the Loan Agreement, the Company issued the Revolving Note to Kompass whereby the Company and Digital Ally Healthcare jointly and severally promise to pay to the order of Kompass the lesser of (i) $4,880,000.00, or (ii) the aggregate principal amount of all Revolving Loans outstanding under and pursuant to the Loan Agreement at the maturity or maturities and in the amount or amounts stated on the records of Kompass, together with interest (computed on the actual number of days elapsed on the basis of a 360 day year) at a floating per annum rate equal to the greater of (i) the Prime Rate plus four percent or (ii) eight percent, on the aggregate principal amount of all Revolving Loans outstanding from time to time as provided in the Loan Agreement.

 

The Company entered into the Mortgage to secure its obligations under the Loan Agreement. The property mortgaged under the Mortgage consists of the Mortgaged Property. The Mortgage contains customary covenants, representations and warranties by the Company.

 

18

 

On August 12, 2024, the Company sold the Mortgaged Property and paid off the $4,880,000 outstanding principal balance together with all accrued and unpaid interest. In addition, upon origination of the Revolving Loan, the Company recorded debt issuance costs of $188,255 which was fully amortized as of the date the Mortgage was paid in full. The remaining unamortized discount was $-0- and $171,258 as September 30, 2024 and December 31, 2023, respectively.

 

Merchant Cash Advances – Video Solutions Segment

 

In November 2023, the Company obtained a short-term merchant advance, which totalled $1,050,000, from a single lender to fund operations. These advances included origination fees totalling $50,000 for net proceeds of $1,000,000. The advance is, for the most part, secured by expected future sales transactions of the Company with expected payments on a weekly basis. The Company will repay an aggregate of $1,512,000 to the lender. The loan bears interest at 2.9% per week.

 

During the nine months ended September 30, 2024, the Company made repayments totalling $1,382,500 and received additional proceeds of $1,144,000. The Company refinanced this loan in April 2024 resulting in the additional proceeds received during the nine months ended September 30, 2024. The refinancing was deemed to be an extinguishment of debt and a loss on extinguishment of debt was recorded during the nine months ended September 30, 2024 of $68,827.

 

As of September 30, 2024 the outstanding principal balance was $2,091,500 which is expected to be repaid in 2024 and early 2025. As of September 30, 2024 the remaining discount balance was $52,538.

 

The remaining unamortized discount was $52,538 and $369,171 as September 30, 2024 and December 31, 2023, respectively.

 

Merchant Cash Advances – Entertainment Segment

 

On March 1, 2024, the Company obtained a short-term merchant advance, which totalled $1,000,000, from a single lender to fund operations. These advances included origination and issuance fees totalling $85,000 for net proceeds of $915,000. The advance is, for the most part, is secured by expected future sales transactions of the Company with expected payments on a weekly basis. The Company will repay an aggregate of $1,425,000 to the lender. The loan bears interest at an 40.4523% annual effective rate based on latest debt modification. During the three and nine months ended September 30, 2024, the Company made repayments totalling $803,850 and $855,749, respectively.

 

The Company modified/amended the underlying loan agreement twice during the three months ended September 30, 2024, resulting in additional proceeds totalling $393,836. The modifications were both deemed to be extinguishments of debt resulting in a $310,505 total loss on the extinguishment of debt during the three and nine months ended September 30, 2024. As of September 30, 2024 the outstanding balance was $1,101,569 which is expected to be repaid in 2024. See NOTE 16. SUBSEQUENT EVENTS for an update to this matter.

 

The remaining unamortized discount was $263,417 and $-0- as September 30, 2024 and December 31, 2023, respectively.

 

The Company entered into the original agreement on March 1, 2024. On July 13, 2024, the Company entered into a letter agreement with the Purchaser, amending the terms of the note agreement, and on September 12, 2024, the Company entered into a second letter agreement further amending the terms of the note agreement

 

On July 13, 2024, the Company entered into a Letter Agreement with the note holder, which modified the note payable by increasing the principal amount of the note payable from $1,425,000 to $1,725,000; provided, however, that if the Borrowers repay the Note in full on or before August 15, 2024, then the principal amount of the Note shall be reduced automatically by $100,000. Pursuant to the Letter Agreement, the Borrowers’ failure to adhere to certain repayment requirements of the underlying note purchase agreement did not constitute an event of default, as defined in the note purchase agreement. Pursuant to the modified/amended note, the Company agreed to make a cash payment to the note holder in the amount of $150,000 on or before July 26, 2024. The Company also agreed to sell or enter into a firm commitment to sell the office building owned by the Company and pay to the Purchaser: (i) $325,000, if the Company sells or enters into a firm commitment to sell the building on or before August 7, 2024; or (ii) $400,000, if the Company sells or enters into a firm commitment to sell the building after August 7, 2024. Pursuant to the modified/amended note, the Company’s failure to sell or enter into a firm commitment to sell the building prior to September 1, 2024 shall constitute an event of default, as defined in the note purchase agreement. The Company also agreed to pay to the note holder $100,000 per month until the modified/amended note is repaid in full, with the first such payment occurring on August 12, 2024, and each subsequent payment occurring on the 12th calendar day of each month thereafter.

 

On September 25, 2024, the Company and the note holder agreed to an amended and restated senior secured promissory note with a new principal amount of up to $2,000,000. The amended note evidences the new principal amount and amends and restates in its entirety, the terms and provisions of the Note. Pursuant to the amended note the Company promised to pay to the note holder the new principal amount, together with accrued interest or the amount outstanding under the amended note from time to time, to be computed from the date of the amended note at the rates and in the amounts set forth in the amended note. The amount of the unpaid balance, including such interest, that shall be due and payable under the Amended Note may increase and decrease as advances and payments are made thereunder. The Amended Note bears interest at a rate of 1.58% per month.

 

19

 

The Company can request advances in writing to the note holder and upon approval by the note holder to be determined in its sole discretion, (but which shall not be unreasonably withheld), the note holder can either make payment directly to specified vendor(s) or other creditors on behalf of the Company or deposit the advance into the Company’s account.

 

The amended note, requires the Company to repay the amended note, in full, on the earlier of (i) November 1, 2024, and (ii) the consummation of the merger between Kustom Entertainment and CL Merger Sub, Inc. (“CL Merger Sub”) pursuant to the merger agreement among the Company, Kustom Entertainment, Clover Leaf Capital Corp. the Company is also required to pay in arrears in cash an amount equal to 50% of revenues from all ticket sales generated by Kustom Entertainment, up to nine thousand tickets sold, and thereafter equal to 10% of all revenues from all ticket sales until the earlier of the date on which the amended note is repaid in full or the November 1, 2024 maturity date. The Company has the right, but not the obligation, under the amended note to prepay the amended note, upon written notice to the Company, by payment in full of the entire outstanding principal balance plus interest.

 

Furthermore, pursuant to the amended note, the parties agreed to extend the repayment date of $100,000, by the Company to the note holder, from September 26, 2024, to October 10, 2024. As further described in NOTE 16. SUBSEQUENT EVENTS this payment was not made on a timely basis, however, the Note was paid in full on November 7, 2024.

 

NOTE 4. FAIR VALUE MEASUREMENT

 

In accordance with ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC 820”), the Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets or liabilities, such as a business.

 

ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

●	Level 1 — Quoted prices in active markets for identical assets and liabilities
●	Level 2 — Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities)
●	Level 3 — Significant unobservable inputs (including the Company’s own assumptions in determining the fair value)

 

The following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023:

SCHEDULE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS 

		September 30, 2024
		Level 1				Level 2				Level 3				Total
Liabilities:
Warrant derivative liabilities		$	—			$	—			$	1,266,073			$	1,266,073
Contingent consideration promissory notes and contingent consideration earn-out agreement			—				—				—				—
		$	—			$	—			$	1,266,073			$	1,266,073

 

		December 31, 2023
		Level 1				Level 2				Level 3				Total
Liabilities:
Warrant derivative liabilities		$	—			$	—			$	1,369,738			$	1,369,738
Contingent consideration promissory notes and contingent consideration earn-out agreement			—				—				188,470				188,470
		$	—			$	—			$	1,558,208			$	1,558,208

 

20

 

The following table represents the change in Level 3 tier value measurements for the three months ended September 30, 2024:

SCHEDULE OF FAIR VALUE MEASUREMENTS CHANGE IN LEVEL 3 INPUTS 

		Contingent Consideration Promissory Notes and Earn-Out Agreement				Warrant Derivative Liabilities
Balance, December 31, 2023		$	188,470			$	1,369,738
Issuance of warrant derivative liabilities			—				2,075,300
Change in fair value of warrant derivative liabilities			—				(2,178,965	)
Principal payments on contingent consideration promissory notes – Revenue Cycle Management Acquisitions			(188,470	)			—
Change in fair value of contingent consideration promissory notes - Revenue Cycle Management Acquisitions			—				—
Balance, September 30, 2024		$	—			$	1,266,073

 

NOTE 5. ACCRUED EXPENSES

 

Accrued expenses consisted of the following at September 30, 2024 and December 31, 2023:

SCHEDULE OF ACCRUED EXPENSES 

		September 30, 2024				December 31, 2023
Accrued warranty expense		$	11,615			$	17,699
Accrued litigation costs			2,040,292				2,040,292
Accrued payroll and related fringes			585,030				367,826
Accrued sales returns and allowances			93,170				117,713
Accrued taxes			116,463				150,981
Accrued interest - related party			385,390				95,031
Customer deposits			227,885				219,462
Other			136,835				260,326
Total accrued expenses		$	3,596,680			$	3,269,330

 

21

 

Accrued warranty expense was comprised of the following for the nine months ended September 30, 2024:

SCHEDULE OF ACCRUED WARRANTY EXPENSE 

Beginning balance		$	17,699
Provision for warranty expense			38,898
Charges applied to warranty reserve			(44,982	)
Ending balance		$	11,615

 

NOTE 6. INCOME TAXES

 

The effective tax rate for the three and nine months ended September 30, 2024 and 2023 varied from the expected statutory rate due to the Company continuing to provide a 100% valuation allowance on net deferred tax assets. The Company determined that it was appropriate to continue the full valuation allowance on net deferred tax assets as of September 30, 2024, primarily because of the Company’s history of operating losses.

 

The Company has incurred operating losses in recent years, and it continues to be in a three-year cumulative loss position at September 30, 2024. Accordingly, the Company determined there was not sufficient positive evidence regarding its potential for future profits to outweigh the negative evidence of our three-year cumulative loss position under the guidance provided in ASC 740. Therefore, it is determined to continue to provide a 100% valuation allowance on its net deferred tax assets. The Company expects to continue to maintain a full valuation allowance until it determines that it can sustain a level of profitability that demonstrates its ability to realize these assets. To the extent the Company determines that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed. The Company has available to it approximately $140.9 million (based on its December 31, 2023 tax return) in net operating loss carryforwards to offset future taxable income as of September 30, 2024.

 

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consisted of the following at September 30, 2024 and December 31, 2023:

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT 

		Estimated Useful Life		September 30, 2024				December 31, 2023
Building		25 years		$	—			$	4,537,037
Land		Infinite			—				739,734
Office furniture, fixtures, equipment, and aircraft		3-20 years			780,492				2,065,092
Warehouse and production equipment		3-7 years			237,141				29,055
Demonstration and tradeshow equipment		3-7 years			77,791				87,987
Building improvements		5-7 years			20,935				1,328,654
Total cost					1,116,359				8,787,559
Less: accumulated depreciation and amortization					(671,756	)			(1,503,857	)
Net property, plant and equipment				$	444,603			$	7,283,702

 

22

 

Depreciation expense for the three months ended September 30, 2024 and September 30, 2023 was $127,474 and $188,100, respectively, and is included in general and administrative expenses. Depreciation expense for the nine months ended September 30, 2024 and September 30, 2023 was $471,307 and $533,992, respectively, and is included in general and administrative expenses. 

 

During the nine months ended September 30, 2024 the Company engaged a broker and sold its aircraft for $1,100,000 less closing costs of $1,500. The carrying amount of the aircraft on the date of sale was $1,141,661. As a result of the sale the Company recorded a loss of $41,661 in the Consolidated Statement of Operations.

 

During the three and nine months ended September 30, 2024 the Company engaged a broker and sold its building for $5,900,000 less closing costs of $7,194. The carrying amount of the building on the date of sale was $5,461,623. As a result of the sale the Company recorded a gain of $431,183 in the Consolidated Statement of Operation during the three and nine months ended September 30, 2024.

  

NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS

 

Intangible assets consisted of the following as of September 30, 2024 and December 31, 2023:

SCHEDULE OF INTANGIBLE ASSETS 

		September 30, 2024															December 31, 2023
		Gross value				Accumulated amortization				Accumulated Impairment			Net carrying value				Gross value				Accumulated amortization				Net carrying value
Amortized intangible assets:
Licenses (video solutions segment)		$	151,652			$	23,907			$	—		$	127,745			$	225,545			$	89,887			$	135,658
Patents and trademarks (video solutions segment)			483,521				355,314				—			128,207				483,521				266,403				217,118
Sponsorship agreement network (entertainment segment)			5,600,000				3,453,333				—			2,146,667				5,600,000				2,613,333				2,986,667
SEO content (entertainment segment)			600,000				462,500				—			137,500				600,000				350,000				250,000
Personal seat licenses (entertainment segment)			117,339				12,060				—			105,279				180,081				14,004				166,077
Software			23,653				—				—			23,653				-				-				-
Website enhancements (entertainment segment)			35,900				6,841				—			29,059				13,500				—				13,500
Client agreements (revenue cycle management segments)			999,034				301,695				—			697,339				999,034				226,768				772,266
			8,011,099				4,615,650				—			3,395,449				8,101,681				3,560,395				4,541,286
Indefinite life intangible assets:
Goodwill (Entertainment segment)			6,112,507				—				307,000			5,805,507				5,886,548				—				5,886,548
Goodwill (Revenue cycle management segment)			5,480,966				—				4,322,000			1,158,966				5,480,966				—				5,480,966
Trade name and trademarks (entertainment segment)			900,000				—				201,000			699,000				600,000				—				600,000
Patents and trademarks pending (video solutions segment)			91,623				—				—			91,623				1,622				—				1,622
Total		$	20,596,195			$	4,615,650			$	4,830,000		$	11,150,545			$	20,070,817			$	3,560,395			$	16,510,422

 

23

 

Patents and trademarks pending will be amortized beginning at the time they are issued by the appropriate authorities. If issuance of the final patent or trademark is denied, then the amount deferred will be immediately charged to expense.

 

Amortization expense for the three months ended September 30, 2024 and 2023 was $371,772 and $377,485, respectively and $1,106,939 and $1,122,635 for the nine months ended September 30, 2024 and 2023, respectively. Estimated amortization for intangible assets with definite lives for the next five years ending December 31 and thereafter is as follows:

SCHEDULE OF ESTIMATED AMORTIZATION FOR INTANGIBLE ASSETS 

Year ending December 31:
2024 (October 1, 2024 to December 31, 2024)		$	371,227
2025			1,418,272
2026			913,733
2027			116,387
2028 and thereafter			575,830
Total		$	3,395,449

 

Interim impairment test

 

We performed an interim impairment test as of the last day of the fiscal third quarter of 2024 as management determined that a triggering event had occurred resulting from the additional decline in demand for our services, prolonged economic uncertainty, the fact that the split-off transaction did not occur when and as expected and a further decrease in our stock price. Therefore, we performed an interim impairment test as of the September 30, 2024 for our reporting units with remaining goodwill.

 

The fair value of each reporting unit was estimated using a weighting of the income and market valuation approaches. The income approach applied a fair value methodology to each reporting unit based on discounted cash flows. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. The weighted average cost of capital used in our most recent impairment test ranged from 21% to 32.5%. We also applied a market approach, which develops a value correlation based on the market capitalization of similar publicly traded companies, referred to as a multiple, to apply to the operating results of the reporting units. The primary market multiples used are revenue and earnings before interest, taxes, depreciation, and amortization. The income and market approaches were equally weighted in our most recent annual impairment test, for all of the reporting units.

 

The combined fair values for all reporting units were then reconciled to our aggregate market value of our shares of common stock on the date of valuation, while considering a reasonable control premium. We consider a reporting unit’s fair value to be substantially in excess of the reporting unit’s carrying value at a 20% premium or greater. Based on our most recent impairment test, the video solutions reporting unit’s fair value was substantially in excess of its carrying value, while the revenue cycle management and entertainment segments were determined to be impaired.

 

We held goodwill of $5,480,966 as of September 30, 2024 and December 31, 2023, related to businesses within our revenue cycle management segment. We held goodwill of $6,112,507 and $5,886,548 as of September 30, 2024 and December 31, 2023, respectively, related to businesses within our entertainment segment. As a result of our September 30, 2024 interim impairment test, we concluded that the carrying amount of the revenue cycle management and the entertainment reporting units exceeded its estimated fair values. Thus, we recorded a non-cash goodwill impairment charge of $4,322,000, related to the goodwill carrying balance for the revenue cycle management segment, and a non-cash goodwill impairment charge of $307,000, related to the goodwill carrying balance for the entertainment segment, both of which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024. The goodwill impairment was primarily driven by recent performance of the revenue cycle management and entertainment reporting units since our annual impairment testing date, as well as a delay in the projected timing of recovery. The remaining balance for the goodwill carrying balance related to businesses within our revenue cycle management segment and entertainment segment was $1,158,966 and $5,805,507, respectively as of September 30, 2024.

 

Indefinite-lived intangible assets

 

We held indefinite-lived trade names/trademarks of $900,000 and $600,000 as of September 30, 2024 and December 31, 2023, respectively, related to businesses within our entertainment segment.

 

During the three months ended September 30, 2024, we concluded that the carrying amount of a trade name/trademark related to the entertainment segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $201,000, which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024. The charge was primarily driven by the split-off transaction not being completed when and as expected and our recent revenue and operating performance of the related business given a decline in demand and overall economic uncertainty. The remaining balance for this trade name/trademark was $699,000 as of September 30, 2024.

 

NOTE 9. COMMITMENTS AND CONTINGENCIES

 

Litigation

 

From time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us. It is our policy to not disclose the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on us. After carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously defend any lawsuit filed against us. We record a liability when losses are deemed probable and reasonably estimable. When losses are deemed reasonably possible but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for the claim, if material for disclosure. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of our prevailing, the availability of insurance, and the severity of any potential loss. We reevaluate and update accruals as matters progress over time.

 

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. On July 18, 2022, Culp McAuley filed its Answer to the Company’s Verified Complaint and included Counterclaims alleging breach of contract and seeking monetary damages. On August 8, 2022, the Company filed its Reply and Affirmative Defenses to the Counterclaims by, among other things, denying the allegations and any and all liability.

 

On December 20, 2022, the Company filed a motion for leave to file a second amended complaint to add additional claims against the defendants to avoid fraudulent transfers, to pierce the corporate veil of Culp McAuley, and for remedies related to the claims for fraudulent transfers and piercing the corporate veil. On December 22, 2022, the Court issued an Order granting the Company’s motion for leave to file a second amended complaint, which was filed with the Court on December 27, 2022. Because Culp McAuley’s original counsel withdrew, Culp McAuley was ordered to obtain new counsel on or before December 2, 2022. On December 5, 2022, the Court ordered that Culp McAuley show cause in writing by December 21, 2022, why the Court should not direct the Clerk to enter default against it. On December 22, 2022, the Court directed the Clerk to enter default against Culp McAuley. On February 21, 2023, the Clerk entered default against Culp McAuley.

 

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. On December 7, 2023, the Company filed an application for the Clerk’s entry of default against defendant Brandon Culp. On December 13, 2023, the Clerk entered default against Brandon Culp.

 

24

 

On January 5, 2024, the Company filed a motion for summary judgment against defendants Campbell McAuley and Mark Depew. On the same date, the Company also filed separate motions for default judgment against Culp McAuley and Brandon Culp, respectively. On January 5, 2024, defendant Mark Depew filed a motion for summary judgment against the Company. On May 17, 2024, the Court issued Orders which, respectively, (i) granted defendant Mark Depew’s motion for summary judgment against the Company; (ii) denied the Company’s motion for summary judgment against Depew; (iii) granted the Company’s motion for summary judgment against defendant Campbell McAuley; and (iv) granted the Company’s motions for default judgment against defendants Culp McAuley and Brandon Culp. Finding that defendants Brandon Culp and Campbell McAuley were each the alter ego of Culp McAuley, on June 4, 2024, the Court entered judgment in favor of the Company in the amount of $3,999,984 against Culp McAuley, Brandon Culp, and Campbell McAuley, jointly and severally (the “judgment”). The Company is currently uncertain as to what amount, if any, of the judgment amount it will ultimately be able to recover.

 

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 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. The lawsuit arises from the defendant’s multiple breaches of his obligations to the Company. The Company seeks monetary damages based on certain conduct by the defendant. On May 28, 2024, the defendant filed a motion to strike portions of the complaint and a motion for demurrer. On October 4, 2024, the Court sustained in part and overruled in part defendant’s motion for demurrer. The Court further denied the defendant’s motion to strike in its entirety. The case is pending.

 

As of September 30, 2024, we are able to estimate a range of reasonably possible loss related to the Culp McCauley case (when taking into account, among other things, the uncertainty of recovering the judgment amount owed to the Company by Culp McAuley, Brandon Culp and Campbell McAuley, jointly and severally), our estimate of the aggregate reasonably possible loss (in excess of any accrued amounts) was approximately $1.8 million. Our estimate with respect to the aggregate reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties, which may change quickly and significantly from time to time, particularly if and as we engage with applicable governmental agencies or plaintiffs in connection with a proceeding. Also, the matters underlying the reasonably possible loss will change from time to time. As a result, actual results may vary significantly from the current estimate.

 

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. 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.

 

Notice of Failure to Satisfy a Continued Listing Rule

 

On March 14, 2024, the Nasdaq Listing Qualifications staff notified Digital Ally, Inc. (the “Company”), that due to resignation of Mr. Michael J. Caulfield from the Company’s board of directors (the “Board”) effective on January 31, 2024, the Company no longer complies with the audit committee and compensation committee requirements as set forth in Listing Rule 5605 of The Nasdaq Stock Market LLC (“Nasdaq”), including the requirements that there are at least three independent directors on the Company’s audit committee and at least two independent directors on the Company’s compensation committee.

 

The notification has no immediate effect on the Company’s listing on the Nasdaq Capital Market. In accordance with Nasdaq Listing Rules, the Company is provided a cure period until the earlier of the Company’s next annual shareholders’ meeting (or July 29, 2024 if the next shareholders’ meeting will be held before July 29, 2024) or January 31, 2025 (the “Cure Period”). If the Company does not regain compliance by within the Cure Period, Nasdaq will provide written notice that the Company’s common stock, par value $0.001 per share, will be subject to delisting from the Nasdaq Capital Market, at which time, the Company may appeal the delisting determination to a Hearings Panel.

 

Management of the Company has resolved to take commercially reasonable steps to fill the vacancy on the Board with a new director who qualifies as independent under the Nasdaq Listing Rules as soon as is practical and anticipates regaining compliance during the Cure Period. However, there can be no assurance that the Company will be able to satisfy Nasdaq Listing Rule 5605 or will otherwise be in compliance with other Nasdaq listing criteria. See NOTE 16. SUBSEQUENT EVENTS for additional information pertaining to this matter.

 

NOTE 10. STOCK-BASED COMPENSATION

 

The Company recorded pre-tax compensation expense related to the grant of stock options and restricted stock issued of $(27,789) and $84,586 for the three months ended September 30, 2024 and 2023, and $73,678 and $378,917 for the nine months ended September 30, 2024 and 2023, respectively.

 

25

 

As of September 30, 2024, the Company had adopted ten separate stock option and restricted stock plans: (i) the 2005 Stock Option and Restricted Stock Plan (the “2005 Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the 2007 Stock Option and Restricted Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the “2008 Plan”), (v) the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option and Restricted Stock Plan (the “2013 Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”), (viii) the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”), (ix) the 2020 Stock Option and Restricted Stock Plan (the “2020 Plan”), and (x) the 2022 Stock Option and Restricted Stock Plan (the “2022 Plan”). The 2005 Plan, 2006 Plan, 2007 Plan, 2008 Plan, 2011 Plan, 2013 Plan, 2015 Plan, 2018 Plan, 2020 Plan and 2022 Plan are referred to as the “Plans.”

  

Stock option grants. The Company believes that such awards better align the interests of our employees with those of its stockholders. Option awards have been granted with an exercise price equal to the market price of its stock at the date of grant with such option awards generally vesting based on the completion of continuous service and having ten-year contractual terms. These option awards typically provide for accelerated vesting if there is a change in control (as defined in the Plans). The Company has registered all shares of common stock that are issuable under its Plans with the SEC. A total of 137,042 shares remained available for awards under the various Plans as of September 30, 2024.

 

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model.

 

A summary of all stock option activity under the Plans for the nine months ended September 30, 2024 is as follows: 

 SCHEDULE OF STOCK OPTIONS OUTSTANDING

Options		Number of Shares				Weighted Average Exercise Price
Outstanding at December 31, 2023			53,600			$	45.55
Granted			—				—
Exercised			—				—
Forfeited/expired			(1,100	)			(65.00	)
Outstanding at September 30, 2024			52,500			$	45.14
Exercisable at September 30, 2024			52,500			$	45.14

 

The Plans allow for the cashless exercise of stock options. This provision allows the option holder to surrender/cancel options with an intrinsic value equivalent to the purchase/exercise price of other options exercised. There were no shares surrendered pursuant to cashless exercises during the nine months ended September 30, 2024 and 2023.

 

The aggregate intrinsic value of options outstanding was $-0- and $-0-, at September 30, 2024 and December 31, 2023, respectively. The aggregate intrinsic value of options exercisable was $-0- and $-0-, at September 30, 2024 and December 31, 2023, respectively.

 

As of September 30, 2024, the unrecognized portion of stock compensation expense on all existing stock options was $-0-.

 

26

 

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s option plans as of September 30, 2024: 

 SCHEDULE OF SHARES AUTHORIZED UNDER STOCK OPTION PLANS BY EXERCISE PRICE RANGE

Outstanding options

Exercisable options

Exercise price range

Number of options

Weighted average remaining contractual life

Number of options

Weighted average remaining contractual life

$

0.01 to $49.99

37,000

5.9 years

37,000

5.9 years

$

50.00 to $69.99

14,000

4.0 years

14,000

4.0 years

$

70.00 to $89.99

1,500

1.6 years

1,500

1.6 years

52,500

5.2 years

52,500

5.2 years

 

Restricted stock grants. The Board of Directors has granted restricted stock awards under the Plans. Restricted stock awards are valued on the date of grant and have no purchase price for the recipient. Restricted stock awards typically vest over one to five years corresponding to anniversaries of the grant date. Under the Plans, unvested shares of restricted stock awards may be forfeited upon the termination of service to or employment with the Company, depending upon the circumstances of termination. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive cash dividends.

 

A summary of all restricted stock activity under the Plans for the three months ended September 30, 2024 is as follows:

 SCHEDULE OF RESTRICTED STOCK ACTIVITY

		Number of Restricted shares				Weighted average grant date fair value
Nonvested balance, December 31, 2023			53,875			$	11.27
Granted			80,197				2.12
Vested			(32,250	)			(10.87	)
Forfeited			(51,072	)			(2.91	)
Nonvested balance, September 30, 2024			50,750			$	5.48

 

The Company estimated the fair market value of these restricted stock grants based on the closing market price on the date of grant. As of September 30, 2024, there were $88,399 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants, which will be amortized over the next forty-two months in accordance with their respective vesting scale.

 

The nonvested balance of restricted stock vests as follows:

 SCHEDULE OF NON-VESTED BALANCE OF RESTRICTED STOCK

Years ended		Number of Shares
2024 (October 1, 2024 through December 31, 2024)			—
2025			35,250
2026			6,500
2027			5,000
2028			4,000

 

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NOTE 11. COMMON STOCK PURCHASE WARRANTS

 

2023 Purchase Warrants

 

On April 5, 2023, the Company issued warrants to purchase a total of 1,125,000 shares of Common Stock. The warrant terms provide for net cash settlement outside the control of the Company under certain circumstances. As such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated fair value at their issuance date and at each reporting date with any subsequent changes reported in the consolidated statements of operations as the change in fair value of warrant derivative liabilities. Furthermore, the Company re-values the fair value of warrant derivative liability as of the date the warrant is exercised with the resulting warrant derivative liability transitioned to change in fair value of warrant derivative liabilities through the consolidated statement of operations.

 

The Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of the warrant derivative liability relative to the 2023 Purchase Warrants as of their date of issuance and as of September 30, 2024:

 SCHEDULE OF WARRANT MODIFICATION

		Issuance date assumptions				September 30, 2024 assumptions
Volatility – range			106.0	%			106.6	%
Risk-free rate			3.36	%			3.58	%
Dividend			0	%			0	%
Remaining contractual term			5.0 years				3.5 years
Exercise price		$	5.50 – 7.50			$	5.50 – 7.50
Common stock issuable under the warrants			1,125,000				1,125,000

 

2024 Purchase Warrants

 

On June 25, 2024, the Company issued Series A and prefunded warrants to purchase a total of 1,768,227 shares of Common Stock along with the sale of common stock. The Company also issued Series B Warrants that will be exercisable at any time or times on or after the date Stockholder Approval is obtained. Both the Series A and Series B warrants have reset provisions that are activated upon the date Stockholder Approval is obtained. See NOTE 16. SUBSEQUENT EVENTS for further information on such reset provisions. The warrant terms provide for net cash settlement outside the control of the Company under certain circumstances. As such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated fair value at their issuance date and at each reporting date with any subsequent changes reported in the consolidated statements of operations as the change in fair value of warrant derivative liabilities. Furthermore, the Company re-values the fair value of warrant derivative liability as of the date the warrant is exercised with the resulting warrant derivative liability transitioned to change in fair value of warrant derivative liabilities through the consolidated statement of operations.

 

During the three and nine months ended September 30, 2024, the prefunded warrants to purchase 573,008 shares of common stock were fully exercised.

 

28

 

The Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of the derivative liability relative to the 2024 Purchase Warrants as of their date of issuance and as of September 30, 2024:

 

		Issuance date assumptions				September 30, 2024 assumptions
Volatility – range			72.1 - 101.1%				106.6	%
Risk-free rate			4.25 – 5.46%				3.58	%
Dividend			0	%			0	%
Remaining contractual term			0.1 - 5.0 years				4.7 years
Exercise price		$	2.51			$	2.51
Common stock issuable under the warrants			1,768,227				1,195,219

 

 

The following table summarizes information about shares issuable under all warrants outstanding during the nine months ended September 30, 2024:

 SCHEDULE OF WARRANT ACTIVITY

		Warrants				Weighted average exercise price
Vested Balance, December 31, 2023			1,125,000			$	6.50
Granted			1,768,227				2.51
Exercised			(573,008	)			(2.51	)
Forfeited/cancelled			—				—
Vested Balance, September 30, 2024			2,320,219			$	4.44

 

The total intrinsic value of all outstanding warrants aggregated $-0- as of September 30, 2024. The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable warrants to purchase shares of common stock as of September 30, 2024:

 SCHEDULE OF RANGE OF EXERCISE PRICES AND WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF WARRANTS

				Outstanding and exercisable warrants
Exercise price				Number of warrants				Weighted average remaining contractual life
$	5.50				375,000				3.5 years
$	6.50				375,000				3.5 years
$	7.50				375,000				3.5 years
$	2.51				1,195,219				4.7 years
					2,320,219				4.1 years

 

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NOTE 12. STOCKHOLDERS’ EQUITY

 

2023 Issuance of Restricted Common Stock

 

On January 10, 2023, the board of directors approved the grant of 22,500 shares of common stock to officers of the Company. Such shares will generally vest over a period of one to five years on their respective anniversary dates in January through January 2028, provided that each grantee remains an officer or employee on such dates. Additionally, the board of directors approved the grant of 12,500 restricted common shares to certain new employees of the Company. Such shares will generally vest over a period of one to two years on their respective anniversary dates in January through January 2025, provided that each grantee remains an employee of the company on such dates.

 

2024 Issuance of Restricted Common Stock

 

In January 2024, the board of directors approved the grant of 55,000 shares of common stock to officers of the Company. Such shares will generally vest over a period of one to five years on their respective anniversary dates in January through January 2028, provided that each grantee remains an officer or employee on such dates. Additionally, the board of directors approved the grant of 25,197 restricted common shares to certain new employees of the Company. Such shares will generally vest over a period of one to two years on their respective anniversary dates in January through January 2026, provided that each grantee remains an employee of the company on such dates.

 

2024 Private Placement Transaction

 

On June 24, 2024, the Company entered into a private placement transaction (the “Private Placement”), pursuant to a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional investors (the “Purchasers”) for aggregate gross proceeds of approximately $2.9 million, before deducting fees to the placement agent and other expenses payable by the Company in connection with the Private Placement.

 

As part of the Private Placement, the Company issued an aggregate of 1,195,219 units and pre-funded units (collectively, the “Units”) at a purchase price of $2.51 per unit (less $0.0001 per pre-funded unit). Each Unit consists of (i) one share of common stock, par value $0.001 per share, of the Company (the “Common Stock”) (or one pre-funded warrant to purchase one share of Common Stock (the “Pre-Funded Warrants”)), (ii) one Series A warrant to purchase one share of Common Stock (the “Series A Warrant”) and (iii) one Series B warrant to purchase such number of shares of Common Stock as will be determined on the Reset Date and in accordance with the terms therein (the “Series B Warrant”, and together with the Series A Warrant, the “Warrants”).

 

Cancellation of Restricted Stock

 

During the nine months ended September 30, 2024 and 2023, the Company cancelled 51,072 and 3,625 shares due to termination of employees, respectively.

 

30

 

Exercise of Prefunded Warrants

 

During the nine months ended September 30, 2024, the prefunded warrants to purchase 573,008 shares of common stock were fully exercised.

 

Reverse Stock Split

 

On February 6, 2023, we filed a Certificate of Amendment to the Articles of Incorporation, as amended, with the Secretary of State of the State of Nevada to effect a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the shares of our common stock. The Reverse Stock Split was effective as of time of filing. No fractional shares were issued in connection with the Reverse Stock Split. Any fractional shares of our Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest whole number. In connection with the Reverse Stock Split, our board approved appropriate and proportional adjustments to all outstanding securities or other rights convertible or exercisable into shares of our Common Stock, including, without limitation, all preferred stock, warrants, options, and other equity compensation rights. All historical share and per-share amounts reflected throughout our condensed consolidated financial statements and other financial information in this Report have been adjusted to reflect the Reverse Stock Split as if the split occurred as of the earliest period presented. The par value per share of our common stock was not affected by the Reverse Stock Split.

  

Noncontrolling Interests

 

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”. We reported net loss (income) attributable to noncontrolling interests of consolidated subsidiary of $2,000,206 and $(29,360) for the three months ended September 30, 2024 and 2023, and $1,939,143 and $(228,624) for the nine months ended September 30, 2024 and 2023, respectively.

 

NOTE 13. COUNTRY STAMPEDE ACQUISITION

 

On March 1, 2024, Kustom 440, entered into an Asset Purchase Agreement (the “Acquisition Agreement”) with JC Entertainment, LLC, a Kansas limited liability company (“JC Entertainment”). Pursuant to the Acquisition Agreement, Kustom 440 acquired certain assets associated with a music entertainment event (“Country Stampede”), including all intellectual property arising out of and relating to Country Stampede (“Country Stampede Intellectual Property”) and certain contracts in which JC Entertainment is a party to host and operate the 2024 Country Stampede (the “Assumed Contracts”, and together with the Country Stampede Intellectual Property, the “Purchased Assets”).

 

As consideration for acquiring the Purchased Assets, Kustom 440 paid JC Entertainment the aggregate purchase price amount $542,959, with the sum of $400,000 paid at the time of closing (“Closing”), and the remainder to be paid on or before thirty days from the time of Closing. Kustom 440 shall receive a credit for all non-refunded festival ticket sales for the 2024 Country Stampede to be calculated immediately prior to Closing, and JC Entertainment shall be entitled to keep all ticket sale proceeds made and/or received prior to Closing. Kustom 440 shall be obligated, to the extent a refund is sought after Closing, to provide such refund, if appropriate, to the customer requesting a refund, and shall indemnify and hold harmless JC Entertainment from any and all claims, liabilities, costs, suits, or the like relating to such refund request.

 

The Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, the presentation of the assets acquired, historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, are not required to be presented. Under the acquisition method, the purchase price of the Country Stampede Acquisition has been allocated to the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of the Country Stampede Acquisition. This allocation involves a number of assumptions, estimates, and judgments that could materially affect the timing or amounts recognized in our financial statements. The Country Stampede Acquisition was structured as an asset purchase; however the parties agreed to coordinate the election to invoke IRS Section 338(h)(10) relative to this transaction for tax purposes. Therefore, the excess purchase price over the fair value of net tangible assets acquired was recorded as goodwill, which will be amortized over 15 years for income tax filing purposes. Likewise, the other acquired assets were stepped up to fair value and is deductible for income tax purposes. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

 

31

 

The purchase price of the Country Stampede Acquisition was allocated to tangible assets, goodwill, identifiable intangible assets, and assumed liabilities based on their preliminary estimated fair values at the time of the acquisition. The Company retained the services of an independent valuation firm to determine the fair value of these identifiable intangible assets. The Company will continue to evaluate the fair value of the identified intangible assets. The preliminary estimated fair value of assets acquired, and liabilities assumed in the Country Stampede Acquisition were as follows:

 SCHEDULE OF ESTIMATED FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED ACQUISITION

		As allocated (Preliminary)
Description		March 1, 2024
Assets acquired (provisional):
Tangible assets acquired		$	305,000
Identifiable intangible assets acquired (Trademarks and trade names)			300,000
Goodwill			225,959
Liabilities assumed			(288,000	)
Liabilities assumed pursuant to stock purchase agreement			(288,000	)
Net assets acquired and liabilities assumed		$	542,959
Consideration:
Cash paid at Country Stampede Acquisition date		$	400,000
Cash paid subsequent to closing			142,959
Total Country Stampede Acquisition purchase price		$	542,959

 

During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date.

 

NOTE 14. SEGMENT DATA

 

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. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. The Company’s three operating segments are Video Solutions, Revenue Cycle Management, and Entertainment, each of which has specific personnel responsible for that business and reports to the CODM. Corporate expenses capture the Company’s corporate administrative activities, is also to be reported in the segment information. The Company’s captive insurance subsidiary provides services to the Company’s other business segments and not to outside customers. Therefore, its operations are eliminated in consolidation and is not considered a separate business segment for financial reporting purposes.

 

The Video Solutions Segment encompasses our law, commercial, and Shield™ divisions. This segment includes both service and product revenues through our subscription models offering cloud and warranty solutions, and hardware sales for video and health safety solutions. The Revenue Cycle Management Segment provides working capital and back-office services to a variety of healthcare organizations throughout the country, as a monthly service fee. The Entertainment Segment acts as an intermediary between ticket buyers and sellers within our secondary ticketing platform, ticketsmarter.com, and we also acquire tickets from primary sellers to then sell through various platforms.

 

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The Company’s corporate administration activities are reported in the corporate line item. These activities primarily include expense related to certain corporate officers and support staff, certain accounting staff, expense related to the Company’s Board of Directors, stock option expense for options granted to corporate administration employees, certain consulting expenses, investor relations activities, and a portion of the Company’s legal, auditing and professional fee expenses. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes.

 

Summarized financial information for the Company’s reportable business segments is provided for the indicated periods and as of September 30, 2024, and 2023:

 SCHEDULE OF SEGMENT REPORTING

		2024				2023				2024				2023
		For the three months ended September 30,								For the nine months ended September 30,
		2024				2023				2024				2023
Net Revenues:
Video Solutions		$	1,196,362			$	1,797,348			$	4,500,325			$	5,596,300
Revenue Cycle Management			1,601,792				1,636,543				4,600,745				5,142,904
Entertainment			1,253,557				2,903,808				6,096,227				11,575,315
Total Net Revenues		$	4,051,711			$	6,337,699			$	15,197,297			$	22,314,519
Gross Profit:
Video Solutions		$	769,063			$	426,795			$	1,622,558			$	1,740,397
Revenue Cycle Management			666,723				625,114				1,731,860				2,203,220
Entertainment			304,188				174,240				149,386				1,564,361
Total Gross Profit		$	1,739,974			$	1,226,149			$	3,503,804			$	5,507,978
Operating Income (loss):
Video Solutions		$	(89,055	)		$	(1,311,143	)		$	(1,909,246	)		$	(4,639,316	)
Revenue Cycle Management			(4,085,224	)			43,202				(3,955,761	)			299,010
Entertainment			(1,516,934	)			(1,256,681	)			(3,987,415	)			(2,818,617	)
Corporate			(1,691,086	)			(2,623,421	)			(5,083,070	)			(9,102,631	)
Total Operating Income (Loss)		$	(7,382,299	)		$	(5,148,043	)		$	(14,935,492	)		$	(16,261,554	)
Depreciation and Amortization:
Video Solutions		$	133,246			$	219,955			$	520,970			$	629,677
Revenue Cycle Management			26,735				26,328				80,164				69,066
Entertainment			339,265				319,302				977,112				957,884
Total Depreciation and Amortization		$	499,246			$	565,585			$	1,578,246			$	1,656,627

 

33

 

		September 30, 2024				December 31, 2023
Assets (net of eliminations):
Video Solutions		$	16,876,673			$	26,396,559
Revenue Cycle Management			1,969,225				2,260,376
Entertainment			6,037,666				6,324,211
Corporate			7,379,605				12,047,663
Total Identifiable Assets		$	32,263,169			$	47,028,809

 

The segments recorded noncash items effecting the gross profit and operating income (loss) through the established inventory reserves based on estimates of excess and/or obsolete current and non-current inventory. The Company recorded a reserve for excess and obsolete inventory in the video solutions segment of $4,144,749 and a reserve for the entertainment segment of $78,241 as of September 30, 2024.

 

The segment net revenues reported above represent sales to external customers. Segment gross profit represents net revenues less cost of revenues. 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.

 

NOTE 15. RELATED PARTY TRANSACTIONS

 

Transactions with Managing Member of Nobility Healthcare

 

The Company accrued reimbursable expenses payable to Nobility, LLC totalling $294,715 and $404,483 as of September 30, 2024 and $265,241 as of December 31, 2023 and management fees in accordance with the operating agreement of $6,877 as of September 30, 2024 and $36,502 as of December 31, 2023. The Company recorded management fees of $29,280 and $20,062 for the nine months ended September 30, 2024 and 2023.

 

Transactions with Related Party of TicketSmarter

 

On September 22, 2023, a trust, the beneficiaries of which are TicketSmarter’s Chief Executive Officer and his spouse, made a loan in the amount of $2,325,000 to TicketSmarter to support TicketSmarter’s operations. On October 2, 2023 an additional $375,000 was advanced to Ticketsmarter. The transaction was recorded as a related party note payable (the “TicketSmarter Related Party Note”). The TicketSmarter Related Party Note bears interest of 13.25% per annum with repayment beginning January 2, 2024. As of September 30, 2024, the entire TicketSmarter Related Party note is $2,700,000, is classified as current, with an accrued interest balance of $384,545. The use of proceeds of the TicketSmarter Related Party Note was to resolve numerous outstanding payables at a discounted rate, the discount received to resolve such outstanding payables is recognized as a gain on extinguishment of liabilities on the statement of operations. Additionally, these negotiations relieved TicketSmarter of numerous future obligations following fiscal year 2023.

 

Company Related Party Note

 

On August 22, 2024, Digital Ally’s Chief Executive Officer, made a loan in the amount of $100,000 to the Company to support its operations. The transaction was recorded as a related party note payable (the “Company Related Party Note”). The Company Related Party Note bears interest at the prime Rate (8.00% as of September 30, 2024) per annum with repayment due on demand. As of September 30, 2024, the entire Company Related Party note of $100,000, is classified as current, with an accrued interest balance of $854.

 

34

 

NOTE 16. SUBSEQUENT EVENTS

 

Default and Reservation Letter

 

On March 1, 2024, the Company entered into a Note Purchase Agreement (the “Agreement”), by and between the Company and its wholly-owned subsidiary of the Company (the “Borrowers”), and Mosh Man, LLC, (the “Purchaser”), pursuant to which the Borrowers issued to the Purchaser a Senior Secured Promissory Note (the “Original Note”), as modified pursuant to a Letter Agreement dated July 13, 2024, as further modified by a Letter Agreement dated September 12, 2024, and as further modified pursuant to an Amended and Restated Promissory Note, dated September 25, 2024 (the “Amended Note”, and together with the Original Note, the “Note”). In connection with the Agreement, the Borrowers entered into a security agreement by and between the Borrowers, as grantor, and the Purchaser, as grantee.

 

On October 22, 2024, the Company received a Default and Reservation Letter (the “Default Notice”) from counsel for the administrative agent for the Note, (i) notifying the Company that it is in default under the Note for, among other reasons, failing to make a $100,000 payment that was due on October 10, 2024, (ii) accelerating all principal and interest payments due under the Note, and (iii) demanding the Borrowers enter into a lockbox control agreement within ten (10) business days of the date of the Default Notice. As of the date of the Default Notice, the outstanding obligation of the Company under the Note was approximately $1,600,000.

 

On October 24, 2024, the Company received a Notice of UCC Article 9 Public Sale (the “Sale Notice”) from counsel to the administrative agent for the Note notifying the Company that it intended to conduct a public sale of the collateral securing the Company’s obligations under the Note and Security Agreement on November 5, 2024.

 

As further described below, the Company raised sufficient funds through a private placement which closed on November 7, 2024, to repay the Note in full. The Company’s full repayment of the outstanding obligations under such promissory note effectively cured all defaults under the Agreement and terminated the public sale process of the collateral securing the Borrowers’ obligations thereunder.

 

Securities Purchase Agreement

 

On November 6, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors (the “Purchasers”), pursuant to which the Company agreed to issue and sell to such Purchasers, in a private placement transaction, (i) senior secured promissory notes in aggregate principal amount of $3,600,000 (the “Notes”), and (ii) 808,377 shares (the “Commitment Shares”) of the Company’s common stock, for aggregate gross proceeds of approximately $3.0 million, before deducting placement agent fees and other offering expenses payable by the Company. This private placement closed on November 7, 2024 (the “Closing Date”). 

 

Pursuant to the SPA, the Company was required to use approximately $2,015,623 of the net proceeds from the private placement to pay, in full, all liabilities, obligations and indebtedness owing by the Company and its subsidiary, Kustom Entertainment, Inc., to Mosh Man, LLC (the “Borrower”).

 

The Company’s full repayment of the outstanding obligations under such promissory note effectively cured all defaults under the promissory note and terminated the public sale process of the collateral securing the Borrowers’ obligations thereunder.

 

The Company anticipates that the remaining net proceeds from the Private Placement after repayment of the Mosh Man promissory note, and after deducting placement agent fees and other offering expenses, will meet the Company’s capital needs for approximately three months, subsequent to which the Company anticipates that it will need to raise additional funds to implement its business plan and to service its ongoing operations. The Company also anticipates pursuing the sale of its video solutions business in the short term.

 

35

 

Pursuant to the SPA, the Company is required to file within 30 days of the Closing Date a registration statement with the SEC for a public offering and use its reasonable best efforts to pursue and consummate a follow-on financing transaction within 90 days of the Closing Date. The proceeds of the public offering shall be first used for the repayment of the principal amounts of the Notes. The Company is also required to file within 30 days of the Closing Date a registration statement on Form S-1 (or other appropriate form if the Company is not then S-1 eligible) providing for the resale by the Purchasers of the Commitment Shares issued under the SPA. The Company is required to use commercially reasonable efforts to cause such registration statement to become effective within 60 days following the filing thereof and to keep such registration statement effective at all times until no Purchaser owns any Commitment Shares.

 

Furthermore, pursuant to the SPA, the Company was required to complete the following: (i) the Company’s board of directors shall approve an amendment to the Company’s bylaws setting the quorum required for a special meeting of stockholders to one-third of all stockholders entitled to vote at such special meeting and (ii) the Company shall file with the SEC a preliminary proxy statement on Schedule 14A announcing a meeting of stockholders for the purpose of approving the Series A and Series B warrants issued by the Company on June 25, 2024.

 

Senior Secured Promissory Notes

 

The Notes mature ninety (90) days following their issuance date (the “Maturity Date”) and shall accrue no interest unless and until an Event of Default (as defined in the Notes) has occurred, in which case interest shall accrue at a rate of 14% per annum during the pendency of such Event of Default. In addition, upon customary Events of Default, the Purchasers may require the Company to redeem all or any portion of the Notes in cash with a 125% redemption premium. The Purchasers may also require the Company to redeem all or any portion of the Notes in cash upon a Change of Control, as defined in the Notes, at the prices set forth therein. Upon a Bankruptcy Event of Default (as defined in the Notes), the Company shall immediately pay to the Purchasers an amount in cash representing 100% of all outstanding principal, accrued and unpaid interest, if any, in addition to any and all other amounts due under the Notes, without the requirement for any notice or demand or other action by the Purchaser or any other person.

 

If the Company engages in one or more subsequent financings while the Notes are outstanding, the Company will be required to use at least 100% of the gross proceeds of such financing to redeem all or any portion of the Notes outstanding. The Company may also prepay the Notes in whole or in part at any time or from time to time. The Notes also contain customary representations and warranties and covenants of each of the parties. Subject to certain exceptions, the Notes are secured by a first lien and continuing security interest in and to the Collateral (as defined in the Notes).

 

Notice of Failure to Satisfy a Continued Listing Rule

 

On November 25, 2024, the Company received a notice (the “Notice”) from the Nasdaq Stock Market LLC, which indicated that, as a result of the Company’s delay in filing its Quarterly Report on Form 10-Q for the period ended September 30, 2024, the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires Nasdaq-listed companies to timely file all required periodic financial reports with the U.S. Securities and Exchange Commission.

 

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The Notice states that the Company has until January 24, 2025, to submit to Nasdaq an update to its plan to regain compliance with the Rule. The Notice also indicates that any additional exception to allow the Company to regain compliance with all delinquent filings will be limited to up to 180 calendar days from the due date of the Initial Delinquent Filing, or until May 19, 2025. The Notice has no immediate effect on the listing of the Company’s securities on Nasdaq.

 

The Company continues to work diligently to complete its Quarterly Report and plans to file its Quarterly Report as promptly as possible to regain compliance with the Rule.

 

December 20, 2024, the Company received a written notification from The Nasdaq Stock Market LLC indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), as the Company’s closing bid price for its common stock was below $1.00 per share for the prior thirty (30) consecutive business days. The Company has been granted a 180-calendar day compliance period, or until June 18, 2025, to regain compliance with the Minimum Bid Price Requirement. If the Company is not in compliance by June 18, 2025, the Company may be afforded a second 180-calendar day compliance period. If the Company does not regain compliance within such compliance period, including any granted extensions, its common stock may be subject to delisting, which delisting may be appealed to a Nasdaq hearings panel.

 

Common Stock Warrant Reset

 

On June 24, 2024, the Company entered into a private placement transaction as previously described in NOTE 12. STOCKHOLDERS’ EQUITY (the “June 2024 Private Placement”). As part of the June 2024 Private Placement, the Company issued an aggregate of 1,195,219 units and pre-funded units at a purchase price of $2.51 per unit (less $0.00001 per pre-funded unit). Each Unit consisted of (i) one share of common stock, par value $0.001 per share, of the Company (the “Common Stock”) (or one pre-funded warrant to purchase one share of Common Stock), (ii) one Series A warrant to purchase one share of Common Stock (the “Series A Warrant”) and (iii) one Series B warrant to purchase such number of shares of Common Stock as will be determined on the Reset Date (as defined below) and in accordance with the terms therein. The Pre-Funded Warrants were immediately exercisable at an exercise price of $0.0001 per share of Common Stock and were fully exercised in August 2024. The Series A Warrants became issued and exercisable on and after the date Stockholder Approval was obtained, has an initial exercise price of $2.51 per share of Common Stock and a term of 5 years after the date that the Company obtains Stockholder Approval. Such Stockholder Approval was obtained at the annual meeting of shareholders held on December 17, 2024 as described below. The Series A and B Warrants are now issued and exercisable at any time after the date Stockholder Approval was obtained (December 17, 2024). Both the Series A and B warrants are subject to price and quantity resets based on the lowest daily weighted average trading price of the shares of Common Stock during a period of 20 trading days, subject to a pricing reset floor of $0.502 per share of Common Stock. Based on the Stockholder Approval date of December 17, 2024 and the weighted average trading price experienced, the Series A and B warrants both reset to the floor price of $0.502 per share and the number of shares underlying the Series A Warrants and Series B Warrants were reset to approximately 5,976,095 shares and 4,780,877 shares, respectively. Both the Series A and B warrants are now fully issued and exercisable subsequent to December 17, 2024.

 

Common Stock Issuance

 

The Company issued 698,000 shares of common stock subsequent to September 30, 2024, upon the exercise of common stock purchase Series B warrants.

 

On November 6, 2024, the Company entered into a SPA with certain institutional investors, pursuant to which the Company issued to such institutional investors, in a private placement transaction, (i) senior secured promissory notes in aggregate principal amount of $3,600,000, and (ii) 808,377 shares of the Company’s common stock, for aggregate gross proceeds of approximately $3.0 million.

 

Termination of Material Definitive Agreement.

 

On June 1, 2023, the Company and its wholly owned subsidiary Kustom Entertainment, Inc. (“Kustom”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Clover Leaf Capital Corp., (“Clover Leaf”), and their subsidiary whereby Kustom and Clover Leaf would merge.

 

On November 7, 2024, pursuant to provisions of the Merger Agreement, the Company, Clover Leaf, and related entities the parties entered into a Mutual Termination and Release Agreement (the “Termination Agreement”) to terminate the Merger Agreement. As a result of the Termination Agreement, the Merger Agreement was fully terminated and is of no further force and effect.

 

Amendments to Company Bylaws

 

On November 6, 2024, the Company adopted Amendment No. 1 to its Corporate Bylaws with the approval of the Company’s board of directors. The Bylaws were amended to reduce the quorum requirement at any meeting of the Company’s stockholders to thirty-three and one-third percent (33 1/3%) of the stock issued and outstanding and entitled to vote at such meeting.

 

Annual Meeting

 

The Company held its annual meeting of stockholders (the “Annual Meeting”) on December 17, 2024 for the following purpose:

 

	1.	To elect four directors;
	2.	To ratify the appointment of RBSM LLP as our independent registered public accounting firm;
	3.	To approve the transactions contemplated by the securities purchase agreement, entered into as of June 24, 2024, by and between the Company and investors, including, the issuance of 20% or more of our outstanding shares of common stock, par value $0.001 per share (the “Common Stock”) upon (i) exercise of Series A Common Stock Purchase Warrant; and (ii) exercise of Series B Common Stock Purchase Warrant, each dated June 25, 2024; and
	4.	To approve a proposal to authorize the board of directors of the Company, in its sole and absolute discretion, and without further action of the stockholders, to file an amendment to our articles of incorporation, to effect a reverse stock split of our issued and outstanding Common Stock at a ratio to be determined by the Board, ranging from one-for-five (1:5) to one-for-twenty (1:20), with such reverse stock split to be effected at such time and date, if at all, as determined by the Board in its sole discretion, but no later than December 16, 2025, when the authority granted in this proposal to implement the reverse stock split would terminate.   All of the above matters were approved by the stockholders at the Annual Meeting on December 17, 2024. As a result, the Notice of Failure to Satisfy a Continued Listing Rule described in NOTE 9. COMMITMENTS AND CONTINGENCIES has been cured with the election of four members to serve on our Board of Directors at the Annual Meeting on December 17, 2024.

 

*************************************

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

 

This quarterly report on Form 10-Q (the “Report”) of Digital Ally, Inc. (the “Company”, “we”, “us”, or “our”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “feel,” “forecast,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements.

 

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate.

 

Factors that could cause or contribute to our actual results differing materially from those discussed herein or for our stock price to be adversely affected include, but are not limited to: (1) our losses in recent years, including fiscal years 2024 and 2023; (2) economic and other risks for our business from the effects of the COVID-19 pandemic, including the impacts on our law-enforcement and commercial customers, suppliers and employees and on our ability to raise capital as required; (3) our ability to increase revenues, increase our margins and return to consistent profitability in the current economic and competitive environment; (4) our operation in developing markets and uncertainty as to market acceptance of our technology and new products; (5) the availability of funding from federal, state and local governments to facilitate the budgets of law enforcement agencies, including the timing, amount and restrictions on such funding; (6) our ability to maintain or expand our share of the market for our products in the domestic and international markets in which we compete, including increasing our international revenues; (7) our ability to produce our products in a cost-effective manner; (8) competition from larger, more established companies with far greater economic and human resources; (9) our ability to attract and retain quality employees; (10) risks related to dealing with governmental entities as customers; (11) our expenditure of significant resources in anticipation of sales due to our lengthy sales cycle and the potential to receive no revenue in return; (12) characterization of our market by new products and rapid technological change; (13) our dependence on sales of our EVO-HD, DVM-800, DVM-250 and FirstVU products; (14) that stockholders may lose all or part of their investment if we are unable to compete in our markets and return to profitability; (15) defects in our products that could impair our ability to sell our products or could result in litigation and other significant costs; (16) our dependence on a few manufacturers and suppliers for components of our products and our dependence on domestic and foreign manufacturers for certain of our products; (17) our ability to protect technology through patents and to protect our proprietary technology and information, such as trade secrets, through other similar means; (18) our ability to generate more recurring cloud and service revenues; (19) risks related to our license arrangements; (20) the fluctuation of our operation results from quarter to quarter; (21) sufficient voting power by coalitions of a few of our larger stockholders, including directors and officers, to make corporate governance decisions that could have a significant effect on us and the other stockholders; (22) the issuance or sale of substantial amounts of our Common Stock, or the perception that such sales may occur in the future, which may have a depressive effect on the market price of our securities; (23) potential dilution from the issuance of Common Stock underlying outstanding options and warrants; (24) our additional securities available for issuance, which, if issued, could adversely affect the rights of the holders of our Common Stock; (25) the volatility of our stock price due to a number of factors, including, but not limited to, a relatively limited public float; (26) our ability to integrate and realize the anticipated benefits from acquisitions; (27) our ability to maintain the listing of our Common Stock on the Nasdaq Capital Market

 

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. We have the ability to integrate electronic, radio, computer, mechanical, and multi-media technologies to create positive solutions to our customers’ requests. Our products include: the EVO-HD, DVM-800 and DVM-800 Lite, which are in-car digital video systems for law enforcement and commercial markets; the FirstVU body-worn camera line, consisting of the FirstVu Pro, FirstVu, and the FirstVU HD; our patented and revolutionary VuLink product integrates our body-worn cameras with our in-car systems by providing hands-free automatic activation for both law enforcement and commercial markets; the FLT-250, DVM-250, and DVM-250 Plus, which are our commercial line of digital video mirrors that serve as “event recorders” for the commercial fleet and mass transit markets; and FleetVu and VuLink, which are our cloud-based evidence management systems. We further diversified and broadened our product offerings in 2020, by introducing two new lines of branded products: (1) the ThermoVu™ which is a line of self-contained temperature monitoring stations that provides alerts and controls facility access when an individual’s temperature exceeds a pre-set threshold and (2) our Shield™ disinfectants and cleansers which are for use against viruses and bacteria.

 

 

Our video solutions segment revenue encompasses video recording products and services for our law enforcement and commercial customers and the sale of Shield disinfectant and personal protective products. This segment generates revenues through our subscription models offering cloud and warranty solutions, and hardware sales for video and personal protective safety products and solutions. Revenues for product sales are recognized upon delivery of the product, and revenues from our cloud and warranty subscription plans are deferred over the term of the subscription, typically 3 or 5 years.

 

Revenue Cycle Management Operating Segment – We entered the revenue cycle management business late in the second quarter of 2021 with the formation of our wholly owned subsidiary, Digital Ally Healthcare, Inc. and its majority-owned subsidiary Nobility Healthcare. Nobility Healthcare completed its first acquisition in June 2021, when it acquired a private medical billing company, and has since completed three additional acquisitions of private medical billing companies, in which we will assist in providing working capital and back-office services to healthcare organizations throughout the country. Our assistance consists of insurance and benefit verification, medical treatment documentation and coding, and collections. Through our expertise and experience in this field, we maximize our customers’ service revenues collected, leading to substantial improvements in their operating margins and cash flows.

  

Our revenue cycle management segment consists of our medical billing subsidiaries. Revenues of this segment are recognized after we perform the obligations of our revenue cycle management services. Our revenue cycle management services are services, performed and charged monthly, generally based on a contractual percentage of total customer collections, for which we recognize our net service fees.

 

Entertainment Operating Segment - We also entered into live entertainment and events ticketing services through the formation of our wholly owned subsidiary, TicketSmarter and its completed acquisitions of Goody Tickets, LLC and TicketSmarter, LLC, on September 1, 2021. TicketSmarter provides ticket sales, partnerships, and mainly, ticket resale services through its online ticketing marketplace for live events, TicketSmarter.com. TicketSmarter offers tickets for over 125,000 live events through its platform, for a wide range of events, including concerts, sporting events, theatres, and performing arts, throughout the country. We also offer production and promotion of live music events in third-party venues throughout the country. These services begin with the logistical matters of an event, including artist booking and research, ticketing, staging, on-site operations, vendor sourcing, and day of production.

 

Our entertainment operating segment consists of entertainment services provided through TicketSmarter and its online platform, TicketSmarter.com. Revenues of this segment include ticketing service charges generally determined as a percentage of the face value of the underlying ticket and ticket sales from our ticket inventory which are recognized when the underlying tickets are sold. Entertainment direct expenses include the cost of tickets purchased for resale by the Company and held as inventory, credit card fees, ticketing platform expenses, website maintenance fees, along with other administrative costs.

 

Results of Operations

 

Summarized financial information for the Company’s reportable business segments is provided for the indicated periods and as of September 30, 2024, and September 30, 2023:

 

		For the three months ended September 30,								For the nine months ended September 30,
		2024				2023				2024				2023
Net Revenues:
Video Solutions		$	1,196,362			$	1,797,348			$	4,500,325			$	5,596,300
Revenue Cycle Management			1,601,792				1,636,543				4,600,745				5,142,904
Entertainment			1,253,557				2,903,808				6,096,227				11,575,315
Total Net Revenues		$	4,051,711			$	6,337,699			$	15,197,297			$	22,314,519
Gross Profit:
Video Solutions		$	769,063			$	426,795			$	1,622,558			$	1,740,397
Revenue Cycle Management			666,723				625,114				1,731,860				2,203,220
Entertainment			304,188				174,240				149,386				1,564,361
Total Gross Profit		$	1,739,974			$	1,226,149			$	3,503,804			$	5,507,978
Operating Income (loss):
Video Solutions		$	(89,055	)		$	(1,311,143	)		$	(1,909,246	)		$	(4,639,316	)
Revenue Cycle Management			(4,085,224	)			43,202				(3,955,761	)			299,010
Entertainment			(1,516,934	)			(1,256,681	)			(3,987,415	)			(2,818,617	)
Corporate			(1,691,086	)			(2,623,421	)			(5,083,070	)			(9,102,631	)
Total Operating Income (Loss)		$	(7,382,299	)		$	(5,148,043	)		$	(14,935,492	)		$	(16,261,554	)
Depreciation and Amortization:
Video Solutions		$	133,246			$	219,955			$	520,970			$	629,677
Revenue Cycle Management			26,735				26,328				80,164				69,066
Entertainment			339,265				319,302				977,112				957,884
Total Depreciation and Amortization		$	499,246			$	565,585			$	1,578,246			$	1,656,627

 

 

 

		September 30, 2024				December 31, 2023
Assets (net of eliminations):
Video Solutions		$	16,876,673			$	26,396,559
Revenue Cycle Management			1,969,225				2,260,376
Entertainment			6,037,666				6,324,211
Corporate			7,379,605				12,047,663
Total Identifiable Assets		$	32,263,169			$	47,028,809

 

Segment net revenues reported above represent only sales to external customers. Segment gross profit represents net revenues less cost of revenues. Segment operating income (loss), which is used in management’s evaluation of segment performance, represents net revenues, less 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.

 

Consolidated Results of Operations

 

We experienced operating losses for the nine months of 2024 and all quarters during 2023. The following is a summary of our recent operating results on a quarterly basis:

 

		For the Three Months Ended:
		September 30, 2024				June 30, 2024				March 31, 2024				December 31, 2023				September 30, 2023
Total revenue		$	4,051,711			$	5,616,235			$	5,529,351			$	6,228,351			$	6,337,699
Gross profit			1,739,974				242,392				1,523,699				549,031				1,226,149
Gross profit margin %			42.9	%			4.3	%			27.6	%			8.8	%			19.3	%
Total selling, general and administrative expenses			9,122,273				4,156,613				5,162,733				6,528,031				6,374,192
Operating income (loss)			(7,382,299	)			(3,914,221	)			(3,639,034	)			(5,979,000	)			(5,148,043	)
Operating income (loss) %			(182.2	)%			(69.7	)%			(65.8	)%			(96.0	)%			(81.2	)%
Net income (loss)		$	(5,470,712	)		$	(5,010,551	)		$	(3,943,268	)		$	(7,484,778	)		$	(3,679,043	)

 

Our business is subject to substantial fluctuations on a quarterly basis as reflected in the significant variations in revenues and operating results in the above table. These variations result from various factors, including but not limited to: (1) the timing of large individual orders; (2) the traction gained by products, such as the recently released FirstVu Pro, FirstVu II, FLT-250, EVO HD, the ThermoVu™ and the Shield™ lines; (3) production, quality and other supply chain issues affecting our cost of goods sold; (4) unusual increases in operating expenses, such as the timing of trade shows and stock-based and bonus compensation; (5) the timing of patent infringement litigation settlements (6) ongoing patent and other litigation and related expenses respecting outstanding lawsuits; and (7) the completion of corporate acquisitions including the recent purchases in the revenue cycle management and entertainment operating segments. We reported a net loss of $5,470,712 on revenues of $4,051,711 for the third quarter of 2024.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet debt, nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have a material current or future effect on financial conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses other than the following:

 

We are a party to operating leases and license agreements that represent commitments for future payments and we have issued purchase orders in the ordinary course of business that represent commitments to future payments for goods and services.

 

 

For the Three Months Ended September 30, 2024 and 2023

 

Results of Operations

 

Summarized immediately below and discussed in more detail in the subsequent subsections is an analysis of our operating results for the three months ended September 30, 2024 and 2023, represented as a percentage of total revenues for each such quarter:

 

		For the three months ended September 30,
		2024				2023
Revenue			100	%			100	%
Cost of revenue			57	%			81	%
Gross profit			43	%			19	%
Selling, general and administrative expenses:
Research and development expense			5	%			9	%
Selling, advertising and promotional expense			10	%			30	%
General and administrative expense			91	%			61	%
Goodwill and intangible asset impairment charge			119	%			—
Total selling, general and administrative expenses			225	%			101	%
Operating loss			(182	)%			(81	)%
Change in fair value of derivative liabilities			62	%			29	%
Gain (loss) on extinguishment of liabilities			—	%			8	%
Gain on sale of property, plant and equipment			11	%			—	%
Loss on extinguishment of debt			(8	)%			—	%
Other income and interest income (expense), net			(18	)%			(15	)%
Income (loss) before income tax benefit			(135	)%			(59	)%
Income tax (provision)			—	%			—	%
Net income/(loss)			(135	)%			(59	)%
Net income (loss) attributable to noncontrolling interests of consolidated subsidiary			49	%			—	%
Net income (loss) attributable to common stockholders			(86	)%			(59	)%
Net income/(loss) per share information:
Basic		$	(0.91	)		$	(1.32	)
Diluted		$	(0.91	)		$	(1.32	)

 

 

Revenues

 

Revenues by Type and by Operating Segment

 

Our operating segments generate two types of revenues:

 

Product revenues primarily includes video operating segment hardware sales of in-car and body-worn cameras, along with sales of our ThermoVu^TM units, disinfectants, and personal protective equipment. Additionally, product revenues also include the sale of tickets by our entertainment operating segment that have been purchased or received through our sponsorships and partnerships and held in inventory by our entertainment segment until their sale.

 

Service and other revenues consist of cloud and warranty services revenues from our subscription plan and storage offerings of our video solutions segment. Our entertainment operating segments’ secondary ticketing marketplace revenues are included in service revenue. We recognize service revenue from sales generated through its secondary ticketing marketplace as we collect net services fees on secondary ticketing marketplace transactions. Lastly, our revenue cycle management segment revenues are included in the service revenues for services provided to medical providers throughout the country.

 

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

 

	●	Sales to domestic customers are made directly to the end customer (typically a law enforcement agency or a commercial customer) through our sales force, comprised of our employees. Revenue is recorded when the product is shipped to the end customer.
	●	Sales to international customers are made through independent distributors who purchase products from us at a wholesale price and sell to the end user (typically law enforcement agencies or a commercial customer) at a retail price. The distributor retains the margin as compensation for its role in the transaction. The distributor generally maintains product inventory, customer receivables and all related risks and rewards of ownership. Revenue is recorded when the product is shipped to the distributor consistent with the terms of the distribution agreement.
	●	Repair parts and services for domestic and international customers are generally handled by our inside customer service employees. Revenue is recognized upon shipment of the repair parts and acceptance of the service or materials by the end customer.

 

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

 

●

Our revenue cycle management operating segment generates service revenues through relationships with medium to large healthcare organizations, in which the underlying service revenue is recognized upon execution of services. Service revenues are generally determined as a percentage of the dollar amount of medical billings collected by the customer.

 

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

 

●

Our entertainment operating segment generates product revenues from the sale of tickets directly to consumers for a particular event that the entertainment operating segment has previously purchased and held in inventory for ultimate resale to the end consumer. Service sales through TicketSmarter, are driven largely in part to the usage of the TicketSmarter.com marketplace by buyers and sellers, in which the Company collects service fees for each transaction completed through this platform.

 

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

 

 

Product revenues by operating segment is as follows:

 

		For the three months ended September 30,
		2024				2023
Product Revenues:
Video Solutions		$	306,245			$	977,193
Revenue Cycle Management			—				—
Entertainment			497,700				1,118,044
Total Product Revenues		$	803,945			$	2,095,237

 

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

 

●

Revenues generated by the entertainment operating segment began with the Company’s September 2021 acquisition of TicketSmarter. The entertainment operating segment generated $497,700 in product revenues for the three months ended September 30, 2024, compared to $1,118,044 for the three months ended September 30, 2023, a decrease of $620,344 (55%). Product revenue relates to the timing of the first Kustom 440 music festival in 2023 that did not recur in 2024, the initial Country Stampede music festival in 2024, as well as the resale of tickets purchased for live events, including sporting events, concerts, and theatre, then sold through various platforms to customers. The decrease in revenues is attributable to a reduction in scope of primary ticket sales by Ticketsmarter as it focuses on higher margin events to improve its gross margins.

 

	●	The Company’s video segment operating segment generated revenues totalling $306,245 during the three months ended September 30, 2024 compared to $977,193 for the three months ended September 30, 2023, a decrease of $670,948 (69%). In general, our video solutions operating segment has experienced pressure on its product revenues as our in-car and body-worn systems are facing increased competition because our competitors have released new products with advanced features. Additionally, our law enforcement revenues declined compared to the same period in 2023 due to the Company not having inventory in–stock to fulfil existing backlog orders, price-cutting and competitive actions by our competitors and adverse marketplace effects related to our recent financial condition.
	●	Our video solutions operating segment management has continued to focus on migrating commercial customers, from a hardware sale to a service fee model. Therefore, we expect a reduction in commercial hardware sales (principally DVM-250’s, FLT-250’s, and a portion of our body-worn camera line) as we convert these customers to a service model under which we provide the hardware as part of a recurring monthly service fee. In that respect, we introduced a monthly subscription agreement plan for our body worn cameras and related equipment during 2020 that allowed law enforcement agencies to pay a monthly service fee to obtain body worn cameras without incurring a significant upfront capital outlay. This program has gained some traction, resulting in decreased product revenues and increasing our service revenues. We expect this program to continue to hold traction, resulting in recurring revenues over a span of three to five years.

 

Service and other revenues by operating segment is as follows:

 

		For the three months ended September 30,
		2024				2023
Service and Other Revenues:
Video Solutions		$	890,117			$	820,155
Revenue Cycle Management			1,601,792				1,636,543
Entertainment			755,857				1,785,764
Total Service and Other Revenues		$	3,247,766			$	4,242,462

 

 

Service and other revenues for the three months ended September 30, 2024 and 2023 were $3,247,766 and $4,242,462, respectively, a decrease of $994,696 (23%), due to the following factors:

 

	●	Cloud revenues generated by the video solutions operating segment were $710,580 and $526,401 for the three months ended September 30, 2024 and 2023, respectively, an increase of $184,179 (35%). We have experienced increased interest in our cloud solutions for law enforcement primarily due to the deployment of our cloud-based EVO-HD in-car system and our next generation body-worn camera products, which contributed to our slight increase in cloud revenues in the three months ended September 30, 2024. We expect this trend to continue throughout 2024 as the migration from local storage to cloud storage continues in our customer base.
	●	Video solutions operating segment revenues from extended warranty services were $141,716 and $226,056 for the three months ended September 30, 2024 and 2023, respectively, a decrease of $84,340 (37%).
	●	Our entertainment operating segment generated service revenues totalling $755,857 and $1,785,764 for the three months ended September 30, 2024 and 2023, respectively, a decrease of $1,029,907 (58%). TicketSmarter collects fees on transactions administered through the TicketSmarter.com platform for the buying and selling of tickets for live events throughout the country. We expect our entertainment operating segment to continue to fluctuate as we look to right-size this segment and work towards profitability.
	●	Our revenue cycle management operating segment generated service revenues totalling $1,601,792 and $1,636,543 for the three months ended September 30, 2024 and 2023, respectively, a decrease of $34,751 (2%). Our revenue cycle management operating segment provides revenue cycle management solutions and back-office services to healthcare organizations throughout the country. We expect our revenue cycle management segment to continue to present a strong revenue outlook moving forward.

 

Total revenues for the three months ended September 30, 2024 and 2023 were $4,051,711 and $6,337,699, respectively, a decrease of $2,285,988 (36%), due to the reasons noted above.

 

Cost of Product Revenue

 

Overall cost of product revenue sold for the three months ended September 30, 2024, and 2023 was $547,562 and $2,587,750, respectively, a decrease of $2,040,188 (79%). Overall cost of goods sold for products as a percentage of product revenues for the three months ended September 30, 2024, and 2023 were 68% and 124%, respectively. Cost of products sold by operating segment is as follows:

 

		For the three months ended September 30,
		2024				2023
Cost of Product Revenues:
Video Solutions		$	157,336			$	957,987
Revenue Cycle Management			—				—
Entertainment			390,226				1,629,763
Total Cost of Product Revenues		$	547,562			$	2,587,750

 

The decrease in cost of goods sold for our video solutions segment products was primarily driven by the sale of repair inventory and components as compared to the same period in the prior year. We have been unable to ship backlog due to low inventory levels of finished goods. Cost of product sold as a percentage of product revenues for the video solutions segment decreased to 51% for the three months ended September 30, 2024 as compared to 98% for the three months ended September 30, 2023.

 

 

The decrease in entertainment operating segment cost of product sold was driven by the reduction in sponsored events and primary ticket sales as we selectively limited our events presented for the three months ended September 30, 2024 compared to September 30, 2023, resulting in cost of product revenue of $390,226 for the three months ended September 30, 2024, compared to $1,629,763 for the three months ended September 30, 2023. Cost of product sold as a percentage of product revenues for the entertainment segment was 78% for the three months ended September 30, 2024 as compared to 146% for the three months ended September 30, 2023.

 

Cost of Service Revenue

 

Overall cost of service revenue sold for the three months ended September 30, 2024, and 2023 was $1,764,175 and $2,523,800, respectively, a decrease of $759,625 (30%). Overall cost of goods sold for services as a percentage of service revenues for the three months ended September 30, 2024, and 2023 were 54% and 59%, respectively. Cost of service revenues by operating shipment is as follows:

 

		For the three months ended September 30,
		2024				2023
Cost of Service Revenues:
Video Solutions		$	269,962			$	382,430
Revenue Cycle Management			935,070				1,011,429
Entertainment			559,143				1,129,941
Total Cost of Service Revenues		$	1,764,175			$	2,523,800

 

The decrease in cost of service revenues for our video solutions segment reflects our staffing reductions implemented during 2024 in order to right-size our operations commensurate with our service revenues in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Cost of service revenues as a percentage of service revenues for the video solutions segment decreased to 30% for the three months ended September 30, 2024 as compared to 47% for the three months ended September 30, 2023.

 

Cost of service revenues as a percentage of service revenues for the revenue cycle management operating segment remained consistent at 58% for the three months ended September 30, 2024 as compared to 62% for the three months ended September 30, 2023.

 

The decrease in entertainment operating segment cost of service revenues is commensurate with the decrease in service revenues in the three months ended September 30, 2024, compared to the three months ended September 30, 2023. Cost of service revenues as a percentage of service revenues for the entertainment segment was 74% for the three months ended September 30, 2024 as compared to 63% for the three months ended September 30, 2023.

 

 

Gross Profit

 

Overall gross profit for the three months ended September 30, 2024 and 2023 was $1,739,974 and $1,226,149, respectively, an increase of $513,825 (42%). Gross profit by operating segment was as follows:

 

		For the three months ended September 30,
		2024				2023
Gross Profit:
Video Solutions		$	769,063			$	426,795
Revenue Cycle Management			666,723				625,114
Entertainment			304,188				174,240
Total Gross Profit		$	1,739,974			$	1,226,149

 

The overall increase is attributable to the improvement in gross profit generated by the video solutions and entertainment segments for the three months ended September 30, 2024 compared to 2023 along with a decrease in the overall cost of sales as a percentage of overall revenues to 57% for the three months ended September 30, 2024 from 81% for the three months ended September 30, 2023. Our goal is to continue to improve our margins over the longer term based on the expected margins generated by our new recent revenue cycle management and entertainment operating segments together with our video solutions operating segment and its expected margins from our EVO-HD, DVM-800, VuLink, FirstVu Pro, FirstVu II, and our cloud evidence storage and management offering, provided that they gain traction in the marketplace. In addition, if revenues from the video solutions segment increase, we will seek to further improve our margins from this segment through expansion and increased efficiency utilizing fixed manufacturing overhead components. We plan to continue our initiative to more efficiently management of our supply chain through outsourcing production, quantity purchases and more effective purchasing practices.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were $9,122,273 and $6,374,192 for the three months ended September 30, 2024 and 2023, respectively, an increase of $2,748,081 (43%). The increase was primarily attributable to the goodwill and intangible asset impairment charge recorded during the 2024 period offset by a reduction in new sponsorships being entered into by the Company. Our selling, general and administrative expenses as a percentage of sales increased to 225% for the three months ended September 30, 2024 compared to 101% in the same period in 2023. The significant components of selling, general and administrative expenses are as follows:

 

		For the three months ended September 30,
		2024				2023
Research and development expense		$	210,818			$	564,146
Selling, advertising and promotional expense			414,727				1,932,982
General and administrative expense			3,666,728				3,877,064
Goodwill and intangible asset impairment charge			4,830,000				—
Total		$	9,122,273			$	6,374,192

 

Research and development expense. Our research and development expenses totalled $210,818 and $564,146 for the three months ended September 30, 2024 and 2023, respectively which represents a decrease of $353,328 (63%). We have focused on controlling our expenditures on bringing new products to market, including updates and improvements to current products in response to our decline in revenues. The decrease in research and development expense reflects the large cut-back in our engineering staff and research activities in order to right-size our expenses in this area with our revenues.

 

 

Selling, advertising and promotional expenses. Selling, advertising and promotional expense totalled $414,727 and $1,932,982 for the three months ended September 30, 2024 and 2023, respectively, a decrease of $1,518,255 (79%). The decrease in selling, advertising and promotional expenses reflects the large cut-back in selling staff and promotional and advertising activities in order to right-size our expenses in this area with our revenues. In addition, the decrease is attributable to the reduction in new sponsorships being entered into by the Company and its subsidiary TicketSmarter.

 

General and administrative expense. General and administrative expenses totalled $3,666,728 and $3,877,064 for the three months ended September 30, 2024 and 2023, respectively. The decrease in general and administrative expenses in the three months ended September 30, 2024 compared to the same period in 2023 is primarily attributable to a decrease in administrative salaries and reductions in headcount in order to right-size our expenses in this area with our revenues. The decrease in general and administrative expenses was offset by a substantial increase legal and professional expenses for the three months ended September 30, 2024 compared to the same period in 2023 due to the failed merger with CloverLeaf and various capital raises we have undertaken.

 

Goodwill and intangible asset impairment charge. We performed an interim impairment test as of the last day of the fiscal third quarter of 2024 as management determined that a triggering event had occurred resulting from the additional decline in demand for our services, prolonged economic uncertainty, the fact that the split-off transaction did not occur when and as expected and a further decrease in our stock price. Therefore, we performed an interim impairment test as of the September 30, 2024 for our reporting units with remaining goodwill.

 

As a result of our September 30, 2024 interim impairment test, we concluded that the carrying amount of the revenue cycle management and entertainment reporting units exceeded their estimated fair value. Thus, we recorded a non-cash goodwill impairment charge of $4,322,000, representing a portion of the goodwill balance for the revenue cycle management segment, which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024. In addition, we recorded a non-cash goodwill impairment charge of $307,000, representing a portion of the goodwill balance for the entertainment segment, which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the three months ended September 30, 2024. The goodwill impairment was primarily driven by recent performance of the entertainment reporting unit since our annual impairment testing date, as well as a delay in the projected timing of recovery.

 

During the three months ended September 30, 2024, we concluded that the carrying amount of a trade name/trademark related to the entertainment segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $201,000, which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the three months ended September 30, 2024. The charge was primarily driven by the split-off transaction not being completed when and as expected and our recent revenue performance of the related business given a decline in demand and overall economic uncertainty. The remaining balance for this trade name/trademark was $699,000 as of September 30, 2024.

 

Operating Loss

 

For the reasons stated above, our operating loss was $7,382,299 and $5,148,043 for the three months ended September 30, 2024 and 2023, respectively, an increase of $2,234,256 (43%). Operating loss as a percentage of revenues improved to 182% in the three months ended September 30, 2024 from 81% in the same period in 2023.

 

Interest Income

 

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

 

Interest Expense

 

We incurred interest expenses of $771,846 and $959,898 during the three months ended September 30, 2024 and 2023, respectively. The decrease is attributable to the pay-off of the building loan from proceeds of sale of the building and by a reduction and pay-off of the contingent earn-out notes associated with the four Nobility Healthcare acquisitions in 2024.

 

Other income (loss)

 

Other income (loss) decreased to $8,920 for the three months ended September 30, 2024, from $25,394 during the three months ended September 30, 2023, which reflects a reduction in rental income related to a warehouse lease within the corporate headquarters that was terminated when the building was sold.

 

Change in Fair Value of Derivative Liabilities

 

During the second quarter of 2023, the Company issued detachable warrants to purchase a total of 1,125,000 shares of Common Stock in association with the two secured convertible notes previously described. The Company issued an additional 1,195,219 warrants in June 2024. The underlying warrant agreement terms provide for net cash settlement outside the control of the Company in the event of tender offers under certain circumstances. As such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated fair value at their issuance date and at each reporting date with any subsequent changes reported in the condensed consolidated statement of operations as the change in fair value of warrant derivative liabilities. The change in fair value of the warrant derivative liabilities from July 1, 2024, to September 30, 2024, totalled $2,530,675 which was recognized as income in the third quarter of 2024.

 

 

Gain on Extinguishment of Liabilities

 

During the third quarter of 2024, the Company negotiated a termination of its lease on its former headquarters. As a result, the Company recorded a gain of $9,385 on the termination during the three months ended September 30, 2024.

 

Loss on Extinguishment of Debt

 

On March 1, 2024, the Company obtained a short-term merchant advance, which totalled $1,000,000, from a single lender to fund operations. The Company modified/amended the underlying loan agreement twice during the three months ended September 30, 2024. The modifications were both deemed to be extinguishments of debt resulting in a $310,505 total loss during the three and nine months ended September 30, 2024.

 

Gain on Sale of Property, Plant and Equipment

 

During the three months ended September 30, 2024, the Company sold its building for $5,900,000 less closing costs of $7,194. The carrying amount of the building on the date of sale was $5,461,623. As a result of the sale the Company recorded a gain of $431,183 in the Consolidated Statement of Operation during the three months ended September 30, 2024.

 

Loss before Income Tax Benefit

 

As a result of the above results of operations, we reported a loss before income tax benefit of $5,470,712, and $3,679,043 for the three months ended September 30, 2024 and 2023, respectively, an increase of $1,791,669 (49%).

 

Income Tax Benefit

 

We did not record an income tax expense related to our income for the three months ended September 30, 2024 due to our overall net operating loss carryforwards available. We have further determined to continue providing a full valuation reserve on our net deferred tax assets as of September 30, 2023. We had approximately $113.3 million of net operating loss carryforwards and $1.8 million of research and development tax credit carryforwards as of September 30, 2024 available to offset future net taxable income.

 

Net Loss

 

As a result of the above results of operations, we reported a net loss of $5,470,712, and $3,679,043 for the three months ended September 30, 2024 and 2023, respectively, an increase of $1,791,669 (49%).

 

Net Income Attributable to Noncontrolling Interests of Consolidated Subsidiary

 

The Company owns a 51% equity interest in its consolidated, Nobility Healthcare. As a result, the noncontrolling shareholders or minority interest is allocated 49% of the income of Nobility Healthcare which is reflected in the statement of income as “net income attributable to noncontrolling interests of consolidated subsidiary”. We reported net loss (income) attributable to noncontrolling interests of consolidated subsidiary of $2,000,206 and $(29,630) for the three months ended September 30, 2024 and 2023, respectively.

 

 

Net Loss Attributable to Common Stockholders

 

As a result of the above, we reported a net loss attributable to common stockholders of $3,470,506 and $3,708,673 for the three months September 30, 2024 and 2023, respectively, an improvement of $238,167 (6%).

 

Basic and Diluted Loss per Share

 

The basic and diluted loss per share was $0.91 and $1.32 for the three months ended September 30, 2024 and 2023, respectively. Basic loss per share is based upon the weighted average number of common shares outstanding during the period. For the three months ended September 30, 2024 and 2023, all shares issuable upon conversion of convertible debt and the exercise of outstanding stock options and warrants were antidilutive, and, therefore, not included in the computation of diluted loss per share.

 

For the Nine months Ended September 30, 2024 and 2023

 

Results of Operations

 

Summarized immediately below and discussed in more detail in the subsequent subsections is an analysis of our operating results for the nine months ended September 30, 2024 and 2023, represented as a percentage of total revenues for each such quarter:

 

		For the nine months ended September 30,
		2024				2023
Revenue			100	%			100	%
Cost of revenue			77	%			75	%
Gross profit			23	%			25	%
Selling, general and administrative expenses:
Research and development expense			8	%			9	%
Selling, advertising and promotional expense			13	%			26	%
General and administrative expense			68	%			62	%
Goodwill and intangible asset impairment charge			32	%			—	%
Total selling, general and administrative expenses			121	%			97	%
Operating loss			(98	)%			(73	)%
Loss on accrual for legal settlement			—	%			(8	)%
Change in fair value of contingent consideration promissory notes			—	%			1	%
Change in fair value of derivative liabilities			14	%			8	%
Gain on extinguishment of liabilities			5	%			2	%
Loss on extinguishment of debt			(2	)%			—	%
Gain on sale of property, plant and equipment			3	%			—	%
Other income and interest income (expense), net			(18	)%			(11	)%
Income (loss) before income tax benefit			(95	)%			(81	)%
Income tax (provision)			—	%			—	%
Net income/(loss)			(95	)%			(81	)%
Net loss attributable to noncontrolling interests of consolidated subsidiary			13	%			(1	)%
Net income (loss) attributable to common stockholders			(82	)%			(82	)%
Net income/(loss) per share information:
Basic		$	(3.90	)		$	(6.55	)
Diluted		$	(3.90	)		$	(6.55	)

 

 

Product revenues by operating segment is as follows:

 

		For the nine months ended September 30,
		2024				2023
Product Revenues:
Video Solutions		$	1,648,373			$	3,318,815
Revenue Cycle Management			—				—
Entertainment			2,929,019				4,307,891
Total Product Revenues		$	4,577,392			$	7,626,706

 

Product revenues for the nine months ended September 30, 2024 and 2023 were $4,577,392 and $7,626,706 respectively, a decrease of $3,049,314 (40%), due to the following factors:

 

●

Revenues generated by the entertainment operating segment began with the Company’s September 2021 acquisition of TicketSmarter. The new entertainment operating segment generated $2,929,019 in product revenues for the nine months ended September 30, 2024, compared to $4,307,891 for the nine months ended September 30, 2023. This product revenue relates to the first Country Stampede music festival held by Kustom during 2024, as well as the resale of tickets purchased for live events, sporting events, concerts, and theatre, then sold through various platforms to customers. The decrease in revenues is attributable to a reduction in scope of primary ticket sales by Ticketsmarter as it focuses on higher margin events to improve its gross margins.

 

●

The Company’s video segment operating segment generated revenues totalling $1,648,373 during the nine months ended September 30, 2024 compared to $3,318,81 for the nine months ended September 30, 2023. In general, our video solutions operating segment has experienced pressure on its product revenues as our in-car and body-worn systems are facing increased competition because our competitors have released new products with advanced features. Additionally, our law enforcement revenues declined compared to the same period in 2023 due to the Company not having inventory in–stock to fulfill existing backlog orders, price-cutting and competitive actions by our competitors and adverse marketplace effects related to our recent financial condition.

 

 

●

Our video solutions operating segment management has continued to focus on migrating commercial customers, from a hardware sale to a service fee model. Therefore, we expect a reduction in commercial hardware sales (principally DVM-250’s, FLT-250’s, and a portion of our body-worn camera line) as we convert these customers to a service model under which we provide the hardware as part of a recurring monthly service fee. In that respect, we introduced a monthly subscription agreement plan for our body worn cameras and related equipment during the second quarter of 2020 that allowed law enforcement agencies to pay a monthly service fee to obtain body worn cameras without incurring a significant upfront capital outlay. This program has gained some traction, resulting in decreased product revenues and increasing our service revenues. We expect this program to continue to hold traction, resulting in recurring revenues over a span of three to five years.

 

Service and other revenues by operating segment is as follows:

 

		For the nine months ended September 30,
		2024				2023
Service and Other Revenues:
Video Solutions		$	2,851,952			$	2,277,485
Revenue Cycle Management			4,600,745				5,142,904
Entertainment			3,167,208				7,267,424
Total Service and Other Revenues		$	10,619,905			$	14,687,813

 

Service and other revenues for the nine months ended September 30, 2024 and 2023 were $10,619,905 and $14,687,813, respectively, a decrease of $4,067,908 (28%), due to the following factors:

 

	●	Cloud revenues generated by the video solutions operating segment were $1,964,038 and $1,421,174 for the nine months ended September 30, 2024 and 2023, respectively, an increase of $542,864 (38%). We have experienced increased interest in our cloud solutions for law enforcement primarily due to the deployment of our cloud-based EVO-HD in-car system and our next generation body-worn camera products, which contributed to our increased cloud revenues in the nine months ended September 30, 2023. We expect this trend to continue throughout 2024 as the migration from local storage to cloud storage continues in our customer base.
	●	Video solutions operating segment revenues from extended warranty services were $605,723 and $659,130 for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $53,407 (8%). This correlates with the decrease in product revenue during the period.
	●	Our entertainment operating segment generated service revenues totalling $3,167,208 and $7,267,424 for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $4,100,216 (56%). TicketSmarter collects fees on transactions administered through the TicketSmarter.com platform for the buying and selling of tickets for live events throughout the country. We expect our entertainment operating segment to continue to fluctuate as we look right-size this segment and work towards profitability. Our entertainment segment has focused on cost cutting and overall improvements in gross margin rather than top line revenues which has resulted in a reduction in revenues for ticketing events that did not meet its gross margin goals.

 

 

●

Our revenue cycle management operating segment generated service revenues totalling $4,600,745 and $5,142,904 for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $542,159 (11%). Our revenue cycle management operating segment has completed four acquisitions since formation in June of 2021, thus resulting in the new service revenue stream added in the nine months ended September 30, 2024 and 2023. Our revenue cycle management operating segment provides revenue cycle management solutions and back-office services to healthcare organizations throughout the country. The slight decrease in revenue is due to refinement within one of the recent acquisitions, as they strive to maximize profitability rather than focus on top line revenue.

 

Total revenues for the nine months ended September 30, 2024 and 2023 were $15,197,297 and $22,314,519, respectively, a decrease of $7,117,222 (32%), due to the reasons noted above.

 

Cost of Product Revenue

 

Overall cost of product revenue sold for the nine months ended September 30, 2024, and 2023 was $5,534,209 and $7,108,366, respectively, a decrease of $1,574,157 (22%). Overall cost of goods sold for products as a percentage of product revenues for the nine months ended September 30, 2024, and 2023 were 121% and 93%, respectively. Cost of products sold by operating segment is as follows:

 

		For the nine months ended September 30,
		2024				2023
Cost of Product Revenues:
Video Solutions		$	1,913,356			$	3,658,490
Revenue Cycle Management			—				—
Entertainment			3,620,853				3,449,876
Total Cost of Product Revenues		$	5,534,209			$	7,108,366

 

The decrease in cost of goods sold for our video solutions segment products is directly correlated with the decrease in product sales for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. In addition, the video solutions segment recorded valuation allowances for its older product lines and a portion of its Shield products during the first nine months of 2023, directly increasing cost of goods sold for the period. Cost of product sold as a percentage of product revenues for the video solutions segment remained steady at 116% for the nine months ended September 30, 2024 as compared to 110% for the nine months ended September 30, 2023.

 

The increase in entertainment operating segment cost of product sold was driven by the costs of the Country Stampede music festival for the nine months ended September 30, 2024 compared to September 30, 2023, resulting in cost of product revenue of $3,620,853 for the nine months ended September 30, 2024, compared to $3,449,876 for the nine months ended September 30, 2023. Cost of product sold as a percentage of product revenues for the entertainment segment was 124% for the three months ended September 30, 2024 as compared to 80% for the nine months ended September 30, 2023.

 

 

Cost of Service Revenue

 

Overall cost of service revenue sold for the nine months ended September 30, 2024, and 2023 was $6,159,284 and $9,698,175, respectively, a decrease of $3,538,891 (36%). Overall cost of goods sold for services as a percentage of service revenues for the nine months ended September 30, 2024, and 2023 were 58% and 66%, respectively. Cost of service revenues by operating segment is as follows:

 

		For the nine months ended September 30,
		2024				2023
Cost of Service Revenues:
Video Solutions		$	964,412			$	1,024,798
Revenue Cycle Management			2,868,885				2,939,682
Entertainment			2,325,987				5,733,695
Total Cost of Service Revenues		$	6,159,284			$	9,698,175

 

The decrease in cost of service revenues for our video solutions segment is commensurate with the increase in service revenues in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. Cost of service revenues as a percentage of service revenues for the video solutions segment decreased to 34% for the nine months ended September 30, 2024 as compared to 45% for the nine months ended September 30, 2023. The improved cost of service revenues as a percentage of service revenues reflects the results of cost cutting efforts and head-count reductions implemented in 2024 to improve our operating results.

 

The revenue cycle management operating segment cost of service revenue was consistent with the prior period. Cost of service revenues as a percentage of service revenues for the revenue cycle management operating segment was 62% for the nine months ended September 30, 2024 as compared to 57% for the nine months ended September 30, 2023.

 

The decrease in entertainment operating segment cost of service revenues is commensurate with the decrease in service revenues in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. Cost of service revenues as a percentage of service revenues for the entertainment operating segment was 73% for the nine months ended September 30, 2024 as compared to 79% for the nine months ended September 30, 2023.

 

Gross Profit

 

Overall gross profit for the nine months ended September 30, 2024 and 2023 was $3,503,804 and $5,507,978, respectively, a decrease of $2,004,174 (36%). Gross profit by operating segment was as follows:

 

		For the nine months ended September 30,
		2024				2023
Gross Profit:
Video Solutions		$	1,622,557			$	1,658,584
Revenue Cycle Management			1,731,860				2,203,222
Entertainment			149,387				1,646,172
Total Gross Profit		$	3,503,804			$	5,507,978

 

The overall decrease is attributable to the overall decrease in revenues for the nine months ended September 30, 2024 and an increase in the overall cost of sales as a percentage of overall revenues to 77% for the nine months ended September 30, 2024 from 75% for the nine months ended September 30, 2023. Our goal is to improve our margins over the longer term based on the expected margins generated by our new recent revenue cycle management and entertainment operating segments together with our video solutions operating segment and its expected margins from our EVO-HD, DVM-800, VuLink, FirstVu Pro, FirstVu II, ShieldTM disinfectants and our cloud evidence storage and management offering, provided that they gain traction in the marketplace. In addition, if revenues from the video solutions segment increase, we will seek to further improve our margins from this segment through expansion and increased efficiency utilizing fixed manufacturing overhead components. We plan to continue our initiative to more efficient management of our supply chain through outsourcing production, quantity purchases and more effective purchasing practices.

 

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were $18,439,296 and $21,769,532 for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $3,330,236 (15%). The decrease was primarily attributable to the reduction in new sponsorships being entered into by the Company offset by the goodwill and intangible asset impairment charge. Our selling, general and administrative expenses as a percentage of sales increased to 121% for the nine months ended September 30, 2024 compared to 98% in the same period in 2023. The significant components of selling, general and administrative expenses are as follows:

 

		For the nine months ended September 30,
		2024				2023
Research and development expense		$	1,244,060			$	2,039,361
Selling, advertising and promotional expense			1,902,489				5,885,097
General and administrative expense			10,462,747				13,845,074
Goodwill and intangible asset impairment charge			4,830,000				—
Total		$	18,439,296			$	21,769,532

 

Research and development expense. Our research and development expenses totalled $1,244,060 and $2,039,361 for the nine months ended September 30, 2024 and 2023, respectively which represents a decrease of $795,301 (39%). We have focused on controlling our expenditures on bringing new products to market, including updates and improvements to current products in response to our decline in revenues. The decrease in research and development expense reflects the large cut-back in our engineering staff and research activities in order to right-size our expenses in this area with our revenues.

 

Selling, advertising and promotional expenses. Selling, advertising and promotional expense totalled $1,902,489 and $5,885,097 for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $3,982,608 (68%). The decrease in selling, advertising and promotional expenses reflects the large cut-back in selling staff and promotional and advertising activities in order to right-size our expenses in this area with our revenues. In addition, the decrease is attributable to the reduction in new sponsorships being entered into by the Company and its subsidiary TicketSmarter.

 

General and administrative expense. General and administrative expenses totalled $10,462,747 and $13,845,074 for the nine months ended September 30, 2024 and 2023, respectively. The decrease in general and administrative expenses in the three months ended September 30, 2024 compared to the same period in 2023 is primarily attributable to a decrease in administrative salaries and reductions in headcount in order to right-size our expenses in this area with our revenues. The decrease in general and administrative expenses was offset by a substantial increase legal and professional expenses for the nine months ended September 30, 2024 compared to the same period in 2023 due to the failed merger with CloverLeaf and various capital raises we have undertaken.

 

Goodwill and intangible asset impairment charge. We performed an interim impairment test as of the last day of the fiscal third quarter of 2024 as management determined that a triggering event had occurred resulting from the additional decline in demand for our services, prolonged economic uncertainty, the fact that the split-off transaction did not occur when and as expected and a further decrease in our stock price. Therefore, we performed an interim impairment test as of the September 30, 2024 for our reporting units with remaining goodwill.

 

As a result of our September 30, 2024 interim impairment test, we concluded that the carrying amount of the revenue cycle management and entertainment reporting units exceeded their estimated fair value. Thus, we recorded a non-cash goodwill impairment charge of $4,322,000, representing a portion of the goodwill balance for the revenue cycle management segment, which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024. In addition, we recorded a non-cash goodwill impairment charge of $307,000, representing a portion of the goodwill balance for the entertainment segment, which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the nine months ended September 30, 2024. The goodwill impairment was primarily driven by recent performance of the entertainment reporting unit since our annual impairment testing date, as well as a delay in the projected timing of recovery.

 

During the three months ended September 30, 2024, we concluded that the carrying amount of a trade name/trademark related to the entertainment segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $201,000, which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the nine months ended September 30, 2024. The charge was primarily driven by the split-off transaction not being completed when and as expected and our recent revenue performance of the related business given a decline in demand and overall economic uncertainty. The remaining balance for this trade name/trademark was $699,000 as of September 30, 2024.

 

 

Operating Loss

 

For the reasons stated above, our operating loss was $14,935,492 and $16,261,554 for the nine months ended September 30, 2024 and 2023, respectively, an improvement of $1,326,062 (8%). Operating loss as a percentage of revenues changed to 98% in the nine months ended September 30, 2024 from 73% in the same period in 2023.

 

Interest Income

 

Interest income decreased to $63,064 for the nine months ended September 30, 2024, from $84,071 in the same period of 2023, which reflects our change in cash and cash equivalent levels during the nine months ended September 30, 2024 compared to the same period in 2023. The Company held higher levels of cash and cash equivalents during the nine months ended September 30, 2023.

 

Interest Expense

 

We incurred interest expense of $2,505,536 and $2,480,947 during the nine months ended September 30, 2024 and 2023, respectively. The increase is attributable additional debt issued in late 2023 and during the nine months ended September 30, 2024 partially offset by the conversion of the convertible notes entered into in the second quarter of 2023, the payoff of the building debt upon sale of the building and the pay-off of the contingent earn-out notes associated with the four Nobility Healthcare acquisitions.

 

Other income (expense)

 

Other income (expense) decreased to $66,966 for the nine months ended September 30, 2024, from $76,180 during the nine months ended September 30, 2023, which reflects income related to a warehouse lease within the corporate headquarters which ceased in 2024 upon the sale of the building.

 

Change in Fair Value of Derivative Liabilities

 

During the second quarter of 2023, the Company issued detachable warrants to purchase a total of 1,125,000 shares of Common Stock in association with the two secured convertible notes previously described. The Company issued an additional 1,195,219 warrants in June 2024. The underlying warrant agreement terms provide for net cash settlement outside the control of the Company in the event of tender offers under certain circumstances. As such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated fair value at their issuance date and at each reporting date with any subsequent changes reported in the condensed consolidated statement of operations as the change in fair value of warrant derivative liabilities. The change in fair value of the warrant derivative liabilities from December 31, 2023, to September 30, 2024, totalled $2,178,965 which was recognized as income during the nine months ended September 30, 2024.

 

Gain on Extinguishment of Liabilities

 

The Company recorded a gain on the extinguishment of liabilities for the nine months ended September 30, 2024 of $682,345, which reflects income related to the video segment’s ability to negotiate down payables and contract liabilities during the period. In addition, the Company negotiated a termination of its lease on its former headquarters which resulted in a gain of $9,385 on the termination during the nine months ended September 30, 2024.

 

 

The gain on extinguishment of liabilities was $507,304 for the nine months ended September 30, 2023, which reflects income related to the entertainment segment’s ability to negotiate down payables and contract liabilities during the period. The Company utilized funds from the related party note payable to resolve numerous outstanding payables at a discounted rate, the discount received was recognized as a gain on extinguishment of liabilities in the statement of operations for the nine months ended September 30, 2023.

 

Loss on Extinguishment of Debt

 

On March 1, 2024, the Company obtained a short-term merchant advance for its entertainment segment, which totalled $1,000,000, from a single lender to fund operations. The Company modified/amended the underlying loan agreement twice during the nine months ended September 30, 2024. The modifications were both deemed to be extinguishments of debt resulting in a $310,505 total loss during the three and nine months ended September 30, 2024.

 

During the nine months ended September 30, 2024, the Company refinanced its merchant advance loan for its video segment and determined the refinancing of the debt should be treated as a debt extinguishment. As a result, the Company recorded a loss of $68,827 on the extinguishment during the nine months ended September 30, 2024.

 

Gain on Sale of Property, Plant and Equipment

 

During the nine months ended September 30, 2024, the Company sold its building for $5,900,000 less closing costs of $7,194. The carrying amount of the building on the date of sale was $5,461,623. As a result of the sale the Company recorded a gain of $431,183 in the Consolidated Statement of Operation during the nine months ended September 30, 2024. This amount was offset by a separate loss on sale of fixed assets of $41,661 for the nine months ended September 30, 2024.

Loss on accrual for legal settlement

 

The Company recognized a loss on accrual for legal settlement of $-0- and $1,792,308 during the nine months ended September 30, 2024 and 2023, respectively. This is in connection with the ongoing lawsuit with Culp McCauley, Inc.

 

Loss on conversion of convertible debt

 

The Company recognized a loss on conversion of convertible debt of $-0- and $93,386 during the nine months ended September 30, 2024 and 2023, respectively. This is in connection with the convertible note issued during the nine months ended September 30, 2023 and the conversion from debt to equity during the period.

 

Change in Fair Value of Contingent Consideration Promissory Notes

 

During the nine months ended September 30, 2023, The Company recognized a gain on the change in fair value of contingent consideration promissory notes of $177,909. This is in connection with the four acquisitions made by our revenue cycle management segment. There was no similar transaction during the nine months ended September 30, 2024.

 

Loss before Income Tax Benefit

 

As a result of the above results of operations, we reported a loss before income tax benefit of $14,424,531 and $17,979,171 for the nine months ended September 30, 2024 and 2023, respectively, an improvement of $3,554,640 (20%).

 

Income Tax Benefit

 

We did not record an income tax expense related to our income for the nine months ended September 30, 2024 due to our overall net operating loss carryforwards available. We have further determined to continue providing a full valuation reserve on our net deferred tax assets as of September 30, 2024. We had approximately $113.3 million of net operating loss carryforwards and $1.8 million of research and development tax credit carryforwards as of September 30, 2024 available to offset future net taxable income.

 

 

Net Loss

 

As a result of the above results of operations, we reported a net loss of $14,424,531 and $17,979,171 for the nine months ended September 30, 2024 and 2023, respectively, an improvement of $3,554,640 (20%).

 

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 of Nobility Healthcare which is reflected in the statement of income as “net income attributable to noncontrolling interests of consolidated subsidiary”. We reported net loss (income) attributable to noncontrolling interests of consolidated subsidiary of $1,939,143 and $228,624 for the nine months ended September 30, 2024 and 2023, respectively.

 

Net Loss Attributable to Common Stockholders

 

As a result of the above, we reported a net loss attributable to common stockholders of $12,485,388 and $18,207,795 for the nine months September 30, 2024 and 2023, respectively, an improvement of $5,722,407 (31%).

 

Basic and Diluted Loss per Share

 

The basic and diluted loss per share was $3.90 and $6.55 for the nine months ended September 30, 2024 and 2023, respectively. Basic loss per share is based upon the weighted average number of common shares outstanding during the period. For the nine months ended September 30, 2024 and 2023, all shares issuable upon conversion of convertible debt and the exercise of outstanding stock options and warrants were antidilutive, and, therefore, not included in the computation of diluted loss per share.

 

Liquidity and Capital Resources

 

Overall:

 

Management’s Liquidity Plan. We have experienced net losses and cash outflows from operating activities since inception. Based upon our current operating forecast, we anticipate that we will need to restore positive operating cash flows and/or raise additional capital in the short-term to fund operations, meet our customary payment obligations and otherwise execute our business plan over the next 12 months. We are continuously in discussions to raise additional capital, which may include a variety of equity and debt instruments; however, there can be no assurance that our capital raising initiatives will be successful. Our recurring losses and level of cash used in operations, along with uncertainties concerning our ability to raise additional capital, raise substantial doubt about our ability to continue as a going concern.

 

 

Cash, cash equivalents: As of September 30, 2024, we had cash and cash equivalents with an aggregate balance of $415,131, a decrease from a balance of $778,149 (including restricted cash) at December 31, 2023. Summarized immediately below and discussed in more detail in the subsequent subsections are the main elements of the $363,018 net decrease in cash during the nine months ended September 30, 2024:

 

	●	Operating activities:	$4,086,023 of net cash used in operating activities. Net cash used in operating activities was $4,086,023 and $5,842,158 for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $1,756,136. The decrease is attributable to the improved net loss and the usage of cash for operating assets and liabilities during the nine months ended September 30, 2024 compared to the same period in 2023.
	●	Investing activities:	$392,523 of net cash provided by investing activities. Cash provided by (used in) investing activities was $392,523 and $(197,241) for the nine months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024, we made expenditures or received cash for the following: (i) sold our corporate headquarters building for $5,900,000 and received net cash of $425,653 after paying off the building loan and various other deductions (ii) the acquisition of Country Stampede; and (iii) received proceeds from the sale of our aircraft.
	●	Financing activities:	$3,330,482 net cash provided by financing activities. Cash provided by financing activities was $3,330,482 and $4,715,031 for the nine months ended September 30, 2024 and 2023, respectively. During the first nine months of 2024, we most notably refinanced a loan resulting in proceeds of $1,144,000, obtained an additional merchant advance providing proceeds of $1,308,837, obtained $1,175,000 in new commercial extension of credits and issued common stock with detachable warrants resulting in $2,194,745 in net cash proceeds. The cash proceeds were partially offset by payments on outstanding loans including the payments on merchant advances.

 

Commitments:

 

We had $415,131 of cash and cash equivalents and net negative working capital of $13,181,861 as of September 30, 2024. Accounts receivable and other receivables balances represented $5,253,535 of our net working capital at September 30, 2024. We intend to collect our outstanding receivables on a timely basis and reduce the overall level during 2024, which would help to provide positive cash flow to support our operations during 2024. Inventory represents $2,325,118 of our net working capital at September 30, 2024. We are actively managing the level of inventory and our goal is to reduce such level during the balance of 2024 by our sales activities, the increase of which should provide additional cash flow to help support our operations during 2024.

 

Capital Expenditures:

 

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

 

Lease commitments. Total lease expense under the five operating leases was approximately $160,751 and $360,934, during the three and nine months ended September 30, 2024, respectively.

 

 

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

 

Assets:
Operating lease right of use assets		$	515,538
Liabilities:
Operating lease obligations-current portion		$	82,974
Operating lease obligations-less current portion			432,563
Total operating lease obligations		$	515,537

 

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

 

Selling, general and administrative expenses

$

360,934

 

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

 

Year ending December 31:
2024 (October 1, to December 31, 2024)		$	29,974
2025			121,983
2026			122,822
2027			115,766
Thereafter			230,949
Total undiscounted minimum future lease payments			621,494
Imputed interest			(105,957	)
Total operating lease liability		$	515,537

 

Debt obligations – Outstanding debt obligations comprises the following:

 

		September 30, 2024				December 31, 2023
Economic injury disaster loan (EIDL)		$	145,328			$	147,781
Contingent consideration promissory note – Nobility Healthcare Division Acquisition			—				129,651
Contingent consideration promissory note – Nobility Healthcare Division Acquisition			—				58,819
Revolving Loan Agreement			—				4,880,000
Commercial Extension of Credit- Entertainment Segment			295,000				87,928
Merchant Advances – Video Solutions Segment			2,091,500				1,350,000
Merchant Advances – Entertainment Segment			1,364,986				—
Unamortized debt issuance costs			(315,955	)			(540,429	)
Debt obligations			3,580,859				6,113,750
Less: current maturities of debt obligations			3,438,910				1,260,513
Debt obligations, long-term		$	141,949			$	4,853,237

 

 

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

 

		September 30, 2024
2024 (October 1, 2024 to December 31, 2024)		$	3,436,363
2025			3,412
2026			3,542
2027			3,677
2028 and thereafter			133,865
Total		$	3,580,859

 

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. 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.

 

Revenue Recognition / Allowances for Doubtful Accounts. Revenue is recognized for the shipment of products or delivery of service when all five of the following conditions are met:

 

	(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.

 

We consider the terms and conditions of the contract and our customary business practices in identifying our contracts under ASC 606. We determine we have a contract when the customer order is approved, we can identify each party’s rights regarding the services to be transferred, we can identify the payment terms for the services, we have determined the customer has the ability and intent to pay and the contract has commercial substance. At contract inception we evaluate whether the contract includes more than one performance obligation. We apply judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer.

 

Performance obligations promised in a contract are identified based on the services and the products that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the services and the products is separately identifiable from other promises in the contract. Our performance obligations consist of (i) products, (ii) professional services, and (iii) extended warranties.

 

 

The transaction price is determined based on the consideration to which we expect to be entitled in exchange for transferring services to the customer. Variable consideration is included in the transaction price if, in our judgment it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of our contracts contain a significant financing component.

 

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on the relative standalone selling price (“SSP”).

 

Revenue for our video solutions segment is recognized at the time the related performance obligation is satisfied by transferring the control of the promised service to a customer. Revenue is recognized when control of the service is transferred to the customer, in an amount that reflects the consideration that we expect to receive in exchange for our services. We generate all our revenue from contracts with customers.

 

Revenue for our revenue cycle management segment is recorded on a net basis, as its primary source of revenue is its end-to-end service fees. These service fees are reported as revenue monthly upon completion of our performance obligation to provide the agreed upon services.

 

Revenue for our entertainment segment is recorded on a gross or net basis based on management’s assessment of whether we are acting as a principal or agent in the transaction. The determination is based upon the evaluation of control over the event ticket, including the right to sell the ticket, prior to its transfer to the ticket buyer.

 

We sell our tickets held in inventory, which consists of one performance obligation, being to transfer control of an event ticket to the buyer upon confirmation of the order. We act as the principal in these transactions as we own the ticket at the time of sale, therefore we control the ticket prior to transferring to the customer. In these transactions, revenue is recorded on a gross basis based on the value of the ticket and is recognized when an order is confirmed. Payment is typically due upon delivery of the ticket.

 

We also act as an intermediary between buyers and sellers through the online secondary marketplace. Revenues derived from this marketplace primarily consist of service fees from entertainment operations, and consists of one primary performance obligation, which is facilitating the transaction between the buyer and seller, being satisfied at the time the order has been confirmed. As we do not control the ticket prior to the transfer, we act as an agent in these transactions. Revenue is recognized on a net basis, net of the amount due to the seller when an order is confirmed, the seller is then obligated to deliver the tickets to the buyer per the seller’s listing. Payment is due at the time of sale.

 

We review all significant, unusual, or nonstandard shipments of product or delivery of services as a routine part of our accounting and financial reporting process to determine compliance with these requirements. Extended warranties are offered on selected products, and when a customer purchases an extended warranty, the associated proceeds are treated as contract liability and recognized over the term of the extended warranty.

 

For our video solutions segment, our principal customers are state, local, and federal law enforcement agencies, which historically have been low risks for uncollectible accounts. However, we have commercial customers and international distributors that present a greater risk for uncollectible accounts than such law enforcement customers and we consider a specific reserve for bad debts based on their individual circumstances. Our historical bad debts have been negligible since we commenced deliveries during 2006.

 

For our entertainment segment, our customers are mainly online visitors that pay at the time of the transaction, and we collect the service fees charged with the transaction. Thus, leading to minimal risk for uncollectible accounts, to which we then consider a specific reserve for bad debts based on their individual circumstances. As we continue to learn more about the collectability related to this recent acquisition, we will track historical bad debts and continue to assess appropriate reserves.

 

For our revenue cycle management segment, our customers are mainly medium to large healthcare organizations that are charged monthly upon the execution of our services. Being these customers are healthcare organizations with minimal risk for uncollectible accounts, we consider a specific reserve for bad debts based on their individual circumstances. As we continue to learn more about the collectability related to this recently added segment, we will track historical bad debts and continue to assess appropriate reserves.

 

Allowance for Excess and Obsolete Inventory. We record valuation reserves on our inventory for estimated excess or obsolete inventory items. The amount of the reserve is equal to the difference between the cost of the inventory and the estimated market value based upon assumptions about future demand and market conditions. On a quarterly basis, management performs an analysis of the underlying inventory to identify reserves needed for excess and obsolescence. Management uses its best judgment to estimate appropriate reserves based on this analysis. In addition, we adjust the carrying value of inventory if the current market value of that inventory is below its cost.

 

 

Inventories consisted of the following at September 30, 2024 and December 31, 2023:

 

		September 30, 2024				December 31, 2023
Raw material and component parts– video solutions segment		$	2,638,063			$	3,044,653
Work-in-process– video solutions segment			11,565				20,396
Finished goods – video solutions segment			3,533,839				4,623,489
Finished goods – entertainment segment			364,641				699,204
Subtotal			6,548,108				8,387,742
Reserve for excess and obsolete inventory– video solutions segment			(4,144,749	)			(4,355,666	)
Reserve for excess and obsolete inventory – entertainment segment			(78,241	)			(186,795	)
Total inventories		$	2,325,118			$	3,845,281

 

We balance the need to maintain strategic inventory levels to ensure competitive delivery performance to our customers against the risk of inventory obsolescence due to changing technology and customer requirements. As reflected above, our inventory reserves represented 65% of the gross inventory balance at September 30, 2024, compared to 54% of the gross inventory balance at December 31, 2023. We had $4,222,990 and $4,542,461 in reserves for obsolete and excess inventories at September 30, 2024 and December 31, 2023, respectively. The decrease in the inventory reserve is primarily due to the reduction in finished goods and movement of excess inventory. Additionally, the Company determined a reasonable reserve for inventory held at the ticket operating segment, in which some inventory items sell below cost or go unsold, thus having to be fully written-off following the event date. We believe the reserves are appropriate given our inventory levels as of September 30, 2024.

 

If actual future demand or market conditions are less favorable than those projected by management or significant engineering changes to our products that are not anticipated and appropriately managed, additional inventory write-downs may be required in excess of the inventory reserves already established.

 

Goodwill and other intangible assets. When we acquire a business, we determine the fair value of the assets acquired and liabilities assumed on the date of acquisition, which may include a significant amount of intangible assets such as customer relationships, software and content, as well as goodwill. When determining the fair values of the acquired intangible assets, we consider, among other factors, analyses of historical financial performance and an estimate of the future performance of the acquired business. The fair values of the acquired intangible assets are primarily calculated using an income approach that relies on discounted cash flows. This method starts with a forecast of the expected future net cash flows for the asset and then adjusts the forecast to present value by applying a discount rate that reflects the risk factors associated with the cash flow streams. We consider this approach to be the most appropriate valuation technique because the inherent value of an acquired intangible asset is its ability to generate future income. In a typical acquisition, we engage a third-party valuation expert to assist us with the fair value analyses for acquired intangible assets.

 

Determining the fair values of acquired intangible assets requires us to exercise significant judgment. We select reasonable estimates and assumptions based on evaluating a number of factors, including, but not limited to, marketplace participants, consumer awareness and brand history. Additionally, there are significant judgments inherent in discounted cash flows such as estimating the amount and timing of projected future cash flows, the selection of discount rates, hypothetical royalty rates and contributory asset capital charges. Specifically, the selected discount rates are intended to reflect the risk inherent in the projected future cash flows generated by the underlying acquired intangible assets.

 

 

Determining an acquired intangible asset’s useful life also requires significant judgment and is based on evaluating a number of factors, including, but not limited to, the expected use of the asset, historical client retention rates, consumer awareness and trade name history, as well as any contractual provisions that could limit or extend an asset’s useful life.

 

The Company’s goodwill is evaluated in accordance with FASB ASC Topic 350, which requires goodwill to be assessed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. In addition, an impairment evaluation of our amortizable intangible assets may also be performed if events or circumstances indicate potential impairment. Among the factors that could trigger an impairment review are current operating results that do not align with our annual plan or historical performance; changes in our strategic plans or the use of our assets; restructuring changes or other changes in our business segments; competitive pressures and changes in the general economy or in the markets in which we operate; and a significant decline in our stock price and our market capitalization relative to our net book value.

 

When performing our annual assessment of the recoverability of goodwill, we initially perform a qualitative analysis evaluating whether any events or circumstances occurred or exist that provide evidence that it is more likely than not that the fair value of any of our reporting units is less than the related carrying amount. If we do not believe that it is more likely than not that the fair value of any of our reporting units is less than the related carrying amount, then no quantitative impairment test is performed. However, if the results of our qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its respective carrying amount, then we perform a two-step quantitative impairment test.

 

Evaluating the recoverability of goodwill requires judgments and assumptions regarding future trends and events. As a result, both the precision and reliability of our estimates are subject to uncertainty. Among the factors that we consider in our qualitative assessment are general economic conditions and the competitive environment; actual and projected reporting unit financial performance; forward-looking business measurements; and external market assessments. To determine the fair values of our reporting units for a quantitative analysis, we typically utilize detailed financial projections, which include significant variables, such as projected rates of revenue growth, profitability and cash flows, as well as assumptions regarding discount rates, the Company’s weighted average cost of capital and other data.

 

We performed an interim impairment test as of the last day of the fiscal third quarter of 2024 as management determined that a triggering event had occurred resulting from the additional decline in demand for our services, prolonged economic uncertainty, the fact that the split-off transaction did not occur when and as expected and a further decrease in our stock price. Therefore, we performed an interim impairment test as of the September 30, 2024 for our reporting units with remaining goodwill.

 

The fair value of each reporting unit was estimated using a weighting of the income and market valuation approaches. The income approach applied a fair value methodology to each reporting unit based on discounted cash flows. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. The weighted average cost of capital used in our most recent impairment test ranged from 21% to 32.5%. We also applied a market approach, which develops a value correlation based on the market capitalization of similar publicly traded companies, referred to as a multiple, to apply to the operating results of the reporting units. The primary market multiples used are revenue and earnings before interest, taxes, depreciation, and amortization. The income and market approaches were equally weighted in our most recent annual impairment test, for all of the reporting units.

 

The combined fair values for all reporting units were then reconciled to our aggregate market value of our shares of common stock on the date of valuation, while considering a reasonable control premium. We consider a reporting unit’s fair value to be substantially in excess of the reporting unit’s carrying value at a 20% premium or greater. Based on our most recent impairment test, the video solutions reporting unit’s fair value was substantially in excess of its carrying value, while the revenue cycle management and entertainment segments were determined to be impaired.

 

We held goodwill of $5,480,966 as of September 30, 2024 and December 31, 2023, related to businesses within our revenue cycle management segment. We held goodwill of $6,112,507 and $5,886,548 as of September 30, 2024 and December 31, 2023, respectively, related to businesses within our entertainment segment. As a result of our September 30, 2024 interim impairment test, we concluded that the carrying amount of the revenue cycle management and the entertainment reporting units exceeded its estimated fair values. Thus, we recorded a non-cash goodwill impairment charge of $4,322,000, related to the goodwill carrying balance for the revenue cycle management segment, and a non-cash goodwill impairment charge of $307,000, related to the goodwill carrying balance for the entertainment segment, both of which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024. The goodwill impairment was primarily driven by recent performance of the revenue cycle management and entertainment reporting units since our annual impairment testing date, as well as a delay in the projected timing of recovery. The remaining balance for the goodwill carrying balance related to businesses within our revenue cycle management segment and entertainment segment was $1,158,966 and $5,805,507, respectively as of September 30, 2024.

 

We held indefinite-lived trade names/trademarks of $900,000 and $600,000 as of September 30, 2024 and December 31, 2023, respectively, related to businesses within our entertainment segment.

 

During the three months ended September 30, 2024, we concluded that the carrying amount of a trade name/trademark related to the entertainment segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $201,000, which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024. The charge was primarily driven by the split-off transaction not being completed when and as expected and our recent revenue and operating performance of the related business given a decline in demand and overall economic uncertainty. The remaining balance for this trade name/trademark was $699,000 as of September 30, 2024.

 

Warranty Reserves. We generally provide up to a two-year parts and labor standard warranty on our products to our customers. Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are established using historical information on the nature, frequency, and average cost of claims. We actively study trends of claims and take action to improve product quality and minimize claims. Our warranty reserves were decreased to $11,615 as of September 30, 2024 compared to $17,699 as of December 31, 2023 due to newer products gaining a long history of claims to consider, which was slightly offset as we begin to slow our warranty exposures through the roll-off of DVM-750 and DVM-800 units from warranty coverage. Standard warranty exposure on the DVM-800 and DVM-250plus are the responsibility of the contract manufacturers which reduced our overall warranty exposure as these are very popular products in our line. There is a risk that we will have higher warranty claim frequency rates and average cost of claims than our history has indicated on our legacy mirror products on our new products for which we have limited experience. Actual experience could differ from the amounts estimated requiring adjustments to these liabilities in future periods.

 

Warrant derivative liabilities. On April 5, 2023, the Company issued warrants to purchase a total of 1,125,000 shares of Common Stock. The warrant terms provide for net cash settlement outside the control of the Company under certain circumstances in the event of tender offers. As such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated fair value at their issuance date and at each reporting date with any subsequent changes reported in the consolidated statements of operations as the change in fair value of warrant derivative liabilities. Furthermore, the Company revalues the fair value of warrant derivative liability as of the date the warrant is exercised with the resulting warrant derivative liability transitioned to equity.

 

 

The Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of the warrant derivative liability as of their date of issuance and as of September 30, 2024:

 

		Issuance date assumptions				September 30, 2024 assumptions
Volatility - range			106.0	%			106.6	%
Risk-free rate			3.36	%			3.58	%
Dividend			0	%			0	%
Remaining contractual term			5.0 years				3.5 years
Exercise price		$	5.50 – 7.50			$	5.50 – 7.50
Common stock issuable under the warrants			1,125,000				1,125,000

 

On June 25, 2024, the Company issued warrants to purchase a total of 1,195,219 shares of Common Stock. The warrant terms provide for net cash settlement outside the control of the Company under certain circumstances. As such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated fair value at their issuance date and at each reporting date with any subsequent changes reported in the consolidated statements of operations as the change in fair value of warrant derivative liabilities. Furthermore, the Company re-values the fair value of warrant derivative liability as of the date the warrant is exercised with the resulting warrant derivative liability transitioned to change in fair value of warrant derivative liabilities through the consolidated statement of operations.

 

The Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of the warrant derivative liabilities as of their date of issuance and as of September 30, 2024:

 

		Issuance date assumptions				September 30, 2024 assumptions
Volatility – range			72.1 - 101.1	%			106.6	%
Risk-free rate			4.25 – 5.46	%			3.58	%
Dividend			0	%			0	%
Remaining contractual term			0.1 - 5.0 years				4.7 years
Exercise price		$	2.51			$	2.51
Common stock issuable under the warrants			1,768,227				1,195,219

 

Stock-based Compensation Expense. We grant stock options to our employees and directors and such benefits provided are share-based payment awards which require us to make significant estimates related to determining the value of our share-based compensation. Our expected stock-price volatility assumption is based on historical volatilities of the underlying stock that are obtained from public data sources and there were no stock options granted during the three or nine months ended September 30, 2024.

 

 

If factors change and we develop different assumptions in future periods, the compensation expense that we record in the future may differ significantly from what we have recorded in the current period. There is a high degree of subjectivity involved when using option pricing models to estimate share-based compensation. Changes in the subjective input assumptions can materially affect our estimates of fair values of our share-based compensation. Certain share-based payment awards, such as employee stock options, may expire worthless or otherwise result in zero intrinsic value compared to the fair values originally estimated on the grant date and reported in our financial statements. Alternatively, values may be realized from these instruments that are significantly in excess of the fair values originally estimated on the grant date and reported in our financial statements. Although the fair value of employee share-based awards is determined using an established option pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. In addition, we account for forfeitures as they occur.

 

Accounting for Income Taxes. Accounting for income taxes requires significant estimates and judgments on the part of management. Such estimates and judgments include, but are not limited to, the effective tax rate anticipated to apply to tax differences that are expected to reverse in the future, the sufficiency of taxable income in future periods to realize the benefits of net deferred tax assets and net operating losses currently recorded and the likelihood that tax positions taken in tax returns will be sustained on audit.

 

As required by authoritative guidance, we record deferred tax assets or liabilities based on differences between financial reporting and tax bases of assets and liabilities using currently enacted rates that will be in effect when the differences are expected to reverse. Authoritative guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that all or some portion of the deferred tax asset will not be realized. As of September 30, 2023, we have fully reserved all of our deferred tax assets. Based on a review of our deferred tax assets and recent operating performance, we determined that our valuation allowance should be increased by $17,220,000 to a balance of $34,200,000 to fully reserve our deferred tax assets at December 31, 2023. We determined that it was appropriate to continue to provide a full valuation reserve on our net deferred tax assets as of September 30, 2024, because of the overall net operating loss carryforwards available. We expect to continue to maintain a full valuation allowance until we determine that we can sustain a level of profitability that demonstrates our ability to realize these assets. To the extent we determine that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed. Such a reversal would be recorded as an income tax benefit and, for some portion related to deductions for stock option exercises, an increase in shareholders’ equity.

 

As required by authoritative guidance, we have performed a comprehensive review of our portfolio of uncertain tax positions in accordance with recognition standards established by the FASB, an uncertain tax position represents our expected treatment of a tax position taken in a filed tax return or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. We have no recorded liability as of September 30, 2024 representing uncertain tax positions.

 

We have generated substantial deferred income tax assets related to our operations primarily from the charge to compensation expense taken for stock options, certain tax credit carryforwards and net operating loss carryforwards. For us to realize the income tax benefit of these assets, we must generate sufficient taxable income in future periods when such deductions are allowed for income tax purposes. In some cases where deferred taxes were the result of compensation expense recognized on stock options, our ability to realize the income tax benefit of these assets is also dependent on our share price increasing to a point where these options have intrinsic value at least equal to the grant date fair value and are exercised. In assessing whether a valuation allowance is needed in connection with our deferred income tax assets, we have evaluated our ability to generate sufficient taxable income in future periods to utilize the benefit of the deferred income tax assets. We continue to evaluate our ability to use recorded deferred income tax asset balances. If we fail to generate taxable income for financial reporting in future years, no additional tax benefit would be recognized for those losses, since we will not have accumulated enough positive evidence to support our ability to utilize net operating loss carryforwards in the future. Therefore, we may be required to increase our valuation allowance in future periods should our assumptions regarding the generation of future taxable income not be realized.

 

Inflation and Seasonality

 

Inflation has not materially affected us during the past fiscal year. We do not believe that our Video Solutions and Revenue Cycle Management segments business is seasonal in nature, however; the Entertainment Segment is expected to generate higher revenues during the second half of the calendar year than in the first half.

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not Applicable.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

The Company maintains disclosure controls and procedures, as such terms are defined in Rules 13a-15(e) under the Exchange Act. The Company, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of such disclosure controls and procedures for this Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2024 to provide reasonable assurance that material information required to be disclosed by the Company in this Report was recorded, processed, summarized and communicated to the Company’s management as appropriate and within the time periods specified in SEC rules and forms.

 

As part of our plan to remediate our controls which were not effective, we are performing a full review of our internal control procedures. We have implemented, and plan to continue to implement, new controls and new processes. We have hired and plan to continue to hire additional qualified personnel and establish more robust processes to support our internal control over financial reporting, including clearly defined roles and responsibilities. The Company anticipates time being required to complete the implementation and to assess and ensure the sustainability of these controls. The effectiveness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

 

Changes in Internal Control over Financial Reporting

 

There have not been any changes in the Company’s internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

The information regarding certain legal proceedings in which we are involved as set forth in Note 9 – Contingencies of the Notes to the Condensed Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report on Form 10-Q) is incorporated by reference into this Item 1.

 

In addition to such legal proceedings, we are faced with or involved in various other claims and legal proceedings arising in the normal course of our businesses. At this time, we do not believe any material losses under such other claims and proceedings to be probable. While the ultimate outcome of such claims or legal proceedings cannot be predicted with certainty, it is in the opinion of management, after consultation with legal counsel, that the final outcome in such proceedings, in the aggregate, would not have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

 

Item 1A. Risk Factors.

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

There were no unregistered sales of equity securities during the nine months ended September 30, 2024 that were not disclosed by the Company on a Current Report on Form 8-K.

 

Item 3. Defaults upon Senior Securities.

 

There were no defaults upon senior securities during the nine months ended September 30, 2024 that were not disclosed by the Company on a Current Report on Form 8-K.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

Not applicable.

 

 

Item 6. Exhibits.

 

(a) Exhibits.

 

	4.1	Amendment No. 2 to the Merger Agreement, issued by Digital Ally, Inc. (incorporated by reference to Exhibit 2.1 to Company’s Current Report on Form 8-K with the SEC on September 4, 2024)
	10.1	Letter Agreement by and between Digital Ally, Inc. and Mosh Man, LLC (incorporated by reference to Exhibit 10.1 to Company’s Current Report on Form 8-K with the SEC on July 18, 2024
	10.2	Purchase and Sale Agreement dated August 2, 20924 between Digital Ally, Inc, and Serenity Now, LLC (incorporated by reference to Exhibit 10.1 to Company’s Current Report on Form 8-K with the SEC on August 6, 2024.
	10.3	Amendment to the Promissory Note between TicketSmarter and certain Purchasers (incorporated by reference to Exhibit 10.1 to Company’s Current Report on Form 8-K with the SEC on August 23, 2024)
	10.4	Second Letter Agreement between Digital Ally, Inc. and certain Mosh Man, LLC (incorporated by reference to Exhibit 10.1 to Company’s Current Report on Form 8-K with the SEC on September 13, 2024).
	10.5	Amended Note between Digital Ally, Inc. and certain Mosh Man, LLC (incorporated by reference to Exhibit 10.1 to Company’s Current Report on Form 8-K with the SEC on September 27, 2024).
	31.1	Certificate of Stanton E. Ross pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as amended.
	31.2	Certificate of Thomas J. Heckman pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as amended.
	32.1	Certificate of Stanton E. Ross pursuant to Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
	32.2	Certificate of Thomas J. Heckman pursuant to Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
	101.INS	Inline XBRL Instance Document
	101.SCH	Inline XBRL Schema Document
	101.CAL	Inline XBRL Calculation Linkbase Document
	101.DEF	Inline XBRL Definition Linkbase Document
	101.LAB	Inline XBRL Label Linkbase Document
	101.PRE	Inline XBRL Presentation Linkbase Document
	104	Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)

 

In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

 

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: December 30, 2024

 

	DIGITAL ALLY, INC.
	By:	/s/ Stanton E. Ross
	Name:	Stanton E. Ross
	Title:	Chief Executive Officer
	By:	/s/ Thomas J. Heckman
	Name:	Thomas J. Heckman
	Title:	Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer)

 

 

EXHIBIT 31.1

 

DIGITAL ALLY, INC.

 

CERTIFICATIONS

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Stanton E. Ross, Chief Executive Officer of Digital Ally, Inc., certify that:

 

	1.	I have reviewed this report on Form 10-Q for the nine months ended September 30, 2024 of Digital Ally, Inc.
	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
	4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

Date: December 30, 2024

 

/s/ Stanton E. Ross
Stanton E. Ross
Chief Executive Officer
(Principal Executive Officer)

 

 

 

EXHIBIT 31.2

 

DIGITAL ALLY, INC.

 

CERTIFICATIONS

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Thomas J. Heckman, Chief Financial Officer of Digital Ally, Inc., certify that:

 

	1.	I have reviewed this report on Form 10-Q for the nine months ended September 30, 2024 of Digital Ally, Inc.
	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
	4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

Date: December 30, 2024

 

/s/ Thomas J. Heckman
THOMAS J. HECKMAN
Chief Financial Officer
(Principal Financial Officer)

 

 

 

 

EXHIBIT 32.1

 

DIGITAL ALLY, INC.

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Digital Ally, Inc. (the “Company”) on Form 10-Q for the three months ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stanton E. Ross, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Stanton E. Ross
Stanton E. Ross
Chief Executive Officer
(Principal Executive Officer)
December 30, 2024

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Digital Ally, Inc. and will be retained by Digital Ally, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

EXHIBIT 32.2

 

DIGITAL ALLY, INC.

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Digital Ally, Inc. (the “Company”) on Form 10-Q for the three months ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas J. Heckman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Thomas J. Heckman
THOMAS J. HECKMAN
Chief Financial Officer
(Principal Financial Officer)
December 30, 2024

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Digital Ally, Inc. and will be retained by Digital Ally, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

 

v3.24.4

Cover - $ / shares	9 Months Ended
	Sep. 30, 2024	Dec. 27, 2024
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2024
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2024
Current Fiscal Year End Date	--12-31
Entity File Number	001-33899
Entity Registrant Name	Digital Ally, Inc.
Entity Central Index Key	0001342958
Entity Tax Identification Number	20-0064269
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	14001 Marshall Drive
Entity Address, City or Town	Lenexa
Entity Address, State or Province	KS
Entity Address, Postal Zip Code	66215
City Area Code	(913)
Local Phone Number	814-7774
Title of 12(b) Security	Common stock, $0.001 par value per share
Trading Symbol	DGLY
Security Exchange Name	NASDAQ
Entity Current Reporting Status	No
Entity Interactive Data Current	No
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		5,531,469
Entity Listing, Par Value Per Share	$ 0.001

v3.24.4

Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 415,131	$ 680,549
Accounts receivable – trade, net of $176,227 allowance – September 30, 2024 and $200,668 – December 31, 2023	1,593,622	1,584,662
Other receivables, net of $25,000 allowance – September 30, 2024 and $5,000 – December 31, 2023	3,659,913	3,107,634
Inventories, net	2,325,118	3,845,281
Prepaid expenses	6,325,183	6,366,368
Total current assets	14,318,967	15,584,494
Property, plant, and equipment, net	444,603	7,283,702
Goodwill and other intangible assets, net	11,150,545	16,510,422
Operating lease right of use assets, net	515,538	1,053,159
Other assets	5,833,516	6,597,032
Total assets	32,263,169	47,028,809
Current liabilities:
Accounts payable	12,247,613	10,732,089
Accrued expenses	3,596,680	3,269,330
Current portion of operating lease obligations	82,974	279,538
Contract liabilities – current portion	4,068,578	2,937,168
Notes payable – related party – current portion	2,800,000	2,700,000
Debt obligations – current portion	3,438,910	1,260,513
Warrant derivative liabilities	1,266,073	1,369,738
Income taxes payable		61
Total current liabilities	27,500,828	22,548,437
Long-term liabilities:
Debt obligations – long term	141,949	4,853,237
Operating lease obligation – long term	432,563	827,836
Contract liabilities – long term	6,625,694	7,340,459
Lease Deposit	10,445	10,445
Total liabilities	34,711,479	35,580,414
Commitments and contingencies
Stockholders’ Equity (Deficit):
Preferred stock, $0.001 par value per share; 10,000,000 shares authorized; none issued or outstanding at September 30, 2024 and December 31, 2023
Common stock, $0.001 par value per share; 200,000,000 shares authorized; shares issued: 4,025,092 shares issued – September 30, 2024 and 2,800,752 shares issued – December 31, 2023	4,025	2,801
Additional paid in capital	128,967,685	128,441,083
Noncontrolling interest in consolidated subsidiary	(1,265,852)	673,292
Accumulated deficit	(130,154,168)	(117,668,781)
Total stockholders’ equity (deficit)	(2,448,310)	11,448,395
Total liabilities and stockholders’ equity (deficit)	$ 32,263,169	$ 47,028,809

v3.24.4

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Statement of Financial Position [Abstract]
Allowance for doubtful accounts receivable	$ 176,227	$ 200,668
Allowance for other receivable, current	$ 25,000	$ 5,000
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	4,025,092	2,800,752

v3.24.4

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenue:
Total revenue	$ 4,051,711	$ 6,337,699	$ 15,197,297	$ 22,314,519
Cost of revenue:
Total cost of revenue	2,311,737	5,111,550	11,693,493	16,806,541
Gross profit	1,739,974	1,226,149	3,503,804	5,507,978
Selling, general and administrative expenses:
Research and development expense	210,818	564,146	1,244,060	2,039,361
Selling, advertising and promotional expense	414,727	1,932,982	1,902,489	5,885,097
General and administrative expense	3,666,728	3,877,064	10,462,747	13,845,074
Goodwill and intangible asset impairment charge	4,830,000		4,830,000
Total selling, general and administrative expenses	9,122,273	6,374,192	18,439,296	21,769,532
Operating loss	(7,382,299)	(5,148,043)	(14,935,492)	(16,261,554)
Other income (expense):
Interest income	13,775	12,986	63,064	84,071
Interest expense	(771,846)	(959,898)	(2,505,536)	(2,480,947)
Other income (expense)	8,920	25,394	66,966	76,180
Loss on accrual for legal settlement				(1,792,308)
Loss on conversion of convertible note				(93,386)
Change in fair value of warrant derivative liabilities	2,530,675	1,863,326	2,178,965	1,803,560
Change in fair value of contingent consideration promissory notes		19,888		177,909
Gain on extinguishment of liabilities	9,385	507,304	691,730	507,304
Loss on extinguishment of debt	(310,505)		(379,332)
Gain on sale of intangibles			5,582
Gain on sale of property, plant and equipment	431,183		389,522
Total other income (expense)	1,911,587	1,469,000	510,961	(1,717,617)
Income (loss) before income tax benefit	(5,470,712)	(3,679,043)	(14,424,531)	(17,979,171)
Income tax benefit
Net loss	(5,470,712)	(3,679,043)	(14,424,531)	(17,979,171)
Net (income) loss attributable to noncontrolling interests of consolidated subsidiary	2,000,206	(29,630)	1,939,143	(228,624)
Net loss attributable to common stockholders	$ (3,470,506)	$ (3,708,673)	$ (12,485,388)	$ (18,207,795)
Net loss per share information:
Basic	$ (0.91)	$ (1.32)	$ (3.90)	$ (6.55)
Diluted	$ (0.91)	$ (1.32)	$ (3.90)	$ (6.55)
Weighted average shares outstanding:
Basic	3,820,860	2,800,752	3,204,495	2,779,530
Diluted	3,820,860	2,800,752	3,204,495	2,779,530
Product [Member]
Revenue:
Total revenue	$ 803,945	$ 2,095,237	$ 4,577,392	$ 7,626,706
Cost of revenue:
Total cost of revenue	547,562	2,587,750	5,534,209	7,108,366
Service, Other [Member]
Revenue:
Total revenue	3,247,766	4,242,462	10,619,905	14,687,813
Cost of revenue:
Total cost of revenue	$ 1,764,175	$ 2,523,800	$ 6,159,284	$ 9,698,175

v3.24.4

Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Noncontrolling Interest [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2022	$ 2,721	$ 127,869,342	$ 448,694	$ (91,980,234)	$ 36,340,523
Balance, shares at Dec. 31, 2022	2,720,170
Stock-based compensation		114,848			114,848
Restricted common stock grant	$ 35	$ (35)
Restricted common stock grant, shares	35,000
Issuance due to rounding from reverse stock split
Issuance due to rounding from reverse stock split, shares	54
Net loss			126,239	$ (6,105,818)	$ (5,979,579)
Balance at Mar. 31, 2023	$ 2,756	127,984,155	574,933	(98,086,052)	30,475,792
Balance, shares at Mar. 31, 2023	2,755,224
Balance at Dec. 31, 2022	$ 2,721	127,869,342	448,694	(91,980,234)	36,340,523
Balance, shares at Dec. 31, 2022	2,720,170
Net loss					$ (17,979,171)
Restricted common stock forfeitures, shares					3,625
Balance at Sep. 30, 2023	$ 2,801	128,367,929	677,318	(110,188,029)	$ 18,860,019
Balance, shares at Sep. 30, 2023	2,800,752
Balance at Mar. 31, 2023	$ 2,756	127,984,155	574,933	(98,086,052)	30,475,792
Balance, shares at Mar. 31, 2023	2,755,224
Stock-based compensation		$ 179,483			$ 179,483
Issuance due to rounding from reverse stock split	24	(24)
Issuance due to rounding from reverse stock split, shares	24,153
Net loss			$ 72,755	$ (8,393,304)	$ (8,320,549)
Restricted common stock forfeitures	$ (4)	4
Restricted common stock forfeitures, shares	(3,625)
Conversion of convertible note into common stock	$ 25	119,725			119,750
Conversion of convertible note into common stock, shares	25,000
Balance at Jun. 30, 2023	$ 2,801	128,283,343	647,688	(106,479,356)	22,454,476
Balance, shares at Jun. 30, 2023	2,800,752
Stock-based compensation		84,586			84,586
Net loss			29,630	(3,708,673)	(3,679,043)
Balance at Sep. 30, 2023	$ 2,801	128,367,929	677,318	(110,188,029)	18,860,019
Balance, shares at Sep. 30, 2023	2,800,752
Balance at Dec. 31, 2023	$ 2,801	128,441,083	673,292	(117,668,781)	11,448,395
Balance, shares at Dec. 31, 2023	2,800,752
Stock-based compensation		40,695			40,695
Restricted common stock grant	$ 80	(80)
Restricted common stock grant, shares	80,197
Net loss			(12,248)	(3,931,020)	(3,943,268)
Restricted common stock forfeitures	$ (1)	1
Restricted common stock forfeitures, shares	(1,125)
Balance at Mar. 31, 2024	$ 2,880	128,481,699	661,044	(121,599,801)	7,545,822
Balance, shares at Mar. 31, 2024	2,879,824
Balance at Dec. 31, 2023	$ 2,801	128,441,083	673,292	(117,668,781)	11,448,395
Balance, shares at Dec. 31, 2023	2,800,752
Net loss					$ (14,424,531)
Restricted common stock forfeitures, shares					51,072
Balance at Sep. 30, 2024	$ 4,025	128,967,685	(1,265,852)	(130,154,168)	$ (2,448,310)
Balance, shares at Sep. 30, 2024	4,025,092
Balance at Mar. 31, 2024	$ 2,880	128,481,699	661,044	(121,599,801)	7,545,822
Balance, shares at Mar. 31, 2024	2,879,824
Stock-based compensation		60,772			60,772
Net loss			73,310	(5,083,861)	(5,010,551)
Sale of common stock and pre-funded warrants, net of offering costs	$ 622	2,528,826			2,529,448
Issuance of common stock, shares	622,211
Fair value of warrants issued along with sale of common stock		(2,075,300)			(2,075,300)
Balance at Jun. 30, 2024	$ 3,502	128,995,997	734,354	(126,683,662)	3,050,191
Balance, shares at Jun. 30, 2024	3,502,035
Stock-based compensation		(27,789)			(27,789)
Net loss			(2,000,206)	(3,470,506)	(5,470,712)
Restricted common stock forfeitures	$ (50)	50
Restricted common stock forfeitures, shares	(49,947)
Issuance of common stock upon exercise of prefunded warrants	$ 573	(573)
Issuance of common stock upon exercise of prefunded warrants, shares	573,004
Balance at Sep. 30, 2024	$ 4,025	$ 128,967,685	$ (1,265,852)	$ (130,154,168)	$ (2,448,310)
Balance, shares at Sep. 30, 2024	4,025,092

v3.24.4

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Cash Flows From Operating Activities:
Net loss	$ (14,424,531)	$ (17,979,171)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization	1,578,246	1,656,627
Gain on sale of property, plant and equipment	(389,522)
Gain on sale on intangible	(5,582)
Goodwill and intangible asset impairment charge	4,830,000
Stock-based compensation	73,678	378,917
Amortization of debt issuance costs	1,792,040	576,380
Gain on extinguishment of liabilities	(691,730)	(507,304)
Loss on extinguishment of debt	379,332
Change in fair value of warrant derivative liabilities	(2,178,965)	(1,803,560)
Convertible debt discount amortization		1,887,273
Loss on conversion of debt		93,386
Provision for inventory obsolescence	(476,441)	(918,571)
Provision for doubtful accounts receivable	(24,441)	47,931
Allowance for doubtful lease reserve	20,000	5,000
Change in fair value of contingent consideration promissory note		(177,909)
Increase (decrease) in:
Accounts receivable – trade	(809,519)	(26,605)
Other receivable	(572,279)	1,453,710
Inventories	2,037,604	2,563,198
Prepaid expenses	379,583	1,142,798
Operating lease right of use assets	114,017	285,667
Other assets	628,416	(1,477,391)
Accounts payable	3,053,399	3,619,557
Accrued expenses	303,335	1,713,623
Accrued expenses-related party	290,101	3,478
Income taxes payable	(61)	(17,544)
Lease deposit		10,445
Operating lease obligations	(121,348)	(285,667)
Contract liabilities	128,645	1,913,574
Net cash used in operating activities	(4,086,023)	(5,842,158)
Cash Flows from Investing Activities:
Purchases of property, plant and equipment	(23,821)	(86,348)
Purchase of intangible assets	(136,056)	(110,893)
Cash paid for acquisition of Country Stampede	(514,432)
Proceeds from sale of intangible asset	90,535
Proceeds from sale of land and building	425,653
Proceeds from sale of property, plant and equipment	550,644
Net cash provided by (used in) investing activities	392,523	(197,241)
Cash Flows from Financing Activities:
Proceeds – Merchant Advances – Video Solutions Segment	1,144,000
Proceeds – Merchant Advances – Entertainment Segment	1,308,837
Net proceeds of equity offering with detachable warrants	2,194,745
Net proceeds of convertible debt with detachable warrants		2,640,000
Proceeds – Commercial Extension of Credit – Entertainment Segment	1,175,000	1,224,577
Payments on Commercial Extension of Credit – Entertainment Segment	(162,928)	(1,156,441)
Payments on Merchant Advances – Video Solutions Segment	(1,382,500)
Net proceeds of related party note payable	100,000	2,325,000
Payments on Merchant Advances – Entertainment Segment	(855,749)
Principal payment on EIDL loan	(2,453)
Principal payment on contingent consideration promissory notes	(188,470)	(318,105)
Net cash provided by financing activities	3,330,482	4,715,031
Net decrease in cash, cash equivalents, and restricted cash	(363,018)	(1,324,368)
Cash, cash equivalents, beginning of period	778,149	3,532,199
Cash, cash equivalents, end of period	415,131	2,207,831
Supplemental disclosures of cash flow information:
Cash payments for interest	429,002	26,220
Cash payments for income taxes	8,006	9,447
Supplemental disclosures of non-cash investing and financing activities:
Commercial extension of credit repaid through accrued revenue – Entertainment segment	825,000
ROU and lease liability recorded on extension (termination) of lease	470,489	538,056
Conversion of convertible notes payable into common stock		119,750
Fair value of warrants issued with sale of shares	2,075,300
Assets acquired in business acquisitions	605,000
Liabilities assumed in the business acquisition	288,000
Goodwill acquired in business acquisitions	225,959
Adjustments of accounts payable with the sale proceeds of property, plant and equipment	549,356
Reduction in proceeds from sale of building for loan, prepaid rent, and other accrued expenses	5,474,347
Payments to vendors directly from proceeds of sale of common stock	334,703
Issuance of common stock upon exercise of re-funded warrants	573
Restricted common stock grant	80	35
Reverse stock split rounding issuances		24
Restricted common stock forfeitures	51	4
Debt discount on convertible note		$ 3,000,000

v3.24.4

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	9 Months Ended
	Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Nature of Operations:   Digital Ally, Inc. was originally incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc. and had no operations until 2004. On November 30, 2004, Vegas Petra, Inc. entered into a Plan of Merger with Digital Ally, Inc., at which time the merged entity was renamed Digital Ally, Inc. (such merged entity, the “Predecessor Registrant”).   On August 23, 2022 (the “Effective Time”), the Predecessor Registrant merged with and into its wholly owned subsidiary, DGLY Subsidiary Inc., a Nevada corporation (the “Registrant”), pursuant to an agreement and plan of merger, dated as of August 23, 2022 (the “Merger Agreement”), between the Predecessor Registrant and the Registrant, with the Registrant as the surviving corporation in the merger (such transaction, the “Merger”). At the Effective Time, Articles of Merger were filed with the Secretary of State of the State of Nevada, pursuant to which the Registrant was renamed “Digital Ally, Inc.” and, by operation of law, succeeded to the assets, continued the business and assumed the rights and obligations of the Predecessor Registrant immediately prior to the Merger. Under the Nevada Revised Statutes, shareholder approval was not required in connection with the Merger Agreement or the transactions contemplated thereby.   At the Effective Time, pursuant to the Merger Agreement, (i) each outstanding share of Predecessor Registrant’s common stock, par value $0.001 per share (the “Predecessor Common Stock”) automatically converted into one share of common stock, par value $0.001 per share, of the Registrant (“Registrant Common Stock”), (ii) each outstanding option, right or warrant to acquire shares of Predecessor Common Stock converted into an option, right or warrant, as applicable, to acquire an equal number of shares of Registrant Common Stock under the same terms and conditions as the original options, rights or warrants, and (iii) the directors and executive officers of the Predecessor Registrant were appointed as directors and executive officers, as applicable, of the Registrant, each to serve in the same capacity and for the same term as such person served with the Predecessor Registrant immediately before the Merger.   The business of the Registrant, Digital Ally, Inc. (with its wholly-owned subsidiaries, Digital Ally International, Inc., Shield Products, LLC, Digital Ally Healthcare, LLC (“Digital Ally Healthcare”), TicketSmarter, Inc. (“TicketSmarter”), Worldwide Reinsurance, Ltd., Digital Connect, Inc., BirdVu Jets, Inc., Kustom 440, Inc. (“Kustom 440”), Kustom Entertainment, Inc., 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 Ticketing Segment. 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 Revenue Cycle Management Segment provides working capital and back-office services to a variety of healthcare organizations throughout the country, as a monthly service fee. The Entertainment Segment acts as an intermediary between ticket buyers and sellers within our secondary ticketing platform, ticketsmarter.com, and we also acquire tickets from primary sellers to then sell through various platforms. The 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. Such required segment information is included in Note 14.   Business Combination   In June 2023, the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Clover Leaf Capital Corp., a Delaware corporation (Nasdaq: CLOE) (“Clover Leaf”), CL Merger Sub, Inc., a Nevada corporation and a wholly owned subsidiary of Clover Leaf (“Merger Sub”), Yntegra Capital Investments LLC, a Delaware limited liability company, in the capacity as the representative from and after the Effective Time (as defined in the Merger Agreement) for the stockholders of Clover Leaf in accordance with the terms and conditions of the Merger Agreement, and Kustom Entertainment, Inc., a Nevada corporation, a wholly owned subsidiary of the Company, with a focus and mission to own and produce events, festivals, and entertainment alongside its evolving primary and secondary ticketing technologies (“Kustom”). Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein upon the consummation of the transactions contemplated by the Merger Agreement (the “Closing”), Merger Sub will merge with and into Kustom, with Kustom continuing as the surviving corporation in the Merger and a wholly owned subsidiary of Clover Leaf. Upon the Closing which is subject to the approval of Clover Leaf’s shareholders and the satisfaction or waiver of certain other customary closing conditions, the common stock of the combined company was expected to be listed on the Nasdaq under a mutually agreed new ticker symbol that reflects the name “Kustom Entertainment”.   On November 8, 2024, Clover Leaf and Kustom mutually agreed to terminate their previously announced Merger Agreement and Plan of Merger effective as of November 7, 2024 by entering into a mutual termination and release agreement among the parties. The parties released each other of all obligations related to the Merger Agreement.     Basis of Presentation:   The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine-month period ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.   The balance sheet as of December 31, 2023 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements.   For further information, refer to the audited consolidated financial statements and footnotes included in the Company’s annual report on Form 10-K for the year ended December 31, 2023.   Liquidity and Going Concern   During the second quarter of 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This update provided U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. Under this standard, the Company is required to evaluate whether there is substantial doubt about its ability to continue as a going concern each reporting period, including interim periods. In evaluating the Company’s ability to continue as a going concern, management considered the conditions and events that could raise substantial doubt about the Company’s ability to continue as a going concern within 12 months after the Company’s financial statements were issued (December 30, 2024). Management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and the Company’s obligations due before December 30, 2025.   The Company has experienced net losses and cash outflows from operating activities since inception. For the nine months ended September 30, 2024, the Company had a net loss attributable to common stockholders of $12,485,388, net cash used in operating activities of $4,086,023, $392,523 provided by investing activities and $3,330,482 provided by financing activities. The Company will have to restore positive operating cash flows and profitability over the next year and/or raise additional capital to fund its operational plans, meet its customary payment obligations and otherwise execute its business plan. There can be no assurance that it will be successful in restoring positive cash flows and profitability, or that it can raise additional financing when needed, and obtain it on terms acceptable or favorable to the Company.   The Company is pursuing a significant capital raise to provide funding for its short and long-term liquidity needs. The Company has implemented an enhanced quality control program to detect and correct product issues before they result in significant rework expenditures affecting its gross margins and has seen progress in that regard. The Company has also implemented a marketing and advertisement reduction plan for its entertainment segment, which will focus on reducing and alleviating current obligations from its media marketing agreements and place a hold on entering into any new agreements. The Company believes that its quality control, cost-cutting initiatives, and new product introduction will eventually restore positive operating cash flows and profitability, although it can offer no assurances in this regard.   Management has evaluated the significance of the conditions described above in relation to the Company’s ability to meet its obligations and concluded that, without additional funding, the Company will not have sufficient funds to meet its obligations within one year from the date the unaudited condensed consolidated financial statements were issued. Such factors raise substantial doubt about the Company’s ability to sustain operations for at least one year from the issuance of these financial statements. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.     Basis of Consolidation:   The accompanying financial statements include the consolidated accounts of Digital Ally, its wholly-owned subsidiaries, Digital Ally International, Inc., Shield Products, LLC, Digital Ally Healthcare, LLC, TicketSmarter, Inc., Worldwide Reinsurance, Ltd., Digital Connect, Inc., BirdVu Jets, Inc., Kustom 440, Inc., and its majority-owned subsidiary Nobility Healthcare, LLC. All intercompany balances and transactions have been eliminated during consolidation.    The Company formed Digital Ally International, Inc. during August 2009 to facilitate the export sales of its products. The Company formed Shield Products, LLC in May 2020 to facilitate the sales of its Shield™ line of disinfectant/cleanser products and ThermoVu™ line of temperature monitoring equipment. The Company formed Nobility Healthcare, LLC (“Nobility Healthcare”) in June 2021 to facilitate the operations of its revenue cycle management solutions and back-office services for healthcare organizations. The Company formed TicketSmarter, Inc. upon its acquisition of Goody Tickets, LLC and TicketSmarter, LLC, to facilitate its global ticketing operations. The Company formed Worldwide Reinsurance Ltd., which is a captive insurance company domiciled in Bermuda. It will provide primarily liability insurance coverage to the Company for which insurance may not be currently available or economically feasible in today’s insurance marketplace. The Company formed Kustom 440, Inc. in 2022 to create unique entertainment experiences directly for consumers.   Fair Value of Financial Instruments:   The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and subordinated notes payable approximate fair value because of the short-term nature of these items.   Revenue Recognition:   The Company applies the provisions of Accounting Standards Codification (ASC) 606-10, Revenue from Contracts with Customers, and all related appropriate guidance. The Company recognizes revenue under the core principle to depict the transfer of control to its customers in an amount reflecting the consideration to which it expects to be entitled. In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.   The Company has two different revenue streams, product and service, represented through its three segments. The Company reports all revenues on a gross basis, other than service revenues from the Company’s entertainment and revenue cycle management segments, Revenues generated by all segments are reported net of sales taxes.   Video Solutions   The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with the customer. In situation where sales are to a distributor, the Company had concluded its contracts are with the distributor as the Company holds a contract bearing enforceable rights and obligations only with the distributor. As part of its consideration for the contract, the Company evaluates certain factors including the customers’ ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which it expects to be entitled. As the Company’s standard payment terms are less than one year, it has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on its relative standalone selling price. The product price as specified on the purchase order is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances. Revenue is recognized when control of the product is transferred to the customer (i.e. when the Company’s performance obligations is satisfied), which typically occurs at shipment. Further in determining whether control has been transferred, the Company considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer. Customers do not have a right to return the product other than for warranty reasons for which they would only receive repair services or replacement products. The Company has also elected the practical expedient under ASC 340-40-25-4 to expense commissions for product sales when incurred as the amortization period of the commission asset the Company would have otherwise recognized is less than one year.     Service and other revenue is comprised of revenues from extended warranties, repair services, cloud revenue and software revenue. Revenue is recognized upon shipment of the product and acceptance of the service or materials by the end customer for repair services. Revenue for extended warranty, cloud service or other software-based products is over the term of the contract warranty or service period. A time-elapsed method is used to measure progress because the Company transfers control evenly over the contractual period. Accordingly, the fixed consideration related to these revenues is generally recognized on a straight-line basis over the contract term, as long as the other revenue recognition criteria have been met.   The Company’s multiple performance obligations may include future in-car or body-worn camera devices to be delivered at defined points within a multi-year contract, and in those arrangements, the Company allocates total arrangement consideration over the life of the multi-year contract to future deliverables using management’s best estimate of selling price.   Revenue Cycle Management   The Company reports revenue cycle management revenues on a net basis, as its primary source of revenue is its end-to-end service fees which is generally determined as a percentage of the invoice amounts collected. These service fees are reported as revenue monthly upon completion of the Company’s performance obligation to provide the agreed upon service.   Entertainment   The Company reports ticketing revenue on a gross or net basis based on management’s assessment of whether the Company is acting as a principal or agent in the transaction. The determination is based upon the evaluation of control over the event ticket, including the right to sell the ticket, prior to its transfer to the ticket buyer.   The Company sells tickets held in inventory, which consists of one performance obligation, being to transfer control of an event ticket to the buyer upon confirmation of the order. The Company acts as the principal in these transactions as the ticket is owned by the Company at the time of sale, therefore controlling the ticket prior to transferring to the customer. In these transactions, revenue is recorded on a gross basis based on the value of the ticket and is recognized when an order is confirmed. Payment is typically due upon delivery of the ticket.   The Company also acts as an intermediary between buyers and sellers through online secondary marketplace. Revenues derived from this marketplace primarily consist of service fees from ticketing operations, and consists of one primary performance obligation, which is facilitating the transaction between the buyer and seller, being satisfied at the time the order has been confirmed. As the Company does not control the ticket prior to the transfer, the Company acts as an agent in these transactions. Revenue is recognized on a net basis, net of the amount due to the seller when an order is confirmed, the seller is then obligated to deliver the tickets to the buyer per the seller’s listing. Payment is due at the time of sale.     Other   Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract and are reported separately as current liabilities and non-current liabilities in the Consolidated Balance Sheets. Such amounts consist of extended warranty contracts, prepaid cloud services and prepaid installation services and are generally recognized as the respective performance obligations are satisfied. During the nine months ended September 30, 2024, the Company recognized revenue of $2.0 million related to its contract liabilities. Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract and are reported separately as current liabilities and non-current liabilities in the Consolidated Balance Sheets. Such amounts consist of extended warranty contracts, prepaid cloud services and prepaid installation services and are generally recognized as the respective performance obligations are satisfied. Total contract liabilities consist of the following:  SCHEDULE OF CONTRACT LIABILITIES      September 30, 2024       December 31, 2023     Additions/ Reclass     Recognized Revenue     September 30, 2024   Contract liabilities, current   $ 2,937,168     $ 1,689,038     $ (557,628 )   $ 4,068,578   Contract liabilities, non-current     7,340,459       761,421       (1,476,186 )     6,625,694                                         $ 10,277,627     $ 2,450,459     $ (2,033,814 )   $ 10,694,272         September 30, 2023       December 31, 2022     Additions/ Reclass     Recognized Revenue     September 30, 2023   Contract liabilities, current   $ 2,154,874     $ 2,133,969     $ (1,536,860 )   $ 2,751,983   Contract liabilities, non-current     5,818,082       1,943,313       (626,848 )     7,134,547                                         $ 7,972,956     $ 4,077,282     $ (2,163,708 )   $ 9,886,530     Sales returns and allowances aggregated $86,370 and $117,713 for the nine months ended September 30, 2024 and September 30, 2023, respectively. Obligations for estimated sales returns and allowances are recognized at the time of sales on an accrual basis. The accrual is determined based upon historical return rates adjusted for known changes in key variables affecting these return rates.    Use of Estimates:   The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management utilizes various other estimates, including but not limited to determining the estimated lives of long-lived assets, determining the potential impairment of long-lived assets, the fair value of warrants, options, the recognition of revenue, inventory valuation reserve, fair value of assets and liabilities acquired in a business combination, incremental borrowing rate on leases, the valuation allowance for deferred tax assets and other legal claims and contingencies. The results of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period that they are determined to be necessary.   Cash and cash equivalents:   Cash and cash equivalents include funds on hand, in bank and short-term investments with original maturities of ninety (90) days or less.    The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At September 30, 2024 and December 31, 2023, the uninsured balance amounted to $0 and $29,700, respectively.   Restricted Cash:   Restricted cash of $-0- and $97,600 was included in other assets as of September 30, 2024 and December 31, 2023, respectively. Restricted cash consists of bank deposits that collateralize a debt obligation. Such debt obligation was paid off as of September 30, 2024.     Accounts Receivable:   Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a weekly basis. The Company determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions.   Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than thirty (30) days beyond terms. No interest is charged on overdue trade receivables.   Goodwill and Other Intangibles:   Goodwill - In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations, using the acquisition method of accounting. The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill. In accordance with ASC 350, Intangibles - Goodwill and Other, the Company assesses goodwill for impairment annually as of December 31st, and more frequently if events and circumstances indicate that goodwill might be impaired.   Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill.   Traditionally, goodwill impairment testing is a two-step process. Step one involves comparing the fair value of the reporting units to its carrying amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating an implied fair value of goodwill. The Company has adopted ASU 2017-04 which simplifies subsequent goodwill measurement by eliminating step two from the goodwill impairment test. As a result, the Company compares the fair value of a reporting unit with its respective carrying value and recognized an impairment charge for the amount by which the carrying amount exceeded the reporting unit’s fair value.   The Company determines the fair value of its reporting units using a weighting of the income and market valuation approaches. The income approach applies a fair value methodology to each reporting unit based on discounted cash flows. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. Under the market approach, we estimate the fair value based on multiples of comparable public companies and precedent transactions. Significant estimates in the market approach include: identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting unit.   Long-lived and Other Intangible Assets - The Company periodically assesses potential impairments of its long-lived assets in accordance with the provisions of ASC 360, Accounting for the Impairment or Disposal of Long-lived Assets. An impairment review is performed whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The Company groups its assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of the other assets and liabilities. The Company has determined that the lowest level for which identifiable cash flows are available is the operating segment level.   Factors considered by the Company include, but are not limited to, significant underperformance relative to historical or projected operating results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative industry or economic trends. When the carrying value of a long-lived asset may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company estimates the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future undiscounted cash flows and eventual disposition is less than the carrying amount of the asset, the Company recognizes an impairment loss. An impairment loss is reflected as the amount by which the carrying amount of the asset exceeds the fair value of the asset, based on the fair value if available, or discounted cash flows, if fair value is not available. The Company assessed potential impairments of its long-lived assets as of December 31, 2023 and concluded that there was no impairment. Subsequent to completing our 2023 annual impairment test, no events or changes in circumstances were noted that required an interim goodwill impairment test until the three months ended September 30, 2024, when events occurred that we considered triggering events.   During the third fiscal quarter of 2024, management determined that triggering events had occurred resulting from the additional decline in demand for our services, prolonged economic uncertainty, the split-off transaction did not occur when and as expected and a further decrease in our stock price. Therefore, we performed an interim impairment test as of September 30, 2024. Refer to NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS for additional details on the interim impairment test, valuation methodologies, and inputs used in the fair value measurements.     Intangible assets include deferred patent costs, license agreements, trademarks and trade names. Legal expenses incurred in preparation of patent application have been deferred and will be amortized over the useful life of granted patents. Costs incurred in preparation of applications that are not granted will be charged to expense at that time. The Company has entered into several sublicense agreements under which it has been assigned the exclusive rights to certain licensed materials used in its products. These sublicense agreements generally require upfront payments to obtain the exclusive rights to such material. The Company capitalizes the upfront payments as intangible assets and amortizes such costs over their estimated useful life on a straight-line method.   Segment Reporting   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. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. The Company’s three operating segments are Video Solutions, Revenue Cycle Management, and Entertainment, each of which has specific personnel responsible for that business and reports to the CODM. Corporate expenses capture the Company’s corporate administrative activities and are also to be reported in the segment information.   Contingent Consideration   In circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of the acquisition date. The Company remeasures this liability each reporting period and records changes in the fair value through the consolidated statement of operations.   Non-Controlling Interests   Non-controlling interests in the Company’s Consolidated Financial Statements represent the interest in subsidiaries held by our venture partner. The venture partner holds a noncontrolling interest in the Company’s consolidated subsidiary Nobility Healthcare, LLC. Since the Company consolidates the financial statements of all wholly-owned and majority owned subsidiaries, the noncontrolling owners’ share of each subsidiary’s results of operations are deducted and reported as net income or loss attributable to noncontrolling interest in the Consolidated Statements of Operations.   New Accounting Standards   In November 2023, the FASB issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.     In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

v3.24.4

INVENTORIES	9 Months Ended
	Sep. 30, 2024
Inventory Disclosure [Abstract]
INVENTORIES	NOTE 2. INVENTORIES   Inventories consisted of the following at September 30, 2024 and December 31, 2023: SCHEDULE OF INVENTORIES      September 30, 2024     December 31, 2023   Raw material and component parts– video solutions segment   $ 2,638,063     $ 3,044,653   Work-in-process– video solutions segment     11,565       20,396   Finished goods – video solutions segment     3,533,839       4,623,489   Finished goods – entertainment segment     364,641       699,204   Subtotal     6,548,108       8,387,742   Reserve for excess and obsolete inventory– video solutions segment     (4,144,749 )     (4,355,666 ) Reserve for excess and obsolete inventory – entertainment segment     (78,241 )     (186,795 ) Total inventories   $ 2,325,118     $ 3,845,281

v3.24.4

DEBT OBLIGATIONS	9 Months Ended
	Sep. 30, 2024
Debt Disclosure [Abstract]
DEBT OBLIGATIONS	NOTE 3. DEBT OBLIGATIONS   Debt obligations is comprised of the following: SCHEDULE OF DEBT OBLIGATIONS      September 30, 2024     December 31, 2023   Economic injury disaster loan (EIDL)   $ 145,328     $ 147,781   Contingent consideration promissory note – Nobility Healthcare Division Acquisition     —       129,651   Contingent consideration promissory note – Nobility Healthcare Division Acquisition     —       58,819   Revolving Loan Agreement     —       4,880,000   Commercial Extension of Credit- Entertainment Segment     295,000       87,928   Merchant Advances – Video Solutions Segment     2,091,500       1,350,000   Merchant Advances – Entertainment Segment     1,364,986       —   Unamortized debt issuance costs     (315,955 )     (540,429 ) Debt obligations     3,580,859       6,113,750   Less: current maturities of debt obligations     3,438,910       1,260,513   Debt obligations, long-term   $ 141,949     $ 4,853,237       Debt obligations mature on an annual basis as follows as of September 30, 2024: SCHEDULE OF MATURITY OF DEBT OBLIGATIONS      September 30, 2024   2024 (October 1, 2024 to December 31, 2024)   $ 3,436,363   2025     3,412   2026     3,542   2027     3,677   2028 and thereafter     133,865             Total   $ 3,580,859     2020 Small Business Administration Notes.   On May 12, 2020, the Company received $150,000 in loan funding from the SBA under the Economic Injury Disaster Loan (“EIDL”) program administered by the SBA, which program was expanded pursuant to the recently enacted CARES Act. The EIDL is evidenced by a secured promissory note, dated May 8, 2020, in the original principal amount of $150,000 with the SBA, the lender.   Under the terms of the note issued under the EIDL program, interest accrues on the outstanding principal at the rate of 3.75% per annum. The term of such note is thirty years, though it may be payable sooner upon an event of default under such note. Monthly principal and interest payments began in November 2022, after being deferred for thirty months after the date of disbursement and total $731 per month thereafter. Such note may be prepaid in part or in full, at any time, without penalty. The Company granted the SBA a continuing interest in and to any and all collateral, including but not limited to tangible and intangible personal property.   The Company made principal payments of $2,453 during the nine months ended September 30, 2024 and recorded interest expense of $1,368 and $4,126 for the three and nine months ended September 30, 2024.   Contingent Consideration Promissory Notes   On June 30, 2021, Nobility Healthcare, a subsidiary of the Company, issued a contingent consideration promissory note (the “June Contingent Note”) in connection with a stock purchase agreement between Nobility Healthcare and a private company (the “June Seller”) of $350,000. The June Contingent Note has a three-year term and bears interest at a rate of 3.00% per annum. Quarterly principal and interest payments are deferred for nine months and is due in equal quarterly installments on the seventh business day of each quarter. The principal amount of the June Contingent Note is subject to an earn-out adjustment, being the difference between $975,000 (the “June Projected Revenue”) and the cash basis revenue (the “June Measurement Period Revenue”) collected by the June Seller in its normal course of business from the clients existing on June 30, 2021, during the period from October 1, 2021 through September 30, 2022 (the “June Measurement Period”) measured on a quarterly basis and annualized as of the relevant period. If the June Measurement Period Revenue is less than the June Projected Revenue, such amount will be subtracted from the principal balance of this June Contingent Note on a dollar-for-dollar basis. If the June Measurement Period Revenue is more than the June Projected Revenue, such amount will be added to the principal balance of this June Contingent Note on a dollar-for-dollar basis. In no event will the principal balance of this June Contingent Note become a negative number. The maximum downward earn-out adjustment to the principal balance will be a reduction to zero. There are no limits to the increases to the principal balance of the June Contingent Note as a result of the earn-out adjustments.   The June Contingent Note is considered to be additional purchase price; therefore, the estimated fair value of the contingent liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the acquisition with subsequent changes in fair value recorded as a gain or loss in the Consolidated Statements of Operations. Management recorded the contingent consideration promissory note at its estimated fair value of $350,000 at the acquisition date. Total principal payments, since inception, on this contingent consideration promissory note totalled $290,073. The estimated fair value of the June Contingent Note at September 30, 2024 is $-0-, representing a reduction in its estimated fair value of $58,819 as compared to its estimated fair value as of December 31, 2023. This reduction only relates to the principal payments made for the nine months ended September 30, 2024. Therefore, the Company recorded no gain or loss in the Consolidated Statements of Operations for the nine months ended September 30, 2024.   On August 31, 2021, Nobility Healthcare, issued another contingent consideration promissory note (the “August Contingent Payment Note”) in connection with a stock purchase agreement between Nobility Healthcare and a private company (the “August Sellers”) of $650,000. The August Contingent Payment Note has a three-year term and bears interest at a rate of 3.00% per annum. Quarterly principal and interest payments are deferred for nine months and is due in equal quarterly installments on the seventh business day of each quarter. The principal amount of the August Contingent Payment Note is subject to an earn-out adjustment, being the difference between the $3,000,000 (the “August Projected Revenue”) and the cash basis revenue (the “August Measurement Period Revenue”) collected by the August Sellers in its normal course of business from the clients existing on September 1, 2021, during the period from December 1, 2021 through November 30, 2022 (the “August Measurement Period”) measured on a quarterly basis and annualized as of the relevant period. If the August Measurement Period Revenue is less than the August Projected Revenue, such amount will be subtracted from the principal balance of this August Contingent Payment Note on a dollar-for-dollar basis. If the August Measurement Period Revenue is more than the August Projected Revenue, such amount will be added to the principal balance of this August Contingent Payment Note on a dollar-for-dollar basis. In no event will the principal balance of this August Contingent Payment Note become a negative number. The maximum downward earn-out adjustment to the principal balance will be to zero. There are no limits to the increases to the principal balance of the August Contingent Payment Note as a result of the earn-out adjustments.     The August Contingent Payment Note is considered to be additional purchase price, therefore the estimated fair value of the contingent liability is recorded as a liability at the acquisition date and the fair value is considered part of the consideration paid for the acquisition. Management has recorded the contingent consideration promissory note at its estimated fair value of $650,000 at the acquisition date. Principal payments, since its inception, on this contingent consideration promissory note totalled $681,907. The estimated fair value of the August Contingent Note at September 30, 2024 is $-0-, representing a decrease in its estimated fair value of $129,651 as compared to is estimated fair value as of December 31, 2023. This reduction only relates to the principal payments made for the nine months ended September 30, 2024. Therefore, the Company recorded no gain or loss in the Consolidated Statements of Operations for the nine months ended September 30, 2024.    2023 Commercial Extension of Credit   On February 23, 2023, the Company’s Entertainment segment entered into an extension of credit in the form of a loan to use in marketing and operating its business in accordance with the Private Label Agreement previously entered into with the Lender. The Lender agreed to extend, subject to the conditions hereof, and Borrower agreed to take, a Loan for Principal Sum of $1,000,000.   The Lender retains 25% of each remittance owed to Borrower under the terms of the Private Label Agreement. Such remittances includes regular weekly remittances and any additional incentive payments to which the Borrower may be entitled. The 25% withholding of the Borrower’s applicable remittance is deemed a “Payment” under the terms of this Note, and Payments shall continue until the earlier of (i) repayment of the Principal Sum, accrued Interest, and a fee of $35,000 or (ii) expiration of the Private Label Agreement on December 31, 2023.   During the nine months ended September 30, 2024, the Entertainment segment Company’s Entertainment segment repaid the outstanding principal of $87,928 and did not renew this agreement.   2024 Commercial Extension of Credit   On January 22, 2024, the Company’s Entertainment segment entered into an extension of credit in the form of a loan to use in marketing and operating its business in accordance with the Ticket Solution Agreement. The Lender, Ticket Evolution, Inc., agreed to extend, subject to the conditions hereof, and Borrower agreed to take, an advance for a sum of $75,000 with monthly advances of $100,000.   The advances made are recoupable from client service fees with no more than $25,000 being recouped in any one week. The total advances received for the nine months ended September 30, 2024 were $975,000 and payments made totalled $900,000. The outstanding balance as of September 30, 2024 was $75,000.   On August 7, 2024 and as amended on September 25, 2024, the Company’s Entertainment segment entered into an extension of credit (the “Agreement”) with Vegas Tickets in the form of a prepayment for the rights to acquire certain Major League Baseball and National Football League playoff and season tickets. Vegas Tickets agreed to advance, subject to the conditions of the Agreement, and the Company’s Entertainment segment agreed to take, an advance for a sum of $200,000. Under the Agreement, the Company’s Entertainment segment has the right to reacquire the tickets for a cash amount of $220,000 by November 1, 2024. The repurchase date was extended to December 1, 2024 by an amendment dated October 31, 2024.   The Company’s Entertainment segment intends to repurchase the tickets and has recorded the cash repurchase obligation amount of $220,000 as the outstanding extension of credit balance as of September 30, 2024, with $20,000 of such amount recorded as interest expense during the three and nine months ended September 30, 2024.   Convertible Note   On April 5, 2023, the Company entered into and consummated the initial closing (the “First Closing”) of the transactions contemplated by a Securities Purchase Agreement, dated as of April 5, 2023 (the “Purchase Agreement”), between the Company and certain investors (the “Purchasers”).   At the First Closing, the Company issued and sold to the Purchasers Senior Secured Convertible Notes in the aggregate original principal amount of $3,000,000 (the “Notes”) and warrants (the “Warrants”). The Purchase Agreement provided for a ten percent (10%) original interest discount resulting in gross proceeds to the Company of $2,700,000. No interest accrues under the Notes. The Warrants are exercisable for an aggregate 1,125,000 shares comprised of 375,000 warrants at an exercise price of $5.50 per share of the Company’s common stock, par value $0.001 (the “Common Stock”), 375,000 warrants at an exercise price of $6.50 per share of Common Stock, and 375,000 warrants at an exercise price of $7.50 per share of Common Stock.     Subject to certain conditions, within 18 months from the effectiveness date and while the Notes remain outstanding, the Purchasers have the right to require the Company to consummate a second closing of up to an additional $3,000,000 of Notes (the “Second Notes”) and Warrants on the same terms and conditions as the First Closing, except that the Second Notes may be subordinate to a mortgage on the Company’s headquarters building (the “Bank Mortgage”).   The Notes are convertible into shares of Common Stock at the election of the Purchasers at any time at a fixed conversion price of $5.00 (the “Conversion Price”) per share of Common Stock. The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for, Common Stock at a price below the then-applicable Conversion Price (subject to certain exceptions). Subject to certain conditions, including certain equity conditions, the Company may redeem some or all of the then outstanding principal amount of the Note for cash in an amount equal to 110% of the outstanding principal amount of the Notes (the “Optional Redemption Amount”). In addition, the Purchasers may, at their option, demand repayment at the Optional Redemption Amount upon five (5) business days’ written notice following (i) the closing by the Company of the Bank Mortgage, or (ii) a sale by the Company of Common Stock or Common Stock equivalents.   The Notes rank senior to all outstanding and future indebtedness of the Company and its subsidiaries, and are secured by substantially all of the Company’s assets, as evidenced by (i) a security agreement entered into at the Closing, (ii) a trademark security agreement entered into at the Closing, (iii) a patent security agreement entered into at the Closing, (iv) a guaranty executed by all direct and indirect subsidiaries of the Company pursuant to which each of them has agreed to guaranty the obligations of the Company under the Notes, and (v) a mortgage on the Company’s headquarters building in favor of the Purchasers.   Also at the Closing, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Purchasers. Pursuant to the terms of the Registration Rights Agreement, the Company has agreed to prepare and file with the SEC within the 10th business day following the First Closing (the “Filing Date”) a registration statement covering the resale of the shares of Common Stock issuable upon conversion of the Notes and exercise of the Warrants, and to use its best efforts to cause such Registration Statement to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”), as promptly as possible, but in any event no later than 45 days following the Filing Date (the “Effectiveness Date”). If the Registration Statement is not filed by the Filing Date or is not declared effective by the Effectiveness Date, or under certain other circumstances described in the Registration Rights Agreement, then the Company shall be obligated to pay, as partial liquidated damages, to each Purchaser an amount in cash equal to 2% of the original principal amount of the Notes each month until the applicable event giving rise to such payments is cured. If the Company fails to pay any partial liquidated damages in full within seven days after the date payable, the Company will pay interest thereon at a rate of 10% per annum.   The Company recognized the full warrant derivative value, with the remaining amount being allocated to the debt obligation. As the warrant derivative value exceeded the net proceeds from the issuance, the excess amount is recognized as a loss on the date of the issue date. Thus, the Company recorded a loss of $576,380 as an interest expense on the date of issuance relating to the Notes. The following is the assumptions used in calculating the estimated grant-date fair value of the detachable warrants to purchase common stock granted in connection with the Notes: SCHEDULE OF WARRANT TO PURCHASE COMMON STOCK GRANTED      Terms at April 5, 2023 (issuance date)   Volatility – range     106.0 % Risk-free rate     3.36 % Dividend     0 % Remaining contractual term     5.0 years   Exercise price   $ 5.50 – 7.50   Common stock issuable under the warrants     1,125,000       On June 2, 2023, the Purchasers elected to convert $125,000 principal, at the fixed price of $5.00 per share of common stock, 25,000 shares valued at $119,750. The loss on conversion of convertible note into common shares, of $93,386, was recorded during the period.   On October 26, 2023, the Company entered into a Revolving Loan Agreement of which a portion of the net proceeds were used to repay the principal amount of the Convertible debt. The warrants associated with the convertible debt remain outstanding.   Revolving Loan Agreement   On October 26, 2023, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) by and between the Company, Digital Ally Healthcare, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Digital Ally Healthcare” and, together with the Company, the “Borrower”), and Kompass Kapital Funding, LLC, a Kansas limited liability company (“Kompass”). In connection with the Loan Agreement, on October 26, 2023, the Company entered into a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing (the “Mortgage”) by and between the Company, as grantor, and Kompass, as grantee, and issued a Revolving Note (the “Revolving Note”) to Kompass. The gross proceeds to the Company were $4,880,000 before repaying those certain Senior Secured Convertible Notes issued on April 5, 2023 in the aggregate amount of $3,162,500 and paying customary fees and expenses.   Pursuant to the Loan Agreement, Kompass agreed to make revolving loans (the “Revolving Loans”) available to the Borrower as the Borrower may from time to time request until, but not including, October 26, 2025, and in such amounts as the Borrower may from time to time request, provided, however, that the aggregate principal balance of the Revolving Loans outstanding at any time shall not exceed the lesser of $4,880,000 or an amount equal to eighty percent of the value of the mortgaged property, which consists of the real property owned by the Company having an address of 14001 Marshall Drive, Lenexa, KS 66215 (the “Mortgaged Property”). Under the Loan Agreement, the Revolving Loans made by Kompass may be repaid and, subject to customary terms and conditions, borrowed again up to, but not including October 26, 2025, unless the Revolving Loans are otherwise accelerated, terminated or extended as provided in the Loan Agreement. The Revolving Loans shall be used by the Borrower for the purpose of working capital and to retire existing debt. Under the Loan Agreement, the Borrower is required to provide written notice to Kompass prior to creating, assuming or incurring any debt or becoming liable, whether as endorser, guarantor, surety or otherwise, for any debt or obligation of any other party. While obligations remain outstanding under the Loan Agreement, the Borrower is required to maintain a minimum balance of $97,600 in a reserve account (the “Capital Reserve Account”). Under the Loan Agreement, the Borrower is prohibited from creating, assuming, incurring or suffering or permitting to exist any lien of any kind or character upon the collateral, which consists of the Mortgaged Property and the Company’s interest in the Capital Reserve Account. The Loan Agreement contains customary covenants, representations and warranties by the Borrower.   Pursuant to the Loan Agreement, the Company issued the Revolving Note to Kompass whereby the Company and Digital Ally Healthcare jointly and severally promise to pay to the order of Kompass the lesser of (i) $4,880,000.00, or (ii) the aggregate principal amount of all Revolving Loans outstanding under and pursuant to the Loan Agreement at the maturity or maturities and in the amount or amounts stated on the records of Kompass, together with interest (computed on the actual number of days elapsed on the basis of a 360 day year) at a floating per annum rate equal to the greater of (i) the Prime Rate plus four percent or (ii) eight percent, on the aggregate principal amount of all Revolving Loans outstanding from time to time as provided in the Loan Agreement.   The Company entered into the Mortgage to secure its obligations under the Loan Agreement. The property mortgaged under the Mortgage consists of the Mortgaged Property. The Mortgage contains customary covenants, representations and warranties by the Company.     On August 12, 2024, the Company sold the Mortgaged Property and paid off the $4,880,000 outstanding principal balance together with all accrued and unpaid interest. In addition, upon origination of the Revolving Loan, the Company recorded debt issuance costs of $188,255 which was fully amortized as of the date the Mortgage was paid in full. The remaining unamortized discount was $-0- and $171,258 as September 30, 2024 and December 31, 2023, respectively.   Merchant Cash Advances – Video Solutions Segment   In November 2023, the Company obtained a short-term merchant advance, which totalled $1,050,000, from a single lender to fund operations. These advances included origination fees totalling $50,000 for net proceeds of $1,000,000. The advance is, for the most part, secured by expected future sales transactions of the Company with expected payments on a weekly basis. The Company will repay an aggregate of $1,512,000 to the lender. The loan bears interest at 2.9% per week.   During the nine months ended September 30, 2024, the Company made repayments totalling $1,382,500 and received additional proceeds of $1,144,000. The Company refinanced this loan in April 2024 resulting in the additional proceeds received during the nine months ended September 30, 2024. The refinancing was deemed to be an extinguishment of debt and a loss on extinguishment of debt was recorded during the nine months ended September 30, 2024 of $68,827.   As of September 30, 2024 the outstanding principal balance was $2,091,500 which is expected to be repaid in 2024 and early 2025. As of September 30, 2024 the remaining discount balance was $52,538.   The remaining unamortized discount was $52,538 and $369,171 as September 30, 2024 and December 31, 2023, respectively.   Merchant Cash Advances – Entertainment Segment   On March 1, 2024, the Company obtained a short-term merchant advance, which totalled $1,000,000, from a single lender to fund operations. These advances included origination and issuance fees totalling $85,000 for net proceeds of $915,000. The advance is, for the most part, is secured by expected future sales transactions of the Company with expected payments on a weekly basis. The Company will repay an aggregate of $1,425,000 to the lender. The loan bears interest at an 40.4523% annual effective rate based on latest debt modification. During the three and nine months ended September 30, 2024, the Company made repayments totalling $803,850 and $855,749, respectively.   The Company modified/amended the underlying loan agreement twice during the three months ended September 30, 2024, resulting in additional proceeds totalling $393,836. The modifications were both deemed to be extinguishments of debt resulting in a $310,505 total loss on the extinguishment of debt during the three and nine months ended September 30, 2024. As of September 30, 2024 the outstanding balance was $1,101,569 which is expected to be repaid in 2024. See NOTE 16. SUBSEQUENT EVENTS for an update to this matter.   The remaining unamortized discount was $263,417 and $-0- as September 30, 2024 and December 31, 2023, respectively.   The Company entered into the original agreement on March 1, 2024. On July 13, 2024, the Company entered into a letter agreement with the Purchaser, amending the terms of the note agreement, and on September 12, 2024, the Company entered into a second letter agreement further amending the terms of the note agreement   On July 13, 2024, the Company entered into a Letter Agreement with the note holder, which modified the note payable by increasing the principal amount of the note payable from $1,425,000 to $1,725,000; provided, however, that if the Borrowers repay the Note in full on or before August 15, 2024, then the principal amount of the Note shall be reduced automatically by $100,000. Pursuant to the Letter Agreement, the Borrowers’ failure to adhere to certain repayment requirements of the underlying note purchase agreement did not constitute an event of default, as defined in the note purchase agreement. Pursuant to the modified/amended note, the Company agreed to make a cash payment to the note holder in the amount of $150,000 on or before July 26, 2024. The Company also agreed to sell or enter into a firm commitment to sell the office building owned by the Company and pay to the Purchaser: (i) $325,000, if the Company sells or enters into a firm commitment to sell the building on or before August 7, 2024; or (ii) $400,000, if the Company sells or enters into a firm commitment to sell the building after August 7, 2024. Pursuant to the modified/amended note, the Company’s failure to sell or enter into a firm commitment to sell the building prior to September 1, 2024 shall constitute an event of default, as defined in the note purchase agreement. The Company also agreed to pay to the note holder $100,000 per month until the modified/amended note is repaid in full, with the first such payment occurring on August 12, 2024, and each subsequent payment occurring on the 12th calendar day of each month thereafter.   On September 25, 2024, the Company and the note holder agreed to an amended and restated senior secured promissory note with a new principal amount of up to $2,000,000. The amended note evidences the new principal amount and amends and restates in its entirety, the terms and provisions of the Note. Pursuant to the amended note the Company promised to pay to the note holder the new principal amount, together with accrued interest or the amount outstanding under the amended note from time to time, to be computed from the date of the amended note at the rates and in the amounts set forth in the amended note. The amount of the unpaid balance, including such interest, that shall be due and payable under the Amended Note may increase and decrease as advances and payments are made thereunder. The Amended Note bears interest at a rate of 1.58% per month.     The Company can request advances in writing to the note holder and upon approval by the note holder to be determined in its sole discretion, (but which shall not be unreasonably withheld), the note holder can either make payment directly to specified vendor(s) or other creditors on behalf of the Company or deposit the advance into the Company’s account.   The amended note, requires the Company to repay the amended note, in full, on the earlier of (i) November 1, 2024, and (ii) the consummation of the merger between Kustom Entertainment and CL Merger Sub, Inc. (“CL Merger Sub”) pursuant to the merger agreement among the Company, Kustom Entertainment, Clover Leaf Capital Corp. the Company is also required to pay in arrears in cash an amount equal to 50% of revenues from all ticket sales generated by Kustom Entertainment, up to nine thousand tickets sold, and thereafter equal to 10% of all revenues from all ticket sales until the earlier of the date on which the amended note is repaid in full or the November 1, 2024 maturity date. The Company has the right, but not the obligation, under the amended note to prepay the amended note, upon written notice to the Company, by payment in full of the entire outstanding principal balance plus interest.   Furthermore, pursuant to the amended note, the parties agreed to extend the repayment date of $100,000, by the Company to the note holder, from September 26, 2024, to October 10, 2024. As further described in NOTE 16. SUBSEQUENT EVENTS this payment was not made on a timely basis, however, the Note was paid in full on November 7, 2024.

v3.24.4

FAIR VALUE MEASUREMENT	9 Months Ended
	Sep. 30, 2024
Fair Value Disclosures [Abstract]
FAIR VALUE MEASUREMENT	NOTE 4. FAIR VALUE MEASUREMENT   In accordance with ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC 820”), the Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets or liabilities, such as a business.   ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:   ● Level 1 — Quoted prices in active markets for identical assets and liabilities     ● Level 2 — Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities)     ● Level 3 — Significant unobservable inputs (including the Company’s own assumptions in determining the fair value)   The following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023: SCHEDULE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS      September 30, 2024       Level 1     Level 2     Level 3     Total   Liabilities:                                 Warrant derivative liabilities   $ —     $ —     $ 1,266,073     $ 1,266,073   Contingent consideration promissory notes and contingent consideration earn-out agreement     —       —       —       —       $ —     $ —     $ 1,266,073     $ 1,266,073         December 31, 2023       Level 1     Level 2     Level 3     Total   Liabilities:                                 Warrant derivative liabilities   $ —     $ —     $ 1,369,738     $ 1,369,738   Contingent consideration promissory notes and contingent consideration earn-out agreement     —       —       188,470       188,470       $ —     $ —     $ 1,558,208     $ 1,558,208       The following table represents the change in Level 3 tier value measurements for the three months ended September 30, 2024: SCHEDULE OF FAIR VALUE MEASUREMENTS CHANGE IN LEVEL 3 INPUTS      Contingent Consideration Promissory Notes and Earn-Out Agreement     Warrant Derivative Liabilities                 Balance, December 31, 2023   $ 188,470     $ 1,369,738                     Issuance of warrant derivative liabilities     —       2,075,300                     Change in fair value of warrant derivative liabilities     —       (2,178,965 )                   Principal payments on contingent consideration promissory notes – Revenue Cycle Management Acquisitions     (188,470 )     —                     Change in fair value of contingent consideration promissory notes - Revenue Cycle Management Acquisitions     —       —                     Balance, September 30, 2024   $ —     $ 1,266,073

v3.24.4

ACCRUED EXPENSES	9 Months Ended
	Sep. 30, 2024
Payables and Accruals [Abstract]
ACCRUED EXPENSES	NOTE 5. ACCRUED EXPENSES   Accrued expenses consisted of the following at September 30, 2024 and December 31, 2023: SCHEDULE OF ACCRUED EXPENSES      September 30, 2024     December 31, 2023                 Accrued warranty expense   $ 11,615     $ 17,699   Accrued litigation costs     2,040,292       2,040,292   Accrued payroll and related fringes     585,030       367,826   Accrued sales returns and allowances     93,170       117,713   Accrued taxes     116,463       150,981   Accrued interest - related party     385,390       95,031   Customer deposits     227,885       219,462   Other     136,835       260,326   Total accrued expenses   $ 3,596,680     $ 3,269,330       Accrued warranty expense was comprised of the following for the nine months ended September 30, 2024: SCHEDULE OF ACCRUED WARRANTY EXPENSE  Beginning balance   $ 17,699   Provision for warranty expense     38,898   Charges applied to warranty reserve     (44,982 )           Ending balance   $ 11,615

v3.24.4

INCOME TAXES	9 Months Ended
	Sep. 30, 2024
Income Tax Disclosure [Abstract]
INCOME TAXES	NOTE 6. INCOME TAXES   The effective tax rate for the three and nine months ended September 30, 2024 and 2023 varied from the expected statutory rate due to the Company continuing to provide a 100% valuation allowance on net deferred tax assets. The Company determined that it was appropriate to continue the full valuation allowance on net deferred tax assets as of September 30, 2024, primarily because of the Company’s history of operating losses.   The Company has incurred operating losses in recent years, and it continues to be in a three-year cumulative loss position at September 30, 2024. Accordingly, the Company determined there was not sufficient positive evidence regarding its potential for future profits to outweigh the negative evidence of our three-year cumulative loss position under the guidance provided in ASC 740. Therefore, it is determined to continue to provide a 100% valuation allowance on its net deferred tax assets. The Company expects to continue to maintain a full valuation allowance until it determines that it can sustain a level of profitability that demonstrates its ability to realize these assets. To the extent the Company determines that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed. The Company has available to it approximately $140.9 million (based on its December 31, 2023 tax return) in net operating loss carryforwards to offset future taxable income as of September 30, 2024.

v3.24.4

PROPERTY, PLANT AND EQUIPMENT	9 Months Ended
	Sep. 30, 2024
Property, Plant and Equipment [Abstract]
PROPERTY, PLANT AND EQUIPMENT	NOTE 7. PROPERTY, PLANT AND EQUIPMENT   Property, plant and equipment consisted of the following at September 30, 2024 and December 31, 2023: SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT      Estimated Useful Life   September 30, 2024     December 31, 2023   Building   25 years   $ —     $ 4,537,037   Land   Infinite     —       739,734   Office furniture, fixtures, equipment, and aircraft   3-20 years     780,492       2,065,092   Warehouse and production equipment   3-7 years     237,141       29,055   Demonstration and tradeshow equipment   3-7 years     77,791       87,987   Building improvements   5-7 years     20,935       1,328,654   Total cost         1,116,359       8,787,559   Less: accumulated depreciation and amortization         (671,756 )     (1,503,857 )                       Net property, plant and equipment       $ 444,603     $ 7,283,702       Depreciation expense for the three months ended September 30, 2024 and September 30, 2023 was $127,474 and $188,100, respectively, and is included in general and administrative expenses. Depreciation expense for the nine months ended September 30, 2024 and September 30, 2023 was $471,307 and $533,992, respectively, and is included in general and administrative expenses.    During the nine months ended September 30, 2024 the Company engaged a broker and sold its aircraft for $1,100,000 less closing costs of $1,500. The carrying amount of the aircraft on the date of sale was $1,141,661. As a result of the sale the Company recorded a loss of $41,661 in the Consolidated Statement of Operations.   During the three and nine months ended September 30, 2024 the Company engaged a broker and sold its building for $5,900,000 less closing costs of $7,194. The carrying amount of the building on the date of sale was $5,461,623. As a result of the sale the Company recorded a gain of $431,183 in the Consolidated Statement of Operation during the three and nine months ended September 30, 2024.

v3.24.4

GOODWILL AND OTHER INTANGIBLE ASSETS	9 Months Ended
	Sep. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]
GOODWILL AND OTHER INTANGIBLE ASSETS	NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS   Intangible assets consisted of the following as of September 30, 2024 and December 31, 2023: SCHEDULE OF INTANGIBLE ASSETS      September 30, 2024     December 31, 2023       Gross value     Accumulated amortization     Accumulated Impairment   Net carrying value     Gross value     Accumulated amortization     Net carrying value   Amortized intangible assets:                                                                         Licenses (video solutions segment)   $ 151,652     $ 23,907     $ —   $ 127,745     $ 225,545     $ 89,887     $ 135,658   Patents and trademarks (video solutions segment)     483,521       355,314       —     128,207       483,521       266,403       217,118   Sponsorship agreement network (entertainment segment)     5,600,000       3,453,333       —     2,146,667       5,600,000       2,613,333       2,986,667   SEO content (entertainment segment)     600,000       462,500       —     137,500       600,000       350,000       250,000   Personal seat licenses (entertainment segment)     117,339       12,060       —     105,279       180,081       14,004       166,077   Software     23,653       —       —     23,653       -       -       -   Website enhancements (entertainment segment)     35,900       6,841       —     29,059       13,500       —       13,500   Client agreements (revenue cycle management segments)     999,034       301,695       —     697,339       999,034       226,768       772,266         8,011,099       4,615,650       —     3,395,449       8,101,681       3,560,395       4,541,286                                                           Indefinite life intangible assets:                                                       Goodwill (Entertainment segment)     6,112,507       —       307,000     5,805,507       5,886,548       —       5,886,548   Goodwill (Revenue cycle management segment)     5,480,966       —       4,322,000     1,158,966       5,480,966        —        5,480,966 Trade name and trademarks (entertainment segment)     900,000       —       201,000     699,000       600,000       —       600,000   Patents and trademarks pending (video solutions segment)     91,623       —       —     91,623       1,622       —       1,622                                                           Total   $ 20,596,195     $ 4,615,650     $ 4,830,000   $ 11,150,545     $ 20,070,817     $ 3,560,395     $ 16,510,422       Patents and trademarks pending will be amortized beginning at the time they are issued by the appropriate authorities. If issuance of the final patent or trademark is denied, then the amount deferred will be immediately charged to expense.   Amortization expense for the three months ended September 30, 2024 and 2023 was $371,772 and $377,485, respectively and $1,106,939 and $1,122,635 for the nine months ended September 30, 2024 and 2023, respectively. Estimated amortization for intangible assets with definite lives for the next five years ending December 31 and thereafter is as follows: SCHEDULE OF ESTIMATED AMORTIZATION FOR INTANGIBLE ASSETS  Year ending December 31:       2024 (October 1, 2024 to December 31, 2024)   $ 371,227   2025     1,418,272   2026     913,733   2027     116,387   2028 and thereafter     575,830   Total   $ 3,395,449     Interim impairment test   We performed an interim impairment test as of the last day of the fiscal third quarter of 2024 as management determined that a triggering event had occurred resulting from the additional decline in demand for our services, prolonged economic uncertainty, the fact that the split-off transaction did not occur when and as expected and a further decrease in our stock price. Therefore, we performed an interim impairment test as of the September 30, 2024 for our reporting units with remaining goodwill.   The fair value of each reporting unit was estimated using a weighting of the income and market valuation approaches. The income approach applied a fair value methodology to each reporting unit based on discounted cash flows. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. The weighted average cost of capital used in our most recent impairment test ranged from 21% to 32.5%. We also applied a market approach, which develops a value correlation based on the market capitalization of similar publicly traded companies, referred to as a multiple, to apply to the operating results of the reporting units. The primary market multiples used are revenue and earnings before interest, taxes, depreciation, and amortization. The income and market approaches were equally weighted in our most recent annual impairment test, for all of the reporting units.   The combined fair values for all reporting units were then reconciled to our aggregate market value of our shares of common stock on the date of valuation, while considering a reasonable control premium. We consider a reporting unit’s fair value to be substantially in excess of the reporting unit’s carrying value at a 20% premium or greater. Based on our most recent impairment test, the video solutions reporting unit’s fair value was substantially in excess of its carrying value, while the revenue cycle management and entertainment segments were determined to be impaired.   We held goodwill of $5,480,966 as of September 30, 2024 and December 31, 2023, related to businesses within our revenue cycle management segment. We held goodwill of $6,112,507 and $5,886,548 as of September 30, 2024 and December 31, 2023, respectively, related to businesses within our entertainment segment. As a result of our September 30, 2024 interim impairment test, we concluded that the carrying amount of the revenue cycle management and the entertainment reporting units exceeded its estimated fair values. Thus, we recorded a non-cash goodwill impairment charge of $4,322,000, related to the goodwill carrying balance for the revenue cycle management segment, and a non-cash goodwill impairment charge of $307,000, related to the goodwill carrying balance for the entertainment segment, both of which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024. The goodwill impairment was primarily driven by recent performance of the revenue cycle management and entertainment reporting units since our annual impairment testing date, as well as a delay in the projected timing of recovery. The remaining balance for the goodwill carrying balance related to businesses within our revenue cycle management segment and entertainment segment was $1,158,966 and $5,805,507, respectively as of September 30, 2024.   Indefinite-lived intangible assets   We held indefinite-lived trade names/trademarks of $900,000 and $600,000 as of September 30, 2024 and December 31, 2023, respectively, related to businesses within our entertainment segment.   During the three months ended September 30, 2024, we concluded that the carrying amount of a trade name/trademark related to the entertainment segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $201,000, which was included in goodwill and intangible asset impairment charge on our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024. The charge was primarily driven by the split-off transaction not being completed when and as expected and our recent revenue and operating performance of the related business given a decline in demand and overall economic uncertainty. The remaining balance for this trade name/trademark was $699,000 as of September 30, 2024.

v3.24.4

COMMITMENTS AND CONTINGENCIES	9 Months Ended
	Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	NOTE 9. COMMITMENTS AND CONTINGENCIES   Litigation   From time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us. It is our policy to not disclose the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on us. After carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously defend any lawsuit filed against us. We record a liability when losses are deemed probable and reasonably estimable. When losses are deemed reasonably possible but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for the claim, if material for disclosure. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of our prevailing, the availability of insurance, and the severity of any potential loss. We reevaluate and update accruals as matters progress over time.   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. On July 18, 2022, Culp McAuley filed its Answer to the Company’s Verified Complaint and included Counterclaims alleging breach of contract and seeking monetary damages. On August 8, 2022, the Company filed its Reply and Affirmative Defenses to the Counterclaims by, among other things, denying the allegations and any and all liability.   On December 20, 2022, the Company filed a motion for leave to file a second amended complaint to add additional claims against the defendants to avoid fraudulent transfers, to pierce the corporate veil of Culp McAuley, and for remedies related to the claims for fraudulent transfers and piercing the corporate veil. On December 22, 2022, the Court issued an Order granting the Company’s motion for leave to file a second amended complaint, which was filed with the Court on December 27, 2022. Because Culp McAuley’s original counsel withdrew, Culp McAuley was ordered to obtain new counsel on or before December 2, 2022. On December 5, 2022, the Court ordered that Culp McAuley show cause in writing by December 21, 2022, why the Court should not direct the Clerk to enter default against it. On December 22, 2022, the Court directed the Clerk to enter default against Culp McAuley. On February 21, 2023, the Clerk entered default against Culp McAuley.   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. On December 7, 2023, the Company filed an application for the Clerk’s entry of default against defendant Brandon Culp. On December 13, 2023, the Clerk entered default against Brandon Culp.     On January 5, 2024, the Company filed a motion for summary judgment against defendants Campbell McAuley and Mark Depew. On the same date, the Company also filed separate motions for default judgment against Culp McAuley and Brandon Culp, respectively. On January 5, 2024, defendant Mark Depew filed a motion for summary judgment against the Company. On May 17, 2024, the Court issued Orders which, respectively, (i) granted defendant Mark Depew’s motion for summary judgment against the Company; (ii) denied the Company’s motion for summary judgment against Depew; (iii) granted the Company’s motion for summary judgment against defendant Campbell McAuley; and (iv) granted the Company’s motions for default judgment against defendants Culp McAuley and Brandon Culp. Finding that defendants Brandon Culp and Campbell McAuley were each the alter ego of Culp McAuley, on June 4, 2024, the Court entered judgment in favor of the Company in the amount of $3,999,984 against Culp McAuley, Brandon Culp, and Campbell McAuley, jointly and severally (the “judgment”). The Company is currently uncertain as to what amount, if any, of the judgment amount it will ultimately be able to recover.   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 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. The lawsuit arises from the defendant’s multiple breaches of his obligations to the Company. The Company seeks monetary damages based on certain conduct by the defendant. On May 28, 2024, the defendant filed a motion to strike portions of the complaint and a motion for demurrer. On October 4, 2024, the Court sustained in part and overruled in part defendant’s motion for demurrer. The Court further denied the defendant’s motion to strike in its entirety. The case is pending.   As of September 30, 2024, we are able to estimate a range of reasonably possible loss related to the Culp McCauley case (when taking into account, among other things, the uncertainty of recovering the judgment amount owed to the Company by Culp McAuley, Brandon Culp and Campbell McAuley, jointly and severally), our estimate of the aggregate reasonably possible loss (in excess of any accrued amounts) was approximately $1.8 million. Our estimate with respect to the aggregate reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties, which may change quickly and significantly from time to time, particularly if and as we engage with applicable governmental agencies or plaintiffs in connection with a proceeding. Also, the matters underlying the reasonably possible loss will change from time to time. As a result, actual results may vary significantly from the current estimate.   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. 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.   Notice of Failure to Satisfy a Continued Listing Rule   On March 14, 2024, the Nasdaq Listing Qualifications staff notified Digital Ally, Inc. (the “Company”), that due to resignation of Mr. Michael J. Caulfield from the Company’s board of directors (the “Board”) effective on January 31, 2024, the Company no longer complies with the audit committee and compensation committee requirements as set forth in Listing Rule 5605 of The Nasdaq Stock Market LLC (“Nasdaq”), including the requirements that there are at least three independent directors on the Company’s audit committee and at least two independent directors on the Company’s compensation committee.   The notification has no immediate effect on the Company’s listing on the Nasdaq Capital Market. In accordance with Nasdaq Listing Rules, the Company is provided a cure period until the earlier of the Company’s next annual shareholders’ meeting (or July 29, 2024 if the next shareholders’ meeting will be held before July 29, 2024) or January 31, 2025 (the “Cure Period”). If the Company does not regain compliance by within the Cure Period, Nasdaq will provide written notice that the Company’s common stock, par value $0.001 per share, will be subject to delisting from the Nasdaq Capital Market, at which time, the Company may appeal the delisting determination to a Hearings Panel.   Management of the Company has resolved to take commercially reasonable steps to fill the vacancy on the Board with a new director who qualifies as independent under the Nasdaq Listing Rules as soon as is practical and anticipates regaining compliance during the Cure Period. However, there can be no assurance that the Company will be able to satisfy Nasdaq Listing Rule 5605 or will otherwise be in compliance with other Nasdaq listing criteria. See NOTE 16. SUBSEQUENT EVENTS for additional information pertaining to this matter.

v3.24.4

STOCK-BASED COMPENSATION	9 Months Ended
	Sep. 30, 2024
Share-Based Payment Arrangement [Abstract]
STOCK-BASED COMPENSATION	NOTE 10. STOCK-BASED COMPENSATION   The Company recorded pre-tax compensation expense related to the grant of stock options and restricted stock issued of $(27,789) and $84,586 for the three months ended September 30, 2024 and 2023, and $73,678 and $378,917 for the nine months ended September 30, 2024 and 2023, respectively.     As of September 30, 2024, the Company had adopted ten separate stock option and restricted stock plans: (i) the 2005 Stock Option and Restricted Stock Plan (the “2005 Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the 2007 Stock Option and Restricted Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the “2008 Plan”), (v) the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option and Restricted Stock Plan (the “2013 Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”), (viii) the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”), (ix) the 2020 Stock Option and Restricted Stock Plan (the “2020 Plan”), and (x) the 2022 Stock Option and Restricted Stock Plan (the “2022 Plan”). The 2005 Plan, 2006 Plan, 2007 Plan, 2008 Plan, 2011 Plan, 2013 Plan, 2015 Plan, 2018 Plan, 2020 Plan and 2022 Plan are referred to as the “Plans.”    Stock option grants. The Company believes that such awards better align the interests of our employees with those of its stockholders. Option awards have been granted with an exercise price equal to the market price of its stock at the date of grant with such option awards generally vesting based on the completion of continuous service and having ten-year contractual terms. These option awards typically provide for accelerated vesting if there is a change in control (as defined in the Plans). The Company has registered all shares of common stock that are issuable under its Plans with the SEC. A total of 137,042 shares remained available for awards under the various Plans as of September 30, 2024.   The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model.   A summary of all stock option activity under the Plans for the nine months ended September 30, 2024 is as follows:   SCHEDULE OF STOCK OPTIONS OUTSTANDING Options   Number of Shares     Weighted Average Exercise Price   Outstanding at December 31, 2023     53,600     $ 45.55   Granted     —       —   Exercised     —       —   Forfeited/expired     (1,100 )     (65.00 ) Outstanding at September 30, 2024     52,500     $ 45.14   Exercisable at September 30, 2024     52,500     $ 45.14     The Plans allow for the cashless exercise of stock options. This provision allows the option holder to surrender/cancel options with an intrinsic value equivalent to the purchase/exercise price of other options exercised. There were no shares surrendered pursuant to cashless exercises during the nine months ended September 30, 2024 and 2023.   The aggregate intrinsic value of options outstanding was $-0- and $-0-, at September 30, 2024 and December 31, 2023, respectively. The aggregate intrinsic value of options exercisable was $-0- and $-0-, at September 30, 2024 and December 31, 2023, respectively.   As of September 30, 2024, the unrecognized portion of stock compensation expense on all existing stock options was $-0-.     The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s option plans as of September 30, 2024:   SCHEDULE OF SHARES AUTHORIZED UNDER STOCK OPTION PLANS BY EXERCISE PRICE RANGE         Outstanding options     Exercisable options   Exercise price range     Number of options     Weighted average remaining contractual life     Number of options     Weighted average remaining contractual life                                         $ 0.01 to $49.99       37,000       5.9 years       37,000       5.9 years   $ 50.00 to $69.99       14,000       4.0 years       14,000       4.0 years   $ 70.00 to $89.99       1,500       1.6 years       1,500       1.6 years                                                   52,500       5.2 years       52,500       5.2 years     Restricted stock grants. The Board of Directors has granted restricted stock awards under the Plans. Restricted stock awards are valued on the date of grant and have no purchase price for the recipient. Restricted stock awards typically vest over one to five years corresponding to anniversaries of the grant date. Under the Plans, unvested shares of restricted stock awards may be forfeited upon the termination of service to or employment with the Company, depending upon the circumstances of termination. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive cash dividends.   A summary of all restricted stock activity under the Plans for the three months ended September 30, 2024 is as follows:  SCHEDULE OF RESTRICTED STOCK ACTIVITY     Number of Restricted shares     Weighted average grant date fair value   Nonvested balance, December 31, 2023     53,875     $ 11.27   Granted     80,197       2.12   Vested     (32,250 )     (10.87 ) Forfeited     (51,072 )     (2.91 ) Nonvested balance, September 30, 2024     50,750     $ 5.48     The Company estimated the fair market value of these restricted stock grants based on the closing market price on the date of grant. As of September 30, 2024, there were $88,399 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants, which will be amortized over the next forty-two months in accordance with their respective vesting scale.   The nonvested balance of restricted stock vests as follows:  SCHEDULE OF NON-VESTED BALANCE OF RESTRICTED STOCK Years ended   Number of Shares           2024 (October 1, 2024 through December 31, 2024)     —   2025     35,250   2026     6,500   2027     5,000   2028     4,000

v3.24.4

COMMON STOCK PURCHASE WARRANTS	9 Months Ended
	Sep. 30, 2024
Common Stock Purchase Warrants
COMMON STOCK PURCHASE WARRANTS	NOTE 11. COMMON STOCK PURCHASE WARRANTS   2023 Purchase Warrants   On April 5, 2023, the Company issued warrants to purchase a total of 1,125,000 shares of Common Stock. The warrant terms provide for net cash settlement outside the control of the Company under certain circumstances. As such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated fair value at their issuance date and at each reporting date with any subsequent changes reported in the consolidated statements of operations as the change in fair value of warrant derivative liabilities. Furthermore, the Company re-values the fair value of warrant derivative liability as of the date the warrant is exercised with the resulting warrant derivative liability transitioned to change in fair value of warrant derivative liabilities through the consolidated statement of operations.   The Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of the warrant derivative liability relative to the 2023 Purchase Warrants as of their date of issuance and as of September 30, 2024:  SCHEDULE OF WARRANT MODIFICATION     Issuance date assumptions     September 30, 2024 assumptions   Volatility – range     106.0 %     106.6 % Risk-free rate     3.36 %     3.58 % Dividend     0 %     0 % Remaining contractual term     5.0 years       3.5 years   Exercise price   $ 5.50 – 7.50     $ 5.50 – 7.50   Common stock issuable under the warrants     1,125,000       1,125,000     2024 Purchase Warrants   On June 25, 2024, the Company issued Series A and prefunded warrants to purchase a total of 1,768,227 shares of Common Stock along with the sale of common stock. The Company also issued Series B Warrants that will be exercisable at any time or times on or after the date Stockholder Approval is obtained. Both the Series A and Series B warrants have reset provisions that are activated upon the date Stockholder Approval is obtained. See NOTE 16. SUBSEQUENT EVENTS for further information on such reset provisions. The warrant terms provide for net cash settlement outside the control of the Company under certain circumstances. As such, the Company is required to treat these warrants as derivative liabilities which are valued at their estimated fair value at their issuance date and at each reporting date with any subsequent changes reported in the consolidated statements of operations as the change in fair value of warrant derivative liabilities. Furthermore, the Company re-values the fair value of warrant derivative liability as of the date the warrant is exercised with the resulting warrant derivative liability transitioned to change in fair value of warrant derivative liabilities through the consolidated statement of operations.   During the three and nine months ended September 30, 2024, the prefunded warrants to purchase 573,008 shares of common stock were fully exercised.     The Company has utilized the following assumptions in its Black-Scholes option valuation model to calculate the estimated fair value of the derivative liability relative to the 2024 Purchase Warrants as of their date of issuance and as of September 30, 2024:       Issuance date assumptions     September 30, 2024 assumptions   Volatility – range     72.1 - 101.1%       106.6 % Risk-free rate     4.25 – 5.46%       3.58 % Dividend     0 %     0 % Remaining contractual term     0.1 - 5.0 years       4.7 years   Exercise price   $ 2.51     $ 2.51   Common stock issuable under the warrants     1,768,227       1,195,219       The following table summarizes information about shares issuable under all warrants outstanding during the nine months ended September 30, 2024:  SCHEDULE OF WARRANT ACTIVITY     Warrants     Weighted average exercise price   Vested Balance, December 31, 2023     1,125,000     $ 6.50   Granted     1,768,227       2.51   Exercised     (573,008 )     (2.51 ) Forfeited/cancelled     —       —   Vested Balance, September 30, 2024     2,320,219     $ 4.44     The total intrinsic value of all outstanding warrants aggregated $-0- as of September 30, 2024. The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable warrants to purchase shares of common stock as of September 30, 2024:  SCHEDULE OF RANGE OF EXERCISE PRICES AND WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF WARRANTS         Outstanding and exercisable warrants   Exercise price     Number of warrants     Weighted average remaining contractual life   $ 5.50       375,000       3.5 years   $ 6.50       375,000       3.5 years   $ 7.50       375,000       3.5 years   $ 2.51       1,195,219       4.7 years                                   2,320,219       4.1 years

v3.24.4

STOCKHOLDERS’ EQUITY	9 Months Ended
	Sep. 30, 2024
Equity [Abstract]
STOCKHOLDERS’ EQUITY	NOTE 12. STOCKHOLDERS’ EQUITY   2023 Issuance of Restricted Common Stock   On January 10, 2023, the board of directors approved the grant of 22,500 shares of common stock to officers of the Company. Such shares will generally vest over a period of one to five years on their respective anniversary dates in January through January 2028, provided that each grantee remains an officer or employee on such dates. Additionally, the board of directors approved the grant of 12,500 restricted common shares to certain new employees of the Company. Such shares will generally vest over a period of one to two years on their respective anniversary dates in January through January 2025, provided that each grantee remains an employee of the company on such dates.   2024 Issuance of Restricted Common Stock   In January 2024, the board of directors approved the grant of 55,000 shares of common stock to officers of the Company. Such shares will generally vest over a period of one to five years on their respective anniversary dates in January through January 2028, provided that each grantee remains an officer or employee on such dates. Additionally, the board of directors approved the grant of 25,197 restricted common shares to certain new employees of the Company. Such shares will generally vest over a period of one to two years on their respective anniversary dates in January through January 2026, provided that each grantee remains an employee of the company on such dates.   2024 Private Placement Transaction   On June 24, 2024, the Company entered into a private placement transaction (the “Private Placement”), pursuant to a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional investors (the “Purchasers”) for aggregate gross proceeds of approximately $2.9 million, before deducting fees to the placement agent and other expenses payable by the Company in connection with the Private Placement.   As part of the Private Placement, the Company issued an aggregate of 1,195,219 units and pre-funded units (collectively, the “Units”) at a purchase price of $2.51 per unit (less $0.0001 per pre-funded unit). Each Unit consists of (i) one share of common stock, par value $0.001 per share, of the Company (the “Common Stock”) (or one pre-funded warrant to purchase one share of Common Stock (the “Pre-Funded Warrants”)), (ii) one Series A warrant to purchase one share of Common Stock (the “Series A Warrant”) and (iii) one Series B warrant to purchase such number of shares of Common Stock as will be determined on the Reset Date and in accordance with the terms therein (the “Series B Warrant”, and together with the Series A Warrant, the “Warrants”).   Cancellation of Restricted Stock   During the nine months ended September 30, 2024 and 2023, the Company cancelled 51,072 and 3,625 shares due to termination of employees, respectively.     Exercise of Prefunded Warrants   During the nine months ended September 30, 2024, the prefunded warrants to purchase 573,008 shares of common stock were fully exercised.   Reverse Stock Split   On February 6, 2023, we filed a Certificate of Amendment to the Articles of Incorporation, as amended, with the Secretary of State of the State of Nevada to effect a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the shares of our common stock. The Reverse Stock Split was effective as of time of filing. No fractional shares were issued in connection with the Reverse Stock Split. Any fractional shares of our Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest whole number. In connection with the Reverse Stock Split, our board approved appropriate and proportional adjustments to all outstanding securities or other rights convertible or exercisable into shares of our Common Stock, including, without limitation, all preferred stock, warrants, options, and other equity compensation rights. All historical share and per-share amounts reflected throughout our condensed consolidated financial statements and other financial information in this Report have been adjusted to reflect the Reverse Stock Split as if the split occurred as of the earliest period presented. The par value per share of our common stock was not affected by the Reverse Stock Split.    Noncontrolling Interests   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”. We reported net loss (income) attributable to noncontrolling interests of consolidated subsidiary of $2,000,206 and $(29,360) for the three months ended September 30, 2024 and 2023, and $1,939,143 and $(228,624) for the nine months ended September 30, 2024 and 2023, respectively.

v3.24.4

COUNTRY STAMPEDE ACQUISITION	9 Months Ended
	Sep. 30, 2024
Country Stampede Acquisition [Member]
Business Acquisition [Line Items]
COUNTRY STAMPEDE ACQUISITION	NOTE 13. COUNTRY STAMPEDE ACQUISITION   On March 1, 2024, Kustom 440, entered into an Asset Purchase Agreement (the “Acquisition Agreement”) with JC Entertainment, LLC, a Kansas limited liability company (“JC Entertainment”). Pursuant to the Acquisition Agreement, Kustom 440 acquired certain assets associated with a music entertainment event (“Country Stampede”), including all intellectual property arising out of and relating to Country Stampede (“Country Stampede Intellectual Property”) and certain contracts in which JC Entertainment is a party to host and operate the 2024 Country Stampede (the “Assumed Contracts”, and together with the Country Stampede Intellectual Property, the “Purchased Assets”).   As consideration for acquiring the Purchased Assets, Kustom 440 paid JC Entertainment the aggregate purchase price amount $542,959, with the sum of $400,000 paid at the time of closing (“Closing”), and the remainder to be paid on or before thirty days from the time of Closing. Kustom 440 shall receive a credit for all non-refunded festival ticket sales for the 2024 Country Stampede to be calculated immediately prior to Closing, and JC Entertainment shall be entitled to keep all ticket sale proceeds made and/or received prior to Closing. Kustom 440 shall be obligated, to the extent a refund is sought after Closing, to provide such refund, if appropriate, to the customer requesting a refund, and shall indemnify and hold harmless JC Entertainment from any and all claims, liabilities, costs, suits, or the like relating to such refund request.   The Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, the presentation of the assets acquired, historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, are not required to be presented. Under the acquisition method, the purchase price of the Country Stampede Acquisition has been allocated to the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of the Country Stampede Acquisition. This allocation involves a number of assumptions, estimates, and judgments that could materially affect the timing or amounts recognized in our financial statements. The Country Stampede Acquisition was structured as an asset purchase; however the parties agreed to coordinate the election to invoke IRS Section 338(h)(10) relative to this transaction for tax purposes. Therefore, the excess purchase price over the fair value of net tangible assets acquired was recorded as goodwill, which will be amortized over 15 years for income tax filing purposes. Likewise, the other acquired assets were stepped up to fair value and is deductible for income tax purposes. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.     The purchase price of the Country Stampede Acquisition was allocated to tangible assets, goodwill, identifiable intangible assets, and assumed liabilities based on their preliminary estimated fair values at the time of the acquisition. The Company retained the services of an independent valuation firm to determine the fair value of these identifiable intangible assets. The Company will continue to evaluate the fair value of the identified intangible assets. The preliminary estimated fair value of assets acquired, and liabilities assumed in the Country Stampede Acquisition were as follows:  SCHEDULE OF ESTIMATED FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED ACQUISITION     As allocated (Preliminary)   Description   March 1, 2024   Assets acquired (provisional):         Tangible assets acquired   $ 305,000   Identifiable intangible assets acquired (Trademarks and trade names)     300,000   Goodwill     225,959   Liabilities assumed     (288,000 ) Liabilities assumed pursuant to stock purchase agreement     (288,000 )           Net assets acquired and liabilities assumed   $ 542,959   Consideration:         Cash paid at Country Stampede Acquisition date   $ 400,000   Cash paid subsequent to closing     142,959             Total Country Stampede Acquisition purchase price   $ 542,959     During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date.

v3.24.4

SEGMENT DATA	9 Months Ended
	Sep. 30, 2024
Segment Reporting [Abstract]
SEGMENT DATA	NOTE 14. SEGMENT DATA   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. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. The Company’s three operating segments are Video Solutions, Revenue Cycle Management, and Entertainment, each of which has specific personnel responsible for that business and reports to the CODM. Corporate expenses capture the Company’s corporate administrative activities, is also to be reported in the segment information. The Company’s captive insurance subsidiary provides services to the Company’s other business segments and not to outside customers. Therefore, its operations are eliminated in consolidation and is not considered a separate business segment for financial reporting purposes.   The Video Solutions Segment encompasses our law, commercial, and Shield™ divisions. This segment includes both service and product revenues through our subscription models offering cloud and warranty solutions, and hardware sales for video and health safety solutions. The Revenue Cycle Management Segment provides working capital and back-office services to a variety of healthcare organizations throughout the country, as a monthly service fee. The Entertainment Segment acts as an intermediary between ticket buyers and sellers within our secondary ticketing platform, ticketsmarter.com, and we also acquire tickets from primary sellers to then sell through various platforms.     The Company’s corporate administration activities are reported in the corporate line item. These activities primarily include expense related to certain corporate officers and support staff, certain accounting staff, expense related to the Company’s Board of Directors, stock option expense for options granted to corporate administration employees, certain consulting expenses, investor relations activities, and a portion of the Company’s legal, auditing and professional fee expenses. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes.   Summarized financial information for the Company’s reportable business segments is provided for the indicated periods and as of September 30, 2024, and 2023:  SCHEDULE OF SEGMENT REPORTING     2024     2023     2024     2023       For the three months ended September 30,     For the nine months ended September 30,       2024     2023     2024     2023   Net Revenues:                                 Video Solutions   $ 1,196,362     $ 1,797,348     $ 4,500,325     $ 5,596,300   Revenue Cycle Management     1,601,792       1,636,543       4,600,745       5,142,904   Entertainment     1,253,557       2,903,808       6,096,227       11,575,315   Total Net Revenues   $ 4,051,711     $ 6,337,699     $ 15,197,297     $ 22,314,519                                     Gross Profit:                                 Video Solutions   $ 769,063     $ 426,795     $ 1,622,558     $ 1,740,397   Revenue Cycle Management     666,723       625,114       1,731,860       2,203,220   Entertainment     304,188       174,240       149,386       1,564,361   Total Gross Profit   $ 1,739,974     $ 1,226,149     $ 3,503,804     $ 5,507,978                                     Operating Income (loss):                                 Video Solutions   $ (89,055 )   $ (1,311,143 )   $ (1,909,246 )   $ (4,639,316 ) Revenue Cycle Management     (4,085,224 )     43,202       (3,955,761 )     299,010   Entertainment     (1,516,934 )     (1,256,681 )     (3,987,415 )     (2,818,617 ) Corporate     (1,691,086 )     (2,623,421 )     (5,083,070 )     (9,102,631 ) Total Operating Income (Loss)   $ (7,382,299 )   $ (5,148,043 )   $ (14,935,492 )   $ (16,261,554 )                                   Depreciation and Amortization:                                 Video Solutions   $ 133,246     $ 219,955     $ 520,970     $ 629,677   Revenue Cycle Management     26,735       26,328       80,164       69,066   Entertainment     339,265       319,302       977,112       957,884   Total Depreciation and Amortization   $ 499,246     $ 565,585     $ 1,578,246     $ 1,656,627           September 30, 2024     December 31, 2023   Assets (net of eliminations):                 Video Solutions   $ 16,876,673     $ 26,396,559   Revenue Cycle Management     1,969,225       2,260,376   Entertainment     6,037,666       6,324,211   Corporate     7,379,605       12,047,663   Total Identifiable Assets   $ 32,263,169     $ 47,028,809     The segments recorded noncash items effecting the gross profit and operating income (loss) through the established inventory reserves based on estimates of excess and/or obsolete current and non-current inventory. The Company recorded a reserve for excess and obsolete inventory in the video solutions segment of $4,144,749 and a reserve for the entertainment segment of $78,241 as of September 30, 2024.   The segment net revenues reported above represent sales to external customers. Segment gross profit represents net revenues less cost of revenues. 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.

v3.24.4

RELATED PARTY TRANSACTIONS	9 Months Ended
	Sep. 30, 2024
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	NOTE 15. RELATED PARTY TRANSACTIONS   Transactions with Managing Member of Nobility Healthcare   The Company accrued reimbursable expenses payable to Nobility, LLC totalling $294,715 and $404,483 as of September 30, 2024 and $265,241 as of December 31, 2023 and management fees in accordance with the operating agreement of $6,877 as of September 30, 2024 and $36,502 as of December 31, 2023. The Company recorded management fees of $29,280 and $20,062 for the nine months ended September 30, 2024 and 2023.   Transactions with Related Party of TicketSmarter   On September 22, 2023, a trust, the beneficiaries of which are TicketSmarter’s Chief Executive Officer and his spouse, made a loan in the amount of $2,325,000 to TicketSmarter to support TicketSmarter’s operations. On October 2, 2023 an additional $375,000 was advanced to Ticketsmarter. The transaction was recorded as a related party note payable (the “TicketSmarter Related Party Note”). The TicketSmarter Related Party Note bears interest of 13.25% per annum with repayment beginning January 2, 2024. As of September 30, 2024, the entire TicketSmarter Related Party note is $2,700,000, is classified as current, with an accrued interest balance of $384,545. The use of proceeds of the TicketSmarter Related Party Note was to resolve numerous outstanding payables at a discounted rate, the discount received to resolve such outstanding payables is recognized as a gain on extinguishment of liabilities on the statement of operations. Additionally, these negotiations relieved TicketSmarter of numerous future obligations following fiscal year 2023.   Company Related Party Note   On August 22, 2024, Digital Ally’s Chief Executive Officer, made a loan in the amount of $100,000 to the Company to support its operations. The transaction was recorded as a related party note payable (the “Company Related Party Note”). The Company Related Party Note bears interest at the prime Rate (8.00% as of September 30, 2024) per annum with repayment due on demand. As of September 30, 2024, the entire Company Related Party note of $100,000, is classified as current, with an accrued interest balance of $854.

v3.24.4

SUBSEQUENT EVENTS	9 Months Ended
	Sep. 30, 2024
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	NOTE 16. SUBSEQUENT EVENTS   Default and Reservation Letter   On March 1, 2024, the Company entered into a Note Purchase Agreement (the “Agreement”), by and between the Company and its wholly-owned subsidiary of the Company (the “Borrowers”), and Mosh Man, LLC, (the “Purchaser”), pursuant to which the Borrowers issued to the Purchaser a Senior Secured Promissory Note (the “Original Note”), as modified pursuant to a Letter Agreement dated July 13, 2024, as further modified by a Letter Agreement dated September 12, 2024, and as further modified pursuant to an Amended and Restated Promissory Note, dated September 25, 2024 (the “Amended Note”, and together with the Original Note, the “Note”). In connection with the Agreement, the Borrowers entered into a security agreement by and between the Borrowers, as grantor, and the Purchaser, as grantee.   On October 22, 2024, the Company received a Default and Reservation Letter (the “Default Notice”) from counsel for the administrative agent for the Note, (i) notifying the Company that it is in default under the Note for, among other reasons, failing to make a $100,000 payment that was due on October 10, 2024, (ii) accelerating all principal and interest payments due under the Note, and (iii) demanding the Borrowers enter into a lockbox control agreement within ten (10) business days of the date of the Default Notice. As of the date of the Default Notice, the outstanding obligation of the Company under the Note was approximately $1,600,000.   On October 24, 2024, the Company received a Notice of UCC Article 9 Public Sale (the “Sale Notice”) from counsel to the administrative agent for the Note notifying the Company that it intended to conduct a public sale of the collateral securing the Company’s obligations under the Note and Security Agreement on November 5, 2024.   As further described below, the Company raised sufficient funds through a private placement which closed on November 7, 2024, to repay the Note in full. The Company’s full repayment of the outstanding obligations under such promissory note effectively cured all defaults under the Agreement and terminated the public sale process of the collateral securing the Borrowers’ obligations thereunder.   Securities Purchase Agreement   On November 6, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors (the “Purchasers”), pursuant to which the Company agreed to issue and sell to such Purchasers, in a private placement transaction, (i) senior secured promissory notes in aggregate principal amount of $3,600,000 (the “Notes”), and (ii) 808,377 shares (the “Commitment Shares”) of the Company’s common stock, for aggregate gross proceeds of approximately $3.0 million, before deducting placement agent fees and other offering expenses payable by the Company. This private placement closed on November 7, 2024 (the “Closing Date”).    Pursuant to the SPA, the Company was required to use approximately $2,015,623 of the net proceeds from the private placement to pay, in full, all liabilities, obligations and indebtedness owing by the Company and its subsidiary, Kustom Entertainment, Inc., to Mosh Man, LLC (the “Borrower”).   The Company’s full repayment of the outstanding obligations under such promissory note effectively cured all defaults under the promissory note and terminated the public sale process of the collateral securing the Borrowers’ obligations thereunder.   The Company anticipates that the remaining net proceeds from the Private Placement after repayment of the Mosh Man promissory note, and after deducting placement agent fees and other offering expenses, will meet the Company’s capital needs for approximately three months, subsequent to which the Company anticipates that it will need to raise additional funds to implement its business plan and to service its ongoing operations. The Company also anticipates pursuing the sale of its video solutions business in the short term.     Pursuant to the SPA, the Company is required to file within 30 days of the Closing Date a registration statement with the SEC for a public offering and use its reasonable best efforts to pursue and consummate a follow-on financing transaction within 90 days of the Closing Date. The proceeds of the public offering shall be first used for the repayment of the principal amounts of the Notes. The Company is also required to file within 30 days of the Closing Date a registration statement on Form S-1 (or other appropriate form if the Company is not then S-1 eligible) providing for the resale by the Purchasers of the Commitment Shares issued under the SPA. The Company is required to use commercially reasonable efforts to cause such registration statement to become effective within 60 days following the filing thereof and to keep such registration statement effective at all times until no Purchaser owns any Commitment Shares.   Furthermore, pursuant to the SPA, the Company was required to complete the following: (i) the Company’s board of directors shall approve an amendment to the Company’s bylaws setting the quorum required for a special meeting of stockholders to one-third of all stockholders entitled to vote at such special meeting and (ii) the Company shall file with the SEC a preliminary proxy statement on Schedule 14A announcing a meeting of stockholders for the purpose of approving the Series A and Series B warrants issued by the Company on June 25, 2024.   Senior Secured Promissory Notes   The Notes mature ninety (90) days following their issuance date (the “Maturity Date”) and shall accrue no interest unless and until an Event of Default (as defined in the Notes) has occurred, in which case interest shall accrue at a rate of 14% per annum during the pendency of such Event of Default. In addition, upon customary Events of Default, the Purchasers may require the Company to redeem all or any portion of the Notes in cash with a 125% redemption premium. The Purchasers may also require the Company to redeem all or any portion of the Notes in cash upon a Change of Control, as defined in the Notes, at the prices set forth therein. Upon a Bankruptcy Event of Default (as defined in the Notes), the Company shall immediately pay to the Purchasers an amount in cash representing 100% of all outstanding principal, accrued and unpaid interest, if any, in addition to any and all other amounts due under the Notes, without the requirement for any notice or demand or other action by the Purchaser or any other person.   If the Company engages in one or more subsequent financings while the Notes are outstanding, the Company will be required to use at least 100% of the gross proceeds of such financing to redeem all or any portion of the Notes outstanding. The Company may also prepay the Notes in whole or in part at any time or from time to time. The Notes also contain customary representations and warranties and covenants of each of the parties. Subject to certain exceptions, the Notes are secured by a first lien and continuing security interest in and to the Collateral (as defined in the Notes).   Notice of Failure to Satisfy a Continued Listing Rule   On November 25, 2024, the Company received a notice (the “Notice”) from the Nasdaq Stock Market LLC, which indicated that, as a result of the Company’s delay in filing its Quarterly Report on Form 10-Q for the period ended September 30, 2024, the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires Nasdaq-listed companies to timely file all required periodic financial reports with the U.S. Securities and Exchange Commission.     The Notice states that the Company has until January 24, 2025, to submit to Nasdaq an update to its plan to regain compliance with the Rule. The Notice also indicates that any additional exception to allow the Company to regain compliance with all delinquent filings will be limited to up to 180 calendar days from the due date of the Initial Delinquent Filing, or until May 19, 2025. The Notice has no immediate effect on the listing of the Company’s securities on Nasdaq.   The Company continues to work diligently to complete its Quarterly Report and plans to file its Quarterly Report as promptly as possible to regain compliance with the Rule.   December 20, 2024, the Company received a written notification from The Nasdaq Stock Market LLC indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), as the Company’s closing bid price for its common stock was below $1.00 per share for the prior thirty (30) consecutive business days. The Company has been granted a 180-calendar day compliance period, or until June 18, 2025, to regain compliance with the Minimum Bid Price Requirement. If the Company is not in compliance by June 18, 2025, the Company may be afforded a second 180-calendar day compliance period. If the Company does not regain compliance within such compliance period, including any granted extensions, its common stock may be subject to delisting, which delisting may be appealed to a Nasdaq hearings panel.   Common Stock Warrant Reset   On June 24, 2024, the Company entered into a private placement transaction as previously described in NOTE 12. STOCKHOLDERS’ EQUITY (the “June 2024 Private Placement”). As part of the June 2024 Private Placement, the Company issued an aggregate of 1,195,219 units and pre-funded units at a purchase price of $2.51 per unit (less $0.00001 per pre-funded unit). Each Unit consisted of (i) one share of common stock, par value $0.001 per share, of the Company (the “Common Stock”) (or one pre-funded warrant to purchase one share of Common Stock), (ii) one Series A warrant to purchase one share of Common Stock (the “Series A Warrant”) and (iii) one Series B warrant to purchase such number of shares of Common Stock as will be determined on the Reset Date (as defined below) and in accordance with the terms therein. The Pre-Funded Warrants were immediately exercisable at an exercise price of $0.0001 per share of Common Stock and were fully exercised in August 2024. The Series A Warrants became issued and exercisable on and after the date Stockholder Approval was obtained, has an initial exercise price of $2.51 per share of Common Stock and a term of 5 years after the date that the Company obtains Stockholder Approval. Such Stockholder Approval was obtained at the annual meeting of shareholders held on December 17, 2024 as described below. The Series A and B Warrants are now issued and exercisable at any time after the date Stockholder Approval was obtained (December 17, 2024). Both the Series A and B warrants are subject to price and quantity resets based on the lowest daily weighted average trading price of the shares of Common Stock during a period of 20 trading days, subject to a pricing reset floor of $0.502 per share of Common Stock. Based on the Stockholder Approval date of December 17, 2024 and the weighted average trading price experienced, the Series A and B warrants both reset to the floor price of $0.502 per share and the number of shares underlying the Series A Warrants and Series B Warrants were reset to approximately 5,976,095 shares and 4,780,877 shares, respectively. Both the Series A and B warrants are now fully issued and exercisable subsequent to December 17, 2024.   Common Stock Issuance   The Company issued 698,000 shares of common stock subsequent to September 30, 2024, upon the exercise of common stock purchase Series B warrants.   On November 6, 2024, the Company entered into a SPA with certain institutional investors, pursuant to which the Company issued to such institutional investors, in a private placement transaction, (i) senior secured promissory notes in aggregate principal amount of $3,600,000, and (ii) 808,377 shares of the Company’s common stock, for aggregate gross proceeds of approximately $3.0 million.   Termination of Material Definitive Agreement.   On June 1, 2023, the Company and its wholly owned subsidiary Kustom Entertainment, Inc. (“Kustom”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Clover Leaf Capital Corp., (“Clover Leaf”), and their subsidiary whereby Kustom and Clover Leaf would merge.   On November 7, 2024, pursuant to provisions of the Merger Agreement, the Company, Clover Leaf, and related entities the parties entered into a Mutual Termination and Release Agreement (the “Termination Agreement”) to terminate the Merger Agreement. As a result of the Termination Agreement, the Merger Agreement was fully terminated and is of no further force and effect.   Amendments to Company Bylaws   On November 6, 2024, the Company adopted Amendment No. 1 to its Corporate Bylaws with the approval of the Company’s board of directors. The Bylaws were amended to reduce the quorum requirement at any meeting of the Company’s stockholders to thirty-three and one-third percent (33 1/3%) of the stock issued and outstanding and entitled to vote at such meeting.   Annual Meeting   The Company held its annual meeting of stockholders (the “Annual Meeting”) on December 17, 2024 for the following purpose:     1. To elect four directors;         2. To ratify the appointment of RBSM LLP as our independent registered public accounting firm;         3. To approve the transactions contemplated by the securities purchase agreement, entered into as of June 24, 2024, by and between the Company and investors, including, the issuance of 20% or more of our outstanding shares of common stock, par value $0.001 per share (the “Common Stock”) upon (i) exercise of Series A Common Stock Purchase Warrant; and (ii) exercise of Series B Common Stock Purchase Warrant, each dated June 25, 2024; and         4. To approve a proposal to authorize the board of directors of the Company, in its sole and absolute discretion, and without further action of the stockholders, to file an amendment to our articles of incorporation, to effect a reverse stock split of our issued and outstanding Common Stock at a ratio to be determined by the Board, ranging from one-for-five (1:5) to one-for-twenty (1:20), with such reverse stock split to be effected at such time and date, if at all, as determined by the Board in its sole discretion, but no later than December 16, 2025, when the authority granted in this proposal to implement the reverse stock split would terminate.   All of the above matters were approved by the stockholders at the Annual Meeting on December 17, 2024. As a result, the Notice of Failure to Satisfy a Continued Listing Rule described in NOTE 9. COMMITMENTS AND CONTINGENCIES has been cured with the election of four members to serve on our Board of Directors at the Annual Meeting on December 17, 2024.   *************************************

v3.24.4

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
	Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Business Combination	Business Combination   In June 2023, the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Clover Leaf Capital Corp., a Delaware corporation (Nasdaq: CLOE) (“Clover Leaf”), CL Merger Sub, Inc., a Nevada corporation and a wholly owned subsidiary of Clover Leaf (“Merger Sub”), Yntegra Capital Investments LLC, a Delaware limited liability company, in the capacity as the representative from and after the Effective Time (as defined in the Merger Agreement) for the stockholders of Clover Leaf in accordance with the terms and conditions of the Merger Agreement, and Kustom Entertainment, Inc., a Nevada corporation, a wholly owned subsidiary of the Company, with a focus and mission to own and produce events, festivals, and entertainment alongside its evolving primary and secondary ticketing technologies (“Kustom”). Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein upon the consummation of the transactions contemplated by the Merger Agreement (the “Closing”), Merger Sub will merge with and into Kustom, with Kustom continuing as the surviving corporation in the Merger and a wholly owned subsidiary of Clover Leaf. Upon the Closing which is subject to the approval of Clover Leaf’s shareholders and the satisfaction or waiver of certain other customary closing conditions, the common stock of the combined company was expected to be listed on the Nasdaq under a mutually agreed new ticker symbol that reflects the name “Kustom Entertainment”.   On November 8, 2024, Clover Leaf and Kustom mutually agreed to terminate their previously announced Merger Agreement and Plan of Merger effective as of November 7, 2024 by entering into a mutual termination and release agreement among the parties. The parties released each other of all obligations related to the Merger Agreement.
Basis of Presentation	Basis of Presentation:   The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine-month period ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.   The balance sheet as of December 31, 2023 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements.   For further information, refer to the audited consolidated financial statements and footnotes included in the Company’s annual report on Form 10-K for the year ended December 31, 2023.
Liquidity and Going Concern	Liquidity and Going Concern   During the second quarter of 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This update provided U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. Under this standard, the Company is required to evaluate whether there is substantial doubt about its ability to continue as a going concern each reporting period, including interim periods. In evaluating the Company’s ability to continue as a going concern, management considered the conditions and events that could raise substantial doubt about the Company’s ability to continue as a going concern within 12 months after the Company’s financial statements were issued (December 30, 2024). Management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and the Company’s obligations due before December 30, 2025.   The Company has experienced net losses and cash outflows from operating activities since inception. For the nine months ended September 30, 2024, the Company had a net loss attributable to common stockholders of $12,485,388, net cash used in operating activities of $4,086,023, $392,523 provided by investing activities and $3,330,482 provided by financing activities. The Company will have to restore positive operating cash flows and profitability over the next year and/or raise additional capital to fund its operational plans, meet its customary payment obligations and otherwise execute its business plan. There can be no assurance that it will be successful in restoring positive cash flows and profitability, or that it can raise additional financing when needed, and obtain it on terms acceptable or favorable to the Company.   The Company is pursuing a significant capital raise to provide funding for its short and long-term liquidity needs. The Company has implemented an enhanced quality control program to detect and correct product issues before they result in significant rework expenditures affecting its gross margins and has seen progress in that regard. The Company has also implemented a marketing and advertisement reduction plan for its entertainment segment, which will focus on reducing and alleviating current obligations from its media marketing agreements and place a hold on entering into any new agreements. The Company believes that its quality control, cost-cutting initiatives, and new product introduction will eventually restore positive operating cash flows and profitability, although it can offer no assurances in this regard.   Management has evaluated the significance of the conditions described above in relation to the Company’s ability to meet its obligations and concluded that, without additional funding, the Company will not have sufficient funds to meet its obligations within one year from the date the unaudited condensed consolidated financial statements were issued. Such factors raise substantial doubt about the Company’s ability to sustain operations for at least one year from the issuance of these financial statements. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Basis of Consolidation	Basis of Consolidation:   The accompanying financial statements include the consolidated accounts of Digital Ally, its wholly-owned subsidiaries, Digital Ally International, Inc., Shield Products, LLC, Digital Ally Healthcare, LLC, TicketSmarter, Inc., Worldwide Reinsurance, Ltd., Digital Connect, Inc., BirdVu Jets, Inc., Kustom 440, Inc., and its majority-owned subsidiary Nobility Healthcare, LLC. All intercompany balances and transactions have been eliminated during consolidation.    The Company formed Digital Ally International, Inc. during August 2009 to facilitate the export sales of its products. The Company formed Shield Products, LLC in May 2020 to facilitate the sales of its Shield™ line of disinfectant/cleanser products and ThermoVu™ line of temperature monitoring equipment. The Company formed Nobility Healthcare, LLC (“Nobility Healthcare”) in June 2021 to facilitate the operations of its revenue cycle management solutions and back-office services for healthcare organizations. The Company formed TicketSmarter, Inc. upon its acquisition of Goody Tickets, LLC and TicketSmarter, LLC, to facilitate its global ticketing operations. The Company formed Worldwide Reinsurance Ltd., which is a captive insurance company domiciled in Bermuda. It will provide primarily liability insurance coverage to the Company for which insurance may not be currently available or economically feasible in today’s insurance marketplace. The Company formed Kustom 440, Inc. in 2022 to create unique entertainment experiences directly for consumers.
Fair Value of Financial Instruments	Fair Value of Financial Instruments:   The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and subordinated notes payable approximate fair value because of the short-term nature of these items.
Revenue Recognition	Revenue Recognition:   The Company applies the provisions of Accounting Standards Codification (ASC) 606-10, Revenue from Contracts with Customers, and all related appropriate guidance. The Company recognizes revenue under the core principle to depict the transfer of control to its customers in an amount reflecting the consideration to which it expects to be entitled. In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.   The Company has two different revenue streams, product and service, represented through its three segments. The Company reports all revenues on a gross basis, other than service revenues from the Company’s entertainment and revenue cycle management segments, Revenues generated by all segments are reported net of sales taxes.   Video Solutions   The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with the customer. In situation where sales are to a distributor, the Company had concluded its contracts are with the distributor as the Company holds a contract bearing enforceable rights and obligations only with the distributor. As part of its consideration for the contract, the Company evaluates certain factors including the customers’ ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which it expects to be entitled. As the Company’s standard payment terms are less than one year, it has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on its relative standalone selling price. The product price as specified on the purchase order is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances. Revenue is recognized when control of the product is transferred to the customer (i.e. when the Company’s performance obligations is satisfied), which typically occurs at shipment. Further in determining whether control has been transferred, the Company considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer. Customers do not have a right to return the product other than for warranty reasons for which they would only receive repair services or replacement products. The Company has also elected the practical expedient under ASC 340-40-25-4 to expense commissions for product sales when incurred as the amortization period of the commission asset the Company would have otherwise recognized is less than one year.     Service and other revenue is comprised of revenues from extended warranties, repair services, cloud revenue and software revenue. Revenue is recognized upon shipment of the product and acceptance of the service or materials by the end customer for repair services. Revenue for extended warranty, cloud service or other software-based products is over the term of the contract warranty or service period. A time-elapsed method is used to measure progress because the Company transfers control evenly over the contractual period. Accordingly, the fixed consideration related to these revenues is generally recognized on a straight-line basis over the contract term, as long as the other revenue recognition criteria have been met.   The Company’s multiple performance obligations may include future in-car or body-worn camera devices to be delivered at defined points within a multi-year contract, and in those arrangements, the Company allocates total arrangement consideration over the life of the multi-year contract to future deliverables using management’s best estimate of selling price.   Revenue Cycle Management   The Company reports revenue cycle management revenues on a net basis, as its primary source of revenue is its end-to-end service fees which is generally determined as a percentage of the invoice amounts collected. These service fees are reported as revenue monthly upon completion of the Company’s performance obligation to provide the agreed upon service.   Entertainment   The Company reports ticketing revenue on a gross or net basis based on management’s assessment of whether the Company is acting as a principal or agent in the transaction. The determination is based upon the evaluation of control over the event ticket, including the right to sell the ticket, prior to its transfer to the ticket buyer.   The Company sells tickets held in inventory, which consists of one performance obligation, being to transfer control of an event ticket to the buyer upon confirmation of the order. The Company acts as the principal in these transactions as the ticket is owned by the Company at the time of sale, therefore controlling the ticket prior to transferring to the customer. In these transactions, revenue is recorded on a gross basis based on the value of the ticket and is recognized when an order is confirmed. Payment is typically due upon delivery of the ticket.   The Company also acts as an intermediary between buyers and sellers through online secondary marketplace. Revenues derived from this marketplace primarily consist of service fees from ticketing operations, and consists of one primary performance obligation, which is facilitating the transaction between the buyer and seller, being satisfied at the time the order has been confirmed. As the Company does not control the ticket prior to the transfer, the Company acts as an agent in these transactions. Revenue is recognized on a net basis, net of the amount due to the seller when an order is confirmed, the seller is then obligated to deliver the tickets to the buyer per the seller’s listing. Payment is due at the time of sale.     Other   Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract and are reported separately as current liabilities and non-current liabilities in the Consolidated Balance Sheets. Such amounts consist of extended warranty contracts, prepaid cloud services and prepaid installation services and are generally recognized as the respective performance obligations are satisfied. During the nine months ended September 30, 2024, the Company recognized revenue of $2.0 million related to its contract liabilities. Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract and are reported separately as current liabilities and non-current liabilities in the Consolidated Balance Sheets. Such amounts consist of extended warranty contracts, prepaid cloud services and prepaid installation services and are generally recognized as the respective performance obligations are satisfied. Total contract liabilities consist of the following:  SCHEDULE OF CONTRACT LIABILITIES      September 30, 2024       December 31, 2023     Additions/ Reclass     Recognized Revenue     September 30, 2024   Contract liabilities, current   $ 2,937,168     $ 1,689,038     $ (557,628 )   $ 4,068,578   Contract liabilities, non-current     7,340,459       761,421       (1,476,186 )     6,625,694                                         $ 10,277,627     $ 2,450,459     $ (2,033,814 )   $ 10,694,272         September 30, 2023       December 31, 2022     Additions/ Reclass     Recognized Revenue     September 30, 2023   Contract liabilities, current   $ 2,154,874     $ 2,133,969     $ (1,536,860 )   $ 2,751,983   Contract liabilities, non-current     5,818,082       1,943,313       (626,848 )     7,134,547                                         $ 7,972,956     $ 4,077,282     $ (2,163,708 )   $ 9,886,530     Sales returns and allowances aggregated $86,370 and $117,713 for the nine months ended September 30, 2024 and September 30, 2023, respectively. Obligations for estimated sales returns and allowances are recognized at the time of sales on an accrual basis. The accrual is determined based upon historical return rates adjusted for known changes in key variables affecting these return rates.
Use of Estimates	Use of Estimates:   The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management utilizes various other estimates, including but not limited to determining the estimated lives of long-lived assets, determining the potential impairment of long-lived assets, the fair value of warrants, options, the recognition of revenue, inventory valuation reserve, fair value of assets and liabilities acquired in a business combination, incremental borrowing rate on leases, the valuation allowance for deferred tax assets and other legal claims and contingencies. The results of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period that they are determined to be necessary.
Cash and cash equivalents	Cash and cash equivalents:   Cash and cash equivalents include funds on hand, in bank and short-term investments with original maturities of ninety (90) days or less.    The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At September 30, 2024 and December 31, 2023, the uninsured balance amounted to $0 and $29,700, respectively.   Restricted Cash:   Restricted cash of $-0- and $97,600 was included in other assets as of September 30, 2024 and December 31, 2023, respectively. Restricted cash consists of bank deposits that collateralize a debt obligation. Such debt obligation was paid off as of September 30, 2024.     Accounts Receivable:   Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a weekly basis. The Company determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions.   Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than thirty (30) days beyond terms. No interest is charged on overdue trade receivables.   Goodwill and Other Intangibles:   Goodwill - In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations, using the acquisition method of accounting. The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill. In accordance with ASC 350, Intangibles - Goodwill and Other, the Company assesses goodwill for impairment annually as of December 31st, and more frequently if events and circumstances indicate that goodwill might be impaired.   Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill.   Traditionally, goodwill impairment testing is a two-step process. Step one involves comparing the fair value of the reporting units to its carrying amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating an implied fair value of goodwill. The Company has adopted ASU 2017-04 which simplifies subsequent goodwill measurement by eliminating step two from the goodwill impairment test. As a result, the Company compares the fair value of a reporting unit with its respective carrying value and recognized an impairment charge for the amount by which the carrying amount exceeded the reporting unit’s fair value.   The Company determines the fair value of its reporting units using a weighting of the income and market valuation approaches. The income approach applies a fair value methodology to each reporting unit based on discounted cash flows. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. Under the market approach, we estimate the fair value based on multiples of comparable public companies and precedent transactions. Significant estimates in the market approach include: identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting unit.   Long-lived and Other Intangible Assets - The Company periodically assesses potential impairments of its long-lived assets in accordance with the provisions of ASC 360, Accounting for the Impairment or Disposal of Long-lived Assets. An impairment review is performed whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The Company groups its assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of the other assets and liabilities. The Company has determined that the lowest level for which identifiable cash flows are available is the operating segment level.   Factors considered by the Company include, but are not limited to, significant underperformance relative to historical or projected operating results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative industry or economic trends. When the carrying value of a long-lived asset may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company estimates the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future undiscounted cash flows and eventual disposition is less than the carrying amount of the asset, the Company recognizes an impairment loss. An impairment loss is reflected as the amount by which the carrying amount of the asset exceeds the fair value of the asset, based on the fair value if available, or discounted cash flows, if fair value is not available. The Company assessed potential impairments of its long-lived assets as of December 31, 2023 and concluded that there was no impairment. Subsequent to completing our 2023 annual impairment test, no events or changes in circumstances were noted that required an interim goodwill impairment test until the three months ended September 30, 2024, when events occurred that we considered triggering events.   During the third fiscal quarter of 2024, management determined that triggering events had occurred resulting from the additional decline in demand for our services, prolonged economic uncertainty, the split-off transaction did not occur when and as expected and a further decrease in our stock price. Therefore, we performed an interim impairment test as of September 30, 2024. Refer to NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS for additional details on the interim impairment test, valuation methodologies, and inputs used in the fair value measurements.     Intangible assets include deferred patent costs, license agreements, trademarks and trade names. Legal expenses incurred in preparation of patent application have been deferred and will be amortized over the useful life of granted patents. Costs incurred in preparation of applications that are not granted will be charged to expense at that time. The Company has entered into several sublicense agreements under which it has been assigned the exclusive rights to certain licensed materials used in its products. These sublicense agreements generally require upfront payments to obtain the exclusive rights to such material. The Company capitalizes the upfront payments as intangible assets and amortizes such costs over their estimated useful life on a straight-line method.   Segment Reporting   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. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. The Company’s three operating segments are Video Solutions, Revenue Cycle Management, and Entertainment, each of which has specific personnel responsible for that business and reports to the CODM. Corporate expenses capture the Company’s corporate administrative activities and are also to be reported in the segment information.   Contingent Consideration   In circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of the acquisition date. The Company remeasures this liability each reporting period and records changes in the fair value through the consolidated statement of operations.   Non-Controlling Interests   Non-controlling interests in the Company’s Consolidated Financial Statements represent the interest in subsidiaries held by our venture partner. The venture partner holds a noncontrolling interest in the Company’s consolidated subsidiary Nobility Healthcare, LLC. Since the Company consolidates the financial statements of all wholly-owned and majority owned subsidiaries, the noncontrolling owners’ share of each subsidiary’s results of operations are deducted and reported as net income or loss attributable to noncontrolling interest in the Consolidated Statements of Operations.   New Accounting Standards   In November 2023, the FASB issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.     In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.
Restricted Cash	Restricted Cash:   Restricted cash of $-0- and $97,600 was included in other assets as of September 30, 2024 and December 31, 2023, respectively. Restricted cash consists of bank deposits that collateralize a debt obligation. Such debt obligation was paid off as of September 30, 2024.
Accounts Receivable	Accounts Receivable:   Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a weekly basis. The Company determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions.   Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than thirty (30) days beyond terms. No interest is charged on overdue trade receivables.
Goodwill and Other Intangibles	Goodwill and Other Intangibles:   Goodwill - In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations, using the acquisition method of accounting. The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill. In accordance with ASC 350, Intangibles - Goodwill and Other, the Company assesses goodwill for impairment annually as of December 31st, and more frequently if events and circumstances indicate that goodwill might be impaired.   Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill.   Traditionally, goodwill impairment testing is a two-step process. Step one involves comparing the fair value of the reporting units to its carrying amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating an implied fair value of goodwill. The Company has adopted ASU 2017-04 which simplifies subsequent goodwill measurement by eliminating step two from the goodwill impairment test. As a result, the Company compares the fair value of a reporting unit with its respective carrying value and recognized an impairment charge for the amount by which the carrying amount exceeded the reporting unit’s fair value.   The Company determines the fair value of its reporting units using a weighting of the income and market valuation approaches. The income approach applies a fair value methodology to each reporting unit based on discounted cash flows. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. Under the market approach, we estimate the fair value based on multiples of comparable public companies and precedent transactions. Significant estimates in the market approach include: identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting unit.   Long-lived and Other Intangible Assets - The Company periodically assesses potential impairments of its long-lived assets in accordance with the provisions of ASC 360, Accounting for the Impairment or Disposal of Long-lived Assets. An impairment review is performed whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The Company groups its assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of the other assets and liabilities. The Company has determined that the lowest level for which identifiable cash flows are available is the operating segment level.   Factors considered by the Company include, but are not limited to, significant underperformance relative to historical or projected operating results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative industry or economic trends. When the carrying value of a long-lived asset may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company estimates the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future undiscounted cash flows and eventual disposition is less than the carrying amount of the asset, the Company recognizes an impairment loss. An impairment loss is reflected as the amount by which the carrying amount of the asset exceeds the fair value of the asset, based on the fair value if available, or discounted cash flows, if fair value is not available. The Company assessed potential impairments of its long-lived assets as of December 31, 2023 and concluded that there was no impairment. Subsequent to completing our 2023 annual impairment test, no events or changes in circumstances were noted that required an interim goodwill impairment test until the three months ended September 30, 2024, when events occurred that we considered triggering events.   During the third fiscal quarter of 2024, management determined that triggering events had occurred resulting from the additional decline in demand for our services, prolonged economic uncertainty, the split-off transaction did not occur when and as expected and a further decrease in our stock price. Therefore, we performed an interim impairment test as of September 30, 2024. Refer to NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS for additional details on the interim impairment test, valuation methodologies, and inputs used in the fair value measurements.     Intangible assets include deferred patent costs, license agreements, trademarks and trade names. Legal expenses incurred in preparation of patent application have been deferred and will be amortized over the useful life of granted patents. Costs incurred in preparation of applications that are not granted will be charged to expense at that time. The Company has entered into several sublicense agreements under which it has been assigned the exclusive rights to certain licensed materials used in its products. These sublicense agreements generally require upfront payments to obtain the exclusive rights to such material. The Company capitalizes the upfront payments as intangible assets and amortizes such costs over their estimated useful life on a straight-line method.
Segment Reporting	Segment Reporting   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. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. The Company’s three operating segments are Video Solutions, Revenue Cycle Management, and Entertainment, each of which has specific personnel responsible for that business and reports to the CODM. Corporate expenses capture the Company’s corporate administrative activities and are also to be reported in the segment information.
Contingent Consideration	Contingent Consideration   In circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of the acquisition date. The Company remeasures this liability each reporting period and records changes in the fair value through the consolidated statement of operations.
Non-Controlling Interests	Non-Controlling Interests   Non-controlling interests in the Company’s Consolidated Financial Statements represent the interest in subsidiaries held by our venture partner. The venture partner holds a noncontrolling interest in the Company’s consolidated subsidiary Nobility Healthcare, LLC. Since the Company consolidates the financial statements of all wholly-owned and majority owned subsidiaries, the noncontrolling owners’ share of each subsidiary’s results of operations are deducted and reported as net income or loss attributable to noncontrolling interest in the Consolidated Statements of Operations.
New Accounting Standards	New Accounting Standards   In November 2023, the FASB issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.     In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

v3.24.4

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	9 Months Ended
	Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
SCHEDULE OF CONTRACT LIABILITIES	SCHEDULE OF CONTRACT LIABILITIES      September 30, 2024       December 31, 2023     Additions/ Reclass     Recognized Revenue     September 30, 2024   Contract liabilities, current   $ 2,937,168     $ 1,689,038     $ (557,628 )   $ 4,068,578   Contract liabilities, non-current     7,340,459       761,421       (1,476,186 )     6,625,694                                         $ 10,277,627     $ 2,450,459     $ (2,033,814 )   $ 10,694,272         September 30, 2023       December 31, 2022     Additions/ Reclass     Recognized Revenue     September 30, 2023   Contract liabilities, current   $ 2,154,874     $ 2,133,969     $ (1,536,860 )   $ 2,751,983   Contract liabilities, non-current     5,818,082       1,943,313       (626,848 )     7,134,547                                         $ 7,972,956     $ 4,077,282     $ (2,163,708 )   $ 9,886,530
Cash and cash equivalents include funds on hand, in bank and short-term investments with original maturities of ninety (90) days or less.	Cash and cash equivalents include funds on hand, in bank and short-term investments with original maturities of ninety (90) days or less.    The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At September 30, 2024 and December 31, 2023, the uninsured balance amounted to $0 and $29,700, respectively.

v3.24.4

INVENTORIES (Tables)	9 Months Ended
	Sep. 30, 2024
Inventory Disclosure [Abstract]
SCHEDULE OF INVENTORIES	Inventories consisted of the following at September 30, 2024 and December 31, 2023: SCHEDULE OF INVENTORIES      September 30, 2024     December 31, 2023   Raw material and component parts– video solutions segment   $ 2,638,063     $ 3,044,653   Work-in-process– video solutions segment     11,565       20,396   Finished goods – video solutions segment     3,533,839       4,623,489   Finished goods – entertainment segment     364,641       699,204   Subtotal     6,548,108       8,387,742   Reserve for excess and obsolete inventory– video solutions segment     (4,144,749 )     (4,355,666 ) Reserve for excess and obsolete inventory – entertainment segment     (78,241 )     (186,795 ) Total inventories   $ 2,325,118     $ 3,845,281

v3.24.4

DEBT OBLIGATIONS (Tables)	9 Months Ended
	Sep. 30, 2024
Debt Disclosure [Abstract]
SCHEDULE OF DEBT OBLIGATIONS	Debt obligations is comprised of the following: SCHEDULE OF DEBT OBLIGATIONS      September 30, 2024     December 31, 2023   Economic injury disaster loan (EIDL)   $ 145,328     $ 147,781   Contingent consideration promissory note – Nobility Healthcare Division Acquisition     —       129,651   Contingent consideration promissory note – Nobility Healthcare Division Acquisition     —       58,819   Revolving Loan Agreement     —       4,880,000   Commercial Extension of Credit- Entertainment Segment     295,000       87,928   Merchant Advances – Video Solutions Segment     2,091,500       1,350,000   Merchant Advances – Entertainment Segment     1,364,986       —   Unamortized debt issuance costs     (315,955 )     (540,429 ) Debt obligations     3,580,859       6,113,750   Less: current maturities of debt obligations     3,438,910       1,260,513   Debt obligations, long-term   $ 141,949     $ 4,853,237
SCHEDULE OF MATURITY OF DEBT OBLIGATIONS	Debt obligations mature on an annual basis as follows as of September 30, 2024: SCHEDULE OF MATURITY OF DEBT OBLIGATIONS      September 30, 2024   2024 (October 1, 2024 to December 31, 2024)   $ 3,436,363   2025     3,412   2026     3,542   2027     3,677   2028 and thereafter     133,865             Total   $ 3,580,859
SCHEDULE OF WARRANT TO PURCHASE COMMON STOCK GRANTED	SCHEDULE OF WARRANT TO PURCHASE COMMON STOCK GRANTED      Terms at April 5, 2023 (issuance date)   Volatility – range     106.0 % Risk-free rate     3.36 % Dividend     0 % Remaining contractual term     5.0 years   Exercise price   $ 5.50 – 7.50   Common stock issuable under the warrants     1,125,000

v3.24.4

FAIR VALUE MEASUREMENT (Tables)	9 Months Ended
	Sep. 30, 2024
Fair Value Disclosures [Abstract]
SCHEDULE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS	The following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023: SCHEDULE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS      September 30, 2024       Level 1     Level 2     Level 3     Total   Liabilities:                                 Warrant derivative liabilities   $ —     $ —     $ 1,266,073     $ 1,266,073   Contingent consideration promissory notes and contingent consideration earn-out agreement     —       —       —       —       $ —     $ —     $ 1,266,073     $ 1,266,073         December 31, 2023       Level 1     Level 2     Level 3     Total   Liabilities:                                 Warrant derivative liabilities   $ —     $ —     $ 1,369,738     $ 1,369,738   Contingent consideration promissory notes and contingent consideration earn-out agreement     —       —       188,470       188,470       $ —     $ —     $ 1,558,208     $ 1,558,208
SCHEDULE OF FAIR VALUE MEASUREMENTS CHANGE IN LEVEL 3 INPUTS	The following table represents the change in Level 3 tier value measurements for the three months ended September 30, 2024: SCHEDULE OF FAIR VALUE MEASUREMENTS CHANGE IN LEVEL 3 INPUTS      Contingent Consideration Promissory Notes and Earn-Out Agreement     Warrant Derivative Liabilities                 Balance, December 31, 2023   $ 188,470     $ 1,369,738                     Issuance of warrant derivative liabilities     —       2,075,300                     Change in fair value of warrant derivative liabilities     —       (2,178,965 )                   Principal payments on contingent consideration promissory notes – Revenue Cycle Management Acquisitions     (188,470 )     —                     Change in fair value of contingent consideration promissory notes - Revenue Cycle Management Acquisitions     —       —                     Balance, September 30, 2024   $ —     $ 1,266,073

v3.24.4

ACCRUED EXPENSES (Tables)	9 Months Ended
	Sep. 30, 2024
Payables and Accruals [Abstract]
SCHEDULE OF ACCRUED EXPENSES	Accrued expenses consisted of the following at September 30, 2024 and December 31, 2023: SCHEDULE OF ACCRUED EXPENSES      September 30, 2024     December 31, 2023                 Accrued warranty expense   $ 11,615     $ 17,699   Accrued litigation costs     2,040,292       2,040,292   Accrued payroll and related fringes     585,030       367,826   Accrued sales returns and allowances     93,170       117,713   Accrued taxes     116,463       150,981   Accrued interest - related party     385,390       95,031   Customer deposits     227,885       219,462   Other     136,835       260,326   Total accrued expenses   $ 3,596,680     $ 3,269,330
SCHEDULE OF ACCRUED WARRANTY EXPENSE	Accrued warranty expense was comprised of the following for the nine months ended September 30, 2024: SCHEDULE OF ACCRUED WARRANTY EXPENSE  Beginning balance   $ 17,699   Provision for warranty expense     38,898   Charges applied to warranty reserve     (44,982 )           Ending balance   $ 11,615

v3.24.4

PROPERTY, PLANT AND EQUIPMENT (Tables)	9 Months Ended
	Sep. 30, 2024
Property, Plant and Equipment [Abstract]
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT	Property, plant and equipment consisted of the following at September 30, 2024 and December 31, 2023: SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT      Estimated Useful Life   September 30, 2024     December 31, 2023   Building   25 years   $ —     $ 4,537,037   Land   Infinite     —       739,734   Office furniture, fixtures, equipment, and aircraft   3-20 years     780,492       2,065,092   Warehouse and production equipment   3-7 years     237,141       29,055   Demonstration and tradeshow equipment   3-7 years     77,791       87,987   Building improvements   5-7 years     20,935       1,328,654   Total cost         1,116,359       8,787,559   Less: accumulated depreciation and amortization         (671,756 )     (1,503,857 )                       Net property, plant and equipment       $ 444,603     $ 7,283,702

v3.24.4

GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)	9 Months Ended
	Sep. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]
SCHEDULE OF INTANGIBLE ASSETS	Intangible assets consisted of the following as of September 30, 2024 and December 31, 2023: SCHEDULE OF INTANGIBLE ASSETS      September 30, 2024     December 31, 2023       Gross value     Accumulated amortization     Accumulated Impairment   Net carrying value     Gross value     Accumulated amortization     Net carrying value   Amortized intangible assets:                                                                         Licenses (video solutions segment)   $ 151,652     $ 23,907     $ —   $ 127,745     $ 225,545     $ 89,887     $ 135,658   Patents and trademarks (video solutions segment)     483,521       355,314       —     128,207       483,521       266,403       217,118   Sponsorship agreement network (entertainment segment)     5,600,000       3,453,333       —     2,146,667       5,600,000       2,613,333       2,986,667   SEO content (entertainment segment)     600,000       462,500       —     137,500       600,000       350,000       250,000   Personal seat licenses (entertainment segment)     117,339       12,060       —     105,279       180,081       14,004       166,077   Software     23,653       —       —     23,653       -       -       -   Website enhancements (entertainment segment)     35,900       6,841       —     29,059       13,500       —       13,500   Client agreements (revenue cycle management segments)     999,034       301,695       —     697,339       999,034       226,768       772,266         8,011,099       4,615,650       —     3,395,449       8,101,681       3,560,395       4,541,286                                                           Indefinite life intangible assets:                                                       Goodwill (Entertainment segment)     6,112,507       —       307,000     5,805,507       5,886,548       —       5,886,548   Goodwill (Revenue cycle management segment)     5,480,966       —       4,322,000     1,158,966       5,480,966        —        5,480,966 Trade name and trademarks (entertainment segment)     900,000       —       201,000     699,000       600,000       —       600,000   Patents and trademarks pending (video solutions segment)     91,623       —       —     91,623       1,622       —       1,622                                                           Total   $ 20,596,195     $ 4,615,650     $ 4,830,000   $ 11,150,545     $ 20,070,817     $ 3,560,395     $ 16,510,422
SCHEDULE OF ESTIMATED AMORTIZATION FOR INTANGIBLE ASSETS	SCHEDULE OF ESTIMATED AMORTIZATION FOR INTANGIBLE ASSETS  Year ending December 31:       2024 (October 1, 2024 to December 31, 2024)   $ 371,227   2025     1,418,272   2026     913,733   2027     116,387   2028 and thereafter     575,830   Total   $ 3,395,449

v3.24.4

STOCK-BASED COMPENSATION (Tables)	9 Months Ended
	Sep. 30, 2024
Share-Based Payment Arrangement [Abstract]
SCHEDULE OF STOCK OPTIONS OUTSTANDING	A summary of all stock option activity under the Plans for the nine months ended September 30, 2024 is as follows:   SCHEDULE OF STOCK OPTIONS OUTSTANDING Options   Number of Shares     Weighted Average Exercise Price   Outstanding at December 31, 2023     53,600     $ 45.55   Granted     —       —   Exercised     —       —   Forfeited/expired     (1,100 )     (65.00 ) Outstanding at September 30, 2024     52,500     $ 45.14   Exercisable at September 30, 2024     52,500     $ 45.14
SCHEDULE OF SHARES AUTHORIZED UNDER STOCK OPTION PLANS BY EXERCISE PRICE RANGE	The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s option plans as of September 30, 2024:   SCHEDULE OF SHARES AUTHORIZED UNDER STOCK OPTION PLANS BY EXERCISE PRICE RANGE         Outstanding options     Exercisable options   Exercise price range     Number of options     Weighted average remaining contractual life     Number of options     Weighted average remaining contractual life                                         $ 0.01 to $49.99       37,000       5.9 years       37,000       5.9 years   $ 50.00 to $69.99       14,000       4.0 years       14,000       4.0 years   $ 70.00 to $89.99       1,500       1.6 years       1,500       1.6 years                                                   52,500       5.2 years       52,500       5.2 years
SCHEDULE OF RESTRICTED STOCK ACTIVITY	A summary of all restricted stock activity under the Plans for the three months ended September 30, 2024 is as follows:  SCHEDULE OF RESTRICTED STOCK ACTIVITY     Number of Restricted shares     Weighted average grant date fair value   Nonvested balance, December 31, 2023     53,875     $ 11.27   Granted     80,197       2.12   Vested     (32,250 )     (10.87 ) Forfeited     (51,072 )     (2.91 ) Nonvested balance, September 30, 2024     50,750     $ 5.48
SCHEDULE OF NON-VESTED BALANCE OF RESTRICTED STOCK	The nonvested balance of restricted stock vests as follows:  SCHEDULE OF NON-VESTED BALANCE OF RESTRICTED STOCK Years ended   Number of Shares           2024 (October 1, 2024 through December 31, 2024)     —   2025     35,250   2026     6,500   2027     5,000   2028     4,000

v3.24.4

COMMON STOCK PURCHASE WARRANTS (Tables)	9 Months Ended
	Sep. 30, 2024
Common Stock Purchase Warrants
SCHEDULE OF WARRANT MODIFICATION	SCHEDULE OF WARRANT MODIFICATION     Issuance date assumptions     September 30, 2024 assumptions   Volatility – range     106.0 %     106.6 % Risk-free rate     3.36 %     3.58 % Dividend     0 %     0 % Remaining contractual term     5.0 years       3.5 years   Exercise price   $ 5.50 – 7.50     $ 5.50 – 7.50   Common stock issuable under the warrants     1,125,000       1,125,000         Issuance date assumptions     September 30, 2024 assumptions   Volatility – range     72.1 - 101.1%       106.6 % Risk-free rate     4.25 – 5.46%       3.58 % Dividend     0 %     0 % Remaining contractual term     0.1 - 5.0 years       4.7 years   Exercise price   $ 2.51     $ 2.51   Common stock issuable under the warrants     1,768,227       1,195,219
SCHEDULE OF WARRANT ACTIVITY	The following table summarizes information about shares issuable under all warrants outstanding during the nine months ended September 30, 2024:  SCHEDULE OF WARRANT ACTIVITY     Warrants     Weighted average exercise price   Vested Balance, December 31, 2023     1,125,000     $ 6.50   Granted     1,768,227       2.51   Exercised     (573,008 )     (2.51 ) Forfeited/cancelled     —       —   Vested Balance, September 30, 2024     2,320,219     $ 4.44
SCHEDULE OF RANGE OF EXERCISE PRICES AND WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF WARRANTS	SCHEDULE OF RANGE OF EXERCISE PRICES AND WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF WARRANTS         Outstanding and exercisable warrants   Exercise price     Number of warrants     Weighted average remaining contractual life   $ 5.50       375,000       3.5 years   $ 6.50       375,000       3.5 years   $ 7.50       375,000       3.5 years   $ 2.51       1,195,219       4.7 years                                   2,320,219       4.1 years

v3.24.4

COUNTRY STAMPEDE ACQUISITION (Tables)	9 Months Ended
	Sep. 30, 2024
Country Stampede Acquisition [Member]
Business Acquisition [Line Items]
SCHEDULE OF ESTIMATED FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED ACQUISITION	SCHEDULE OF ESTIMATED FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED ACQUISITION     As allocated (Preliminary)   Description   March 1, 2024   Assets acquired (provisional):         Tangible assets acquired   $ 305,000   Identifiable intangible assets acquired (Trademarks and trade names)     300,000   Goodwill     225,959   Liabilities assumed     (288,000 ) Liabilities assumed pursuant to stock purchase agreement     (288,000 )           Net assets acquired and liabilities assumed   $ 542,959   Consideration:         Cash paid at Country Stampede Acquisition date   $ 400,000   Cash paid subsequent to closing     142,959             Total Country Stampede Acquisition purchase price   $ 542,959

v3.24.4

SEGMENT DATA (Tables)	9 Months Ended
	Sep. 30, 2024
Segment Reporting [Abstract]
SCHEDULE OF SEGMENT REPORTING	Summarized financial information for the Company’s reportable business segments is provided for the indicated periods and as of September 30, 2024, and 2023:  SCHEDULE OF SEGMENT REPORTING     2024     2023     2024     2023       For the three months ended September 30,     For the nine months ended September 30,       2024     2023     2024     2023   Net Revenues:                                 Video Solutions   $ 1,196,362     $ 1,797,348     $ 4,500,325     $ 5,596,300   Revenue Cycle Management     1,601,792       1,636,543       4,600,745       5,142,904   Entertainment     1,253,557       2,903,808       6,096,227       11,575,315   Total Net Revenues   $ 4,051,711     $ 6,337,699     $ 15,197,297     $ 22,314,519                                     Gross Profit:                                 Video Solutions   $ 769,063     $ 426,795     $ 1,622,558     $ 1,740,397   Revenue Cycle Management     666,723       625,114       1,731,860       2,203,220   Entertainment     304,188       174,240       149,386       1,564,361   Total Gross Profit   $ 1,739,974     $ 1,226,149     $ 3,503,804     $ 5,507,978                                     Operating Income (loss):                                 Video Solutions   $ (89,055 )   $ (1,311,143 )   $ (1,909,246 )   $ (4,639,316 ) Revenue Cycle Management     (4,085,224 )     43,202       (3,955,761 )     299,010   Entertainment     (1,516,934 )     (1,256,681 )     (3,987,415 )     (2,818,617 ) Corporate     (1,691,086 )     (2,623,421 )     (5,083,070 )     (9,102,631 ) Total Operating Income (Loss)   $ (7,382,299 )   $ (5,148,043 )   $ (14,935,492 )   $ (16,261,554 )                                   Depreciation and Amortization:                                 Video Solutions   $ 133,246     $ 219,955     $ 520,970     $ 629,677   Revenue Cycle Management     26,735       26,328       80,164       69,066   Entertainment     339,265       319,302       977,112       957,884   Total Depreciation and Amortization   $ 499,246     $ 565,585     $ 1,578,246     $ 1,656,627           September 30, 2024     December 31, 2023   Assets (net of eliminations):                 Video Solutions   $ 16,876,673     $ 26,396,559   Revenue Cycle Management     1,969,225       2,260,376   Entertainment     6,037,666       6,324,211   Corporate     7,379,605       12,047,663   Total Identifiable Assets   $ 32,263,169     $ 47,028,809

v3.24.4

SCHEDULE OF CONTRACT LIABILITIES (Details) - USD ($)	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Contract liabilities, current, beginning	$ 2,937,168	$ 2,154,874
Contract liabilities, current, additions/reclass	1,689,038	2,133,969
Contract liabilities, current, revenue recognized	(557,628)	(1,536,860)
Contract liabilities, current, ending	4,068,578	2,751,983
Contract liabilities, non-current, beginning	7,340,459	5,818,082
Contract liabilities, non-current, additions/reclass	761,421	1,943,313
Contract liabilities, non-current, revenue recognized	(1,476,186)	(626,848)
Contract liabilities, non-current, ending	6,625,694	7,134,547
Contract liabilities, beginning	10,277,627	7,972,956
Contract liabilities, additions/reclass	2,450,459	4,077,282
Contract liabilities, revenue recognized	(2,033,814)	(2,163,708)
Contract liabilities, ending	$ 10,694,272	$ 9,886,530

v3.24.4

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)	9 Months Ended
	Sep. 30, 2024 USD ($) Segments $ / shares	Sep. 30, 2023 USD ($)	Mar. 14, 2024 $ / shares	Dec. 31, 2023 USD ($) $ / shares	Aug. 23, 2022 $ / shares
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Common stock, par value | $ / shares	$ 0.001		$ 0.001	$ 0.001
Net Income (Loss) Attributable to Parent	$ 12,485,388
Net Cash Provided by (Used in) Operating Activities	4,086,023	$ 5,842,158
Net Cash Provided by (Used in) Investing Activities	392,523	(197,241)
Net Cash Provided by (Used in) Financing Activities	3,330,482	4,715,031
Contract liabilities, revenue recognized	2,033,814	2,163,708
Sales return and allowances	86,370	$ 117,713
Cash, FDIC insured amount	250,000
Uninsured balance	0			$ 29,700
Restricted cash	$ 0			$ 97,600
Number of operating segments | Segments	3
Merger Agreement [Member] | Predecessor Common Stock [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Common stock, par value | $ / shares					$ 0.001
Merger Agreement [Member] | Registrant Common Stock [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Common stock, par value | $ / shares					$ 0.001

v3.24.4

SCHEDULE OF INVENTORIES (Details) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Inventory Disclosure [Abstract]
Raw material and component parts– video solutions segment	$ 2,638,063	$ 3,044,653
Work-in-process– video solutions segment	11,565	20,396
Finished goods – video solutions segment	3,533,839	4,623,489
Finished goods – entertainment segment	364,641	699,204
Subtotal	6,548,108	8,387,742
Reserve for excess and obsolete inventory– video solutions segment	(4,144,749)	(4,355,666)
Reserve for excess and obsolete inventory – entertainment segment	(78,241)	(186,795)
Total inventories	$ 2,325,118	$ 3,845,281

v3.24.4

SCHEDULE OF DEBT OBLIGATIONS (Details) - USD ($)	Sep. 30, 2024	Dec. 31, 2023	Jun. 02, 2023
Debt Disclosure [Abstract]
Economic injury disaster loan (EIDL)	$ 145,328	$ 147,781	$ 125,000
Contingent consideration promissory note – Nobility Healthcare Division Acquisition		129,651
Contingent consideration promissory note – Nobility Healthcare Division Acquisition		58,819
Revolving Loan Agreement		4,880,000
Commercial Extension of Credit- Entertainment Segment	295,000	87,928
Merchant Advances – Video Solutions Segment	2,091,500	1,350,000
Merchant Advances – Entertainment Segment	1,364,986
Unamortized debt issuance costs	(315,955)	(540,429)
Debt obligations	3,580,859	6,113,750
Less: current maturities of debt obligations	3,438,910	1,260,513
Debt obligations, long-term	$ 141,949	$ 4,853,237

v3.24.4

SCHEDULE OF MATURITY OF DEBT OBLIGATIONS (Details) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Debt Disclosure [Abstract]
2024 (October 1, 2024 to December 31, 2024)	$ 3,436,363
2025	3,412
2026	3,542
2027	3,677
2028 and thereafter	133,865
Debt obligations	$ 3,580,859	$ 6,113,750

v3.24.4

SCHEDULE OF WARRANT TO PURCHASE COMMON STOCK GRANTED (Details) - Warrant [Member]	Apr. 05, 2023 $ / shares shares
Debt Instrument [Line Items]
Volatility - range	106.00%
Risk-free rate	3.36%
Dividend	0.00%
Remaining contractual term	5 years
Common stock issuable under the warrants | shares	1,125,000
Minimum [Member]
Debt Instrument [Line Items]
Exercise price	$ 5.50
Maximum [Member]
Debt Instrument [Line Items]
Exercise price	$ 7.50

v3.24.4

DEBT OBLIGATIONS (Details Narrative) - USD ($)															1 Months Ended	3 Months Ended		9 Months Ended
	Nov. 01, 2024	Sep. 25, 2024	Aug. 12, 2024	Aug. 08, 2024	Aug. 06, 2024	Jan. 22, 2024	Nov. 30, 2023	Oct. 26, 2023	Jun. 02, 2023	Apr. 05, 2023	Feb. 23, 2023	Aug. 31, 2021	Jun. 30, 2021	May 12, 2020	Mar. 31, 2024	Sep. 30, 2024	Jun. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 20, 2024	Dec. 16, 2024	Nov. 06, 2024	Aug. 31, 2024	Aug. 15, 2024	Aug. 07, 2024	Jul. 26, 2024	Jul. 13, 2024	Mar. 14, 2024	Dec. 31, 2023
Debt Instrument [Line Items]
Principal amount									$ 125,000							$ 145,328		$ 145,328											$ 147,781
Principal loan through remittances																$ 87,928		87,928
Proceeds from convertible debt																			$ 2,640,000
Common stock, par value																$ 0.001		$ 0.001										$ 0.001	$ 0.001
Issuance of warrant derivative liabilities																		$ 576,380
Conversion of convertible securities																	$ 119,750
Loss on conversion of convertibleNote									$ 93,386										93,386
Short-Term Debt, Average Outstanding Amount			$ 4,880,000
Payments of Debt Issuance Costs			188,255
Proceeds merchant advances																		1,144,000
Loss on the extinguishment of debt																$ 310,505		379,332
Merchant advances outstanding balance																2,091,500		2,091,500											$ 1,350,000
Proceeds from Issuance of Debt																		393,836
Repayment of outstanding balance																1,101,569		1,101,569
Merchant Cash Advances [Member]
Debt Instrument [Line Items]
Unamortized discount																52,538		52,538											369,171
Short-term merchant advance							$ 1,050,000
Origination fees total							50,000
Net proceeds of origination fees							1,000,000
Short-term debt							$ 1,512,000
Loan interest rate							2.9
Repayments of short-term debt																		1,382,500
Proceeds merchant advances																		1,144,000
Loss on the extinguishment of debt																		68,827
Merchant advances outstanding balance																2,091,500		2,091,500
Merchant Cash Advances Entertainment Segment [Member]
Debt Instrument [Line Items]
Principal amount		$ 2,000,000
Debt instrument stated percentage		1.58%
Unamortized discount																263,417		263,417											0
Short-term merchant advance															$ 1,000,000
Origination fees total															85,000
Net proceeds of origination fees															915,000
Short-term debt															$ 1,425,000
Loan interest rate															40.4523
Repayments of short-term debt																803,850		855,749
Debt Instrument, Description		(i) November 1, 2024, and (ii) the consummation of the merger between Kustom Entertainment and CL Merger Sub, Inc. (“CL Merger Sub”) pursuant to the merger agreement among the Company, Kustom Entertainment, Clover Leaf Capital Corp. the Company is also required to pay in arrears in cash an amount equal to 50% of revenues from all ticket sales generated by Kustom Entertainment, up to nine thousand tickets sold, and thereafter equal to 10% of all revenues from all ticket sales until the earlier of the date on which the amended note is repaid in full or the November 1, 2024 maturity date. The Company has the right, but not the obligation, under the amended note to prepay the amended note, upon written notice to the Company, by payment in full of the entire outstanding principal balance plus interest.
Repayment date		$ 100,000
Revolving Loan Agreement [Member]
Debt Instrument [Line Items]
Proceeds from secured convertible debt								$ 4,880,000
Proceeds from secured convertible debt								3,162,500
Principal amount outstanding of loans								4,880,000
Debt instrument, repaid, principal								$ 97,600
Loan agreement description								the Company issued the Revolving Note to Kompass whereby the Company and Digital Ally Healthcare jointly and severally promise to pay to the order of Kompass the lesser of (i) $4,880,000.00, or (ii) the aggregate principal amount of all Revolving Loans outstanding under and pursuant to the Loan Agreement at the maturity or maturities and in the amount or amounts stated on the records of Kompass, together with interest (computed on the actual number of days elapsed on the basis of a 360 day year) at a floating per annum rate equal to the greater of (i) the Prime Rate plus four percent or (ii) eight percent, on the aggregate principal amount of all Revolving Loans outstanding from time to time as provided in the Loan Agreement.
Unamortized discount																$ 0		$ 0											171,258
Registration Rights Agreement [Member]
Debt Instrument [Line Items]
Debt instrument stated percentage																10.00%		10.00%
Purchaser percentage																2.00%		2.00%
Letter Agreement [Member]
Debt Instrument [Line Items]
Principal amount																								$ 100,000
Cash payment																										$ 150,000
Sale of asset				$ 400,000	$ 325,000
Repayment of note			$ 100,000
Letter Agreement [Member] | Minimum [Member]
Debt Instrument [Line Items]
Principal amount																											$ 1,425,000
Letter Agreement [Member] | Maximum [Member]
Debt Instrument [Line Items]
Principal amount																											$ 1,725,000
Warrant [Member]
Debt Instrument [Line Items]
Aggregate shares exercisable										1,125,000
Comprised shares										1,125,000
Warrant One [Member]
Debt Instrument [Line Items]
Comprised shares										375,000
Warrant exercise price										$ 5.50
Common stock, par value										$ 0.001
Warrant Two [Member]
Debt Instrument [Line Items]
Comprised shares										375,000
Warrant exercise price										$ 6.50
Warrant Three [Member]
Debt Instrument [Line Items]
Comprised shares										375,000
Warrant exercise price										$ 7.50
Common Stock [Member]
Debt Instrument [Line Items]
Warrant exercise price																							$ 0.0001
Common stock, convertible, conversion price, increase										$ 5.00
Debt instrument, redemption price, percentage										110.00%
Shares issued price per share									$ 5.00
Conversion of convertible securities, shares									25,000								25,000
Conversion of convertible securities									$ 119,750								$ 25
Subsequent Event [Member]
Debt Instrument [Line Items]
Principal amount																						$ 3,600,000
Comprised shares																				698,000
Warrant exercise price																				$ 1.00
Subsequent Event [Member] | Common Stock [Member]
Debt Instrument [Line Items]
Common stock, par value																					$ 0.001
2020 Small Business Administration Notes [Member]
Debt Instrument [Line Items]
Proceeds from loans														$ 150,000
Principal amount														$ 150,000		$ 2,453		$ 2,453
Debt instrument stated percentage														3.75%
principal payment														$ 731
Interest expense																1,368		4,126
June Contingent Payment Note [Member]
Debt Instrument [Line Items]
Principal amount													$ 350,000
Debt instrument stated percentage													3.00%
principal payment													$ 290,073
Principal amount													975,000
Debt instrument fair value													$ 350,000			0		0											58,819
August Contingent Payment Note [Member]
Debt Instrument [Line Items]
Principal amount												$ 650,000
Debt instrument stated percentage												3.00%
principal payment												$ 681,907
Principal amount												3,000,000
Debt instrument fair value												$ 650,000				0		0											$ 129,651
Twenty Twenty Three Commercial Extension of Credit [Member]
Debt Instrument [Line Items]
Line of credit											$ 1,000,000
Borrower percentage											25.00%
Credit facility description											The 25% withholding of the Borrower’s applicable remittance is deemed a “Payment” under the terms of this Note, and Payments shall continue until the earlier of (i) repayment of the Principal Sum, accrued Interest, and a fee of $35,000 or (ii) expiration of the Private Label Agreement on December 31, 2023.
2024 Commercial Extension of Credit [Member]
Debt Instrument [Line Items]
Line of credit						$ 75,000																			$ 200,000
Monthly advances						100,000
Client fees						$ 25,000
Deposits received																		975,000
Advance payments																		900,000
Outstanding balance																		75,000
Credit balance outstanding extension																220,000		220,000
Interest expense																$ 20,000		$ 20,000
2024 Commercial Extension of Credit [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Cash amount	$ 220,000
Securities Purchase Agreement [Member]
Debt Instrument [Line Items]
Debt instrument stated percentage										10.00%
Principal amount										$ 3,000,000
Proceeds from convertible debt										2,700,000
Principal amount										$ 3,000,000

v3.24.4

SCHEDULE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS (Details) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value	$ 1,266,073	$ 1,558,208
Contingent Consideration Promissory Notes and Contingent Consideration Earn Out [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value		188,470
Warrant Derivative Liability [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value	1,266,073	1,369,738
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value
Fair Value, Inputs, Level 1 [Member] | Contingent Consideration Promissory Notes and Contingent Consideration Earn Out [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value
Fair Value, Inputs, Level 1 [Member] | Warrant Derivative Liability [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value
Fair Value, Inputs, Level 2 [Member] | Contingent Consideration Promissory Notes and Contingent Consideration Earn Out [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value
Fair Value, Inputs, Level 2 [Member] | Warrant Derivative Liability [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value	1,266,073	1,558,208
Fair Value, Inputs, Level 3 [Member] | Contingent Consideration Promissory Notes and Contingent Consideration Earn Out [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value		188,470
Fair Value, Inputs, Level 3 [Member] | Warrant Derivative Liability [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value	$ 1,266,073	$ 1,369,738

v3.24.4

SCHEDULE OF FAIR VALUE MEASUREMENTS CHANGE IN LEVEL 3 INPUTS (Details)	9 Months Ended
	Sep. 30, 2024 USD ($)
Short-Term Debt [Line Items]
Beginning balance	$ 1,558,208
Issuance of warrant derivative liabilities	(576,380)
Ending balance	1,266,073
Contingent Consideration Promissory Note [Member]
Short-Term Debt [Line Items]
Beginning balance	188,470
Change in fair value of warrant derivative liabilities
Principal payments on contingent consideration promissory notes - Revenue Cycle Management Acquisitions	(188,470)
Change in fair value of contingent consideration promissory notes - Revenue Cycle Management Acquisitions
Ending balance
Warrant Derivative Liabilities [Member]
Short-Term Debt [Line Items]
Beginning balance	1,369,738
Issuance of warrant derivative liabilities	2,075,300
Change in fair value of warrant derivative liabilities	(2,178,965)
Principal payments on contingent consideration promissory notes - Revenue Cycle Management Acquisitions
Change in fair value of contingent consideration promissory notes - Revenue Cycle Management Acquisitions
Ending balance	$ 1,266,073

v3.24.4

SCHEDULE OF ACCRUED EXPENSES (Details) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Payables and Accruals [Abstract]
Accrued warranty expense	$ 11,615	$ 17,699
Accrued litigation costs	2,040,292	2,040,292
Accrued payroll and related fringes	585,030	367,826
Accrued sales returns and allowances	93,170	117,713
Accrued taxes	116,463	150,981
Accrued interest - related party	385,390	95,031
Customer deposits	227,885	219,462
Other	136,835	260,326
Total accrued expenses	$ 3,596,680	$ 3,269,330

v3.24.4

SCHEDULE OF ACCRUED WARRANTY EXPENSE (Details)	9 Months Ended
	Sep. 30, 2024 USD ($)
Payables and Accruals [Abstract]
Beginning balance	$ 17,699
Provision for warranty expense	38,898
Charges applied to warranty reserve	(44,982)
Ending balance	$ 11,615

v3.24.4

INCOME TAXES (Details Narrative) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Income Tax Disclosure [Abstract]
Statutory rate valuation allowances		100.00%
Deferred tax assets valuation allowance percentage	100.00%
Operating loss carryforwards	$ 140.9

v3.24.4

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Property, Plant and Equipment [Line Items]
Building		$ 4,537,037
Land		739,734
Office furniture, fixtures, equipment, and aircraft	780,492	2,065,092
Warehouse and production equipment	237,141	29,055
Demonstration and tradeshow equipment	77,791	87,987
Building improvements	20,935	1,328,654
Total cost	1,116,359	8,787,559
Less: accumulated depreciation and amortization	(671,756)	(1,503,857)
Net property, plant and equipment	$ 444,603	$ 7,283,702
Building [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	25 years
Land [Member]
Property, Plant and Equipment [Line Items]
Property, Plant, and Equipment, Useful Life, Term, Description [Extensible Enumeration]	Useful Life, Lease Term [Member]
Furniture and Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	3 years
Furniture and Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	20 years
Warehouse [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	3 years
Warehouse [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	7 years
Demonstration and Tradeshow Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	3 years
Demonstration and Tradeshow Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	7 years
Building Improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	5 years
Building Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	7 years

v3.24.4

PROPERTY, PLANT AND EQUIPMENT (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Property, Plant and Equipment [Line Items]
Depreciation	$ 127,474	$ 188,100	$ 471,307	$ 533,992
Loss on sale of assets	431,183		389,522
Aircraft [Member]
Property, Plant and Equipment [Line Items]
Sold aircraft			1,100,000
Closing cost			1,500
Carrying amount	1,141,661		1,141,661
Loss on sale of assets			41,661
Building [Member]
Property, Plant and Equipment [Line Items]
Sold aircraft	5,900,000		5,900,000
Closing cost	7,194		7,194
Carrying amount	5,461,623		5,461,623
Loss on sale of assets	$ 431,183		$ 431,183

v3.24.4

SCHEDULE OF INTANGIBLE ASSETS (Details) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]
Gross value	$ 20,596,195	$ 20,070,817
Accumulated amortization	4,615,650	3,560,395
Impairment	4,830,000
Net carrying value	11,150,545	16,510,422
Finite-Lived Intangible Assets [Member]
Finite-Lived Intangible Assets [Line Items]
Gross value	8,011,099	8,101,681
Accumulated amortization	4,615,650	3,560,395
Impairment
Net carrying value	3,395,449	4,541,286
Finite-Lived Intangible Assets [Member] | Licenses [Member]
Finite-Lived Intangible Assets [Line Items]
Gross value	151,652	225,545
Accumulated amortization	23,907	89,887
Impairment
Net carrying value	127,745	135,658
Finite-Lived Intangible Assets [Member] | Patents and Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Gross value	483,521	483,521
Accumulated amortization	355,314	266,403
Impairment
Net carrying value	128,207	217,118
Finite-Lived Intangible Assets [Member] | Sponsorship Agreement Network [Member]
Finite-Lived Intangible Assets [Line Items]
Gross value	5,600,000	5,600,000
Accumulated amortization	3,453,333	2,613,333
Impairment
Net carrying value	2,146,667	2,986,667
Finite-Lived Intangible Assets [Member] | SEO Content [Member]
Finite-Lived Intangible Assets [Line Items]
Gross value	600,000	600,000
Accumulated amortization	462,500	350,000
Impairment
Net carrying value	137,500	250,000
Finite-Lived Intangible Assets [Member] | Personal Seat Licenses (Entertainment Segment) [Member]
Finite-Lived Intangible Assets [Line Items]
Gross value	117,339	180,081
Accumulated amortization	12,060	14,004
Impairment
Net carrying value	105,279	166,077
Finite-Lived Intangible Assets [Member] | Software [Member]
Finite-Lived Intangible Assets [Line Items]
Gross value	23,653
Accumulated amortization
Impairment
Net carrying value	23,653
Finite-Lived Intangible Assets [Member] | Website Enhancements Entertainment Segment [Member]
Finite-Lived Intangible Assets [Line Items]
Gross value	35,900	13,500
Accumulated amortization	6,841
Impairment
Net carrying value	29,059	13,500
Finite-Lived Intangible Assets [Member] | Client agreements (revenue cycle management segments) [Member]
Finite-Lived Intangible Assets [Line Items]
Gross value	999,034	999,034
Accumulated amortization	301,695	226,768
Impairment
Net carrying value	697,339	772,266
Indefinite-Lived Intangible Assets [Member] | Goodwill Entertainment Segment [Member]
Finite-Lived Intangible Assets [Line Items]
Gross value	6,112,507	5,886,548
Accumulated amortization
Impairment	307,000
Net carrying value	5,805,507	5,886,548
Indefinite-Lived Intangible Assets [Member] | Goodwill Revenue Cycle Management Segment [Member]
Finite-Lived Intangible Assets [Line Items]
Gross value	5,480,966	5,480,966
Accumulated amortization
Impairment	4,322,000
Net carrying value	1,158,966	5,480,966
Indefinite-Lived Intangible Assets [Member] | Trade Name and Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Gross value	900,000	600,000
Accumulated amortization
Impairment	201,000
Net carrying value	699,000	600,000
Indefinite-Lived Intangible Assets [Member] | Patents and Trademarks Pending [Member]
Finite-Lived Intangible Assets [Line Items]
Gross value	91,623	1,622
Accumulated amortization
Impairment
Net carrying value	$ 91,623	$ 1,622

v3.24.4

SCHEDULE OF ESTIMATED AMORTIZATION FOR INTANGIBLE ASSETS (Details)	Sep. 30, 2024 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2024 (October 1, 2024 to December 31, 2024)	$ 371,227
2025	1,418,272
2026	913,733
2027	116,387
2028 and thereafter	575,830
Total	$ 3,395,449

v3.24.4

GOODWILL AND OTHER INTANGIBLE ASSETS (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 371,772	$ 377,485	$ 1,106,939	$ 1,122,635
Excess carrying value percentage	20.00%		20.00%
Goodwill	$ 20,596,195		$ 20,596,195		$ 20,070,817
Goodwill impairment charge	4,830,000		4,830,000
Intangible Assets, Net (Including Goodwill)	11,150,545		11,150,545		16,510,422
Indefinite-Lived Intangible Assets [Member] | Goodwill Revenue Cycle Management Segment [Member]
Finite-Lived Intangible Assets [Line Items]
Goodwill	5,480,966		5,480,966		5,480,966
Goodwill impairment charge			4,322,000
Goodwill impairment charge	4,322,000		4,322,000
Intangible Assets, Net (Including Goodwill)	1,158,966		1,158,966		5,480,966
Indefinite-Lived Intangible Assets [Member] | Goodwill Entertainment Segment [Member]
Finite-Lived Intangible Assets [Line Items]
Goodwill	6,112,507		6,112,507		5,886,548
Goodwill impairment charge	307,000		307,000
Goodwill	1,158,966		1,158,966
Intangible Assets, Net (Including Goodwill)	5,805,507		5,805,507		5,886,548
Indefinite-Lived Intangible Assets [Member] | Trade Name and Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Goodwill	900,000		900,000		600,000
Goodwill impairment charge	201,000		201,000
Intangible Assets, Net (Including Goodwill)	699,000		699,000		$ 600,000
Impairment of intangible assets	201,000
Indefinite lived intangible assets	$ 699,000		$ 699,000
Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average cost of capital			21.00%
Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average cost of capital			32.50%

v3.24.4

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)	Apr. 06, 2024	Sep. 30, 2024	Mar. 14, 2024	Dec. 31, 2023
Commitments and Contingencies Disclosure [Abstract]
Litigation settlement	$ 3,999,984
Aggregate carrying amount of litigation loss		$ 1,800,000
Common stock, par value		$ 0.001	$ 0.001	$ 0.001

v3.24.4

SCHEDULE OF STOCK OPTIONS OUTSTANDING (Details) - Stock Options [Member]	9 Months Ended
	Sep. 30, 2024 $ / shares shares
Options outstanding, beginning balance | shares	53,600
Weighted average exercise price, outstanding, beginning balance | $ / shares	$ 45.55
Options granted | shares
Weighted average exercise price, granted | $ / shares
Options exercised | shares
Weighted average exercise price, exercised | $ / shares
Options forfeited/expired | shares	(1,100)
Weighted average exercise price, forfeited/expired | $ / shares	$ (65.00)
Options outstanding, ending balance | shares	52,500
Weighted average exercise price, outstanding, ending balance | $ / shares	$ 45.14
Options exercisable, ending balance | shares	52,500
Weighted average exercise price, exercisable, ending balance | $ / shares	$ 45.14

v3.24.4

SCHEDULE OF SHARES AUTHORIZED UNDER STOCK OPTION PLANS BY EXERCISE PRICE RANGE (Details)	9 Months Ended
	Sep. 30, 2024 $ / shares shares
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Number of options, outstanding	52,500
Weighted average remaining contractual life, outstanding options	5 years 2 months 12 days
Number of options, exercisable	52,500
Weighted average remaining contractual life, exercisable options	5 years 2 months 12 days
Range One [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise price range, lower limit | $ / shares	$ 0.01
Exercise price range, upper limit | $ / shares	$ 49.99
Number of options, outstanding	37,000
Weighted average remaining contractual life, outstanding options	5 years 10 months 24 days
Number of options, exercisable	37,000
Weighted average remaining contractual life, exercisable options	5 years 10 months 24 days
Range Two [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise price range, lower limit | $ / shares	$ 50.00
Exercise price range, upper limit | $ / shares	$ 69.99
Number of options, outstanding	14,000
Weighted average remaining contractual life, outstanding options	4 years
Number of options, exercisable	14,000
Weighted average remaining contractual life, exercisable options	4 years
Range Three [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise price range, lower limit | $ / shares	$ 70.00
Exercise price range, upper limit | $ / shares	$ 89.99
Number of options, outstanding	1,500
Weighted average remaining contractual life, outstanding options	1 year 7 months 6 days
Number of options, exercisable	1,500
Weighted average remaining contractual life, exercisable options	1 year 7 months 6 days

v3.24.4

SCHEDULE OF RESTRICTED STOCK ACTIVITY (Details) - Restricted Stock [Member]	9 Months Ended
	Sep. 30, 2024 $ / shares shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of restricted shares, non-vested beginning balance | shares	53,875
Weighted average grant date fair value, non-vested beginning balance | $ / shares	$ 11.27
Number of restricted shares, granted | shares	80,197
Weighted average grant date fair value, granted | $ / shares	$ 2.12
Number of restricted shares, vested | shares	(32,250)
Weighted average grant date fair value, vested | $ / shares	$ (10.87)
Number of restricted shares, forfeited | shares	(51,072)
Weighted average grant date fair value, forfeited | $ / shares	$ (2.91)
Number of restricted shares, non-vested ending balance | shares	50,750
Weighted average grant date fair value, non-vested ending balance | $ / shares	$ 5.48

v3.24.4

SCHEDULE OF NON-VESTED BALANCE OF RESTRICTED STOCK (Details)	Sep. 30, 2024 shares
Share-Based Payment Arrangement [Abstract]
2024 (October 1, 2024 through December 31, 2024)
2025	35,250
2026	6,500
2027	5,000
2028	4,000

v3.24.4

STOCK-BASED COMPENSATION (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-based payment arrangement, expense	$ (27,789)	$ 84,586	$ 73,678	$ 378,917
Options, available for grant	137,042		137,042
Aggregate intrinsic value	$ 0		$ 0		$ 0
Aggregate intrinsic value of options exercisable	0		0		$ 0
Unrecognized portion of stock compensation expense	0		0
Restricted Stock Units (RSUs) [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unrecognized portion of stock compensation expense	$ 88,399		$ 88,399

v3.24.4

SCHEDULE OF WARRANT MODIFICATION (Details)	Sep. 30, 2024 shares	Aug. 31, 2024	Jun. 25, 2024 shares	Apr. 05, 2023 shares
Remaining contractual term		5 years
2023 Purchase Warrants [Member]
Common stock issuable under the warrants	1,125,000			1,125,000
2023 Purchase Warrants [Member] | Measurement Input, Price Volatility [Member]
Warrants measurement input	106.6			106.0
2023 Purchase Warrants [Member] | Measurement Input, Risk Free Interest Rate [Member]
Warrants measurement input	3.58			3.36
2023 Purchase Warrants [Member] | Measurement Input, Expected Dividend Rate [Member]
Warrants measurement input	0			0
2023 Purchase Warrants [Member] | Measurement Input, Expected Term [Member]
Remaining contractual term	3 years 6 months			5 years
2023 Purchase Warrants [Member] | Measurement Input, Exercise Price [Member] | Minimum [Member]
Warrants measurement input	5.50			5.50
2023 Purchase Warrants [Member] | Measurement Input, Exercise Price [Member] | Maximum [Member]
Warrants measurement input	7.50			7.50
2024 Purchase Warrants [Member]
Common stock issuable under the warrants	1,195,219		1,768,227
2024 Purchase Warrants [Member] | Measurement Input, Price Volatility [Member]
Warrants measurement input	106.6
2024 Purchase Warrants [Member] | Measurement Input, Price Volatility [Member] | Minimum [Member]
Warrants measurement input			72.1
2024 Purchase Warrants [Member] | Measurement Input, Price Volatility [Member] | Maximum [Member]
Warrants measurement input			101.1
2024 Purchase Warrants [Member] | Measurement Input, Risk Free Interest Rate [Member]
Warrants measurement input	3.58
2024 Purchase Warrants [Member] | Measurement Input, Risk Free Interest Rate [Member] | Minimum [Member]
Warrants measurement input			4.25
2024 Purchase Warrants [Member] | Measurement Input, Risk Free Interest Rate [Member] | Maximum [Member]
Warrants measurement input			5.46
2024 Purchase Warrants [Member] | Measurement Input, Expected Dividend Rate [Member]
Warrants measurement input	0		0
2024 Purchase Warrants [Member] | Measurement Input, Expected Term [Member]
Remaining contractual term	4 years 8 months 12 days
2024 Purchase Warrants [Member] | Measurement Input, Expected Term [Member] | Minimum [Member]
Remaining contractual term			1 month 6 days
2024 Purchase Warrants [Member] | Measurement Input, Expected Term [Member] | Maximum [Member]
Remaining contractual term			5 years
2024 Purchase Warrants [Member] | Measurement Input, Exercise Price [Member]
Warrants measurement input	2.51		2.51

v3.24.4

SCHEDULE OF WARRANT ACTIVITY (Details) - 2024 Purchase Warrants [Member]	9 Months Ended
	Sep. 30, 2024 $ / shares shares
Warrants, vested, beginning balance | shares	1,125,000
Weighted average exercise price, vested, beginning balance | $ / shares	$ 6.50
Warrants, granted | shares	1,768,227
Weighted average exercise price, granted | $ / shares	$ 2.51
Warrants, exercised | shares	(573,008)
Weighted average exercise price, exercised | $ / shares	$ (2.51)
Warrants, forfeited/cancelled | shares
Weighted average exercise price, forfeited/cancelled | $ / shares
Warrants, vested, ending balance | shares	2,320,219
Weighted average exercise price, vested, ending balance | $ / shares	$ 4.44

v3.24.4

SCHEDULE OF RANGE OF EXERCISE PRICES AND WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF WARRANTS (Details)	9 Months Ended
	Sep. 30, 2024 $ / shares shares
2023 Purchase Warrants [Member] | Range One [Member]
Outstanding and exercisable warrants, Exercise price | $ / shares	$ 5.50
Outstanding and exercisable warrants, number of warrants	375,000
Outstanding and exercisable warrants, weighted average remaining contractual life	3 years 6 months
2023 Purchase Warrants [Member] | Range Two [Member]
Outstanding and exercisable warrants, Exercise price | $ / shares	$ 6.50
Outstanding and exercisable warrants, number of warrants	375,000
Outstanding and exercisable warrants, weighted average remaining contractual life	3 years 6 months
2023 Purchase Warrants [Member] | Range Three [Member]
Outstanding and exercisable warrants, Exercise price | $ / shares	$ 7.50
Outstanding and exercisable warrants, number of warrants	375,000
Outstanding and exercisable warrants, weighted average remaining contractual life	3 years 6 months
2024 Purchase Warrants [Member]
Outstanding and exercisable warrants, number of warrants	2,320,219
Outstanding and exercisable warrants, weighted average remaining contractual life	4 years 1 month 6 days
2024 Purchase Warrants [Member] | Range Four [Member]
Outstanding and exercisable warrants, Exercise price | $ / shares	$ 2.51
Outstanding and exercisable warrants, number of warrants	1,195,219
Outstanding and exercisable warrants, weighted average remaining contractual life	4 years 8 months 12 days

v3.24.4

COMMON STOCK PURCHASE WARRANTS (Details Narrative) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2024	Jun. 25, 2024	Apr. 05, 2023
Warrant [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Warrant to purchase				1,125,000
Intrinsic value of outstanding warrants	$ 0	$ 0
2023 Purchase Warrants [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Warrant to purchase				1,125,000
2024 Purchase Warrants [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Warrant to purchase			1,768,227
Warrants exercised	573,008	573,008

v3.24.4

STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($)				1 Months Ended	3 Months Ended		9 Months Ended
	Jun. 24, 2024	Feb. 06, 2023	Jan. 10, 2023	Jan. 31, 2024	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Mar. 14, 2024	Dec. 31, 2023
Common stock, par value					$ 0.001		$ 0.001		$ 0.001	$ 0.001
Cancellation of restricted stock, shares							51,072	3,625
Reverse stock split		1-for-20 reverse stock split
Net loss (income) attributable to noncontrolling interests					$ (2,000,206)	$ 29,630	$ (1,939,143)	$ 228,624
Nobility Healthcare LLC [Member]
Subsidiary, Ownership Percentage, Parent					49.00%		49.00%
Net loss (income) attributable to noncontrolling interests					$ 2,000,206	$ 29,360	$ 1,939,143	$ 228,624
Nobility Healthcare LLC [Member]
Equity Method Investment, Ownership Percentage					51.00%		51.00%
Exercise of Prefunded Warrants [Member]
Warrants exercised							573,008
Private Placement [Member]
Issuance of stock, shares	1,195,219
Share price	$ 2.51
Pre-funded unit price	0.0001
Common stock, par value	$ 0.001
The Securities Purchase Agreement [Member]
Proceeds from private placement	$ 2,900,000
Officers [Member]
Common stock issuance granted			22,500	55,000
Vesting drescription			Such shares will generally vest over a period of one to five years on their respective anniversary dates in January through January 2028, provided that each grantee remains an officer or employee on such dates	Such shares will generally vest over a period of one to five years on their respective anniversary dates in January through January 2028, provided that each grantee remains an officer or employee on such dates
New Employees [Member]
Common stock issuance granted			12,500	25,197
New Employees [Member] | Minimum [Member]
Vesting period			1 year	1 year
New Employees [Member] | Maximum [Member]
Vesting period			2 years	2 years

v3.24.4

SCHEDULE OF ESTIMATED FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED ACQUISITION (Details) - Country Stampede Acquisition [Member]	Mar. 01, 2024 USD ($)
Business Acquisition [Line Items]
Tangible assets acquired	$ 305,000
Identifiable intangible assets acquired (Trademarks and trade names)	300,000
Goodwill	225,959
Liabilities assumed pursuant to stock purchase agreement	(288,000)
Net assets acquired and liabilities assumed	542,959
Cash paid at Country Stampede Acquisition date	400,000
Cash paid subsequent to closing	142,959
Acquisition purchase price	$ 542,959

v3.24.4

COUNTRY STAMPEDE ACQUISITION (Details Narrative) - JC Entertainment LLC [Member]	Mar. 01, 2024 USD ($)
Business Acquisition [Line Items]
Acquisition purchase price	$ 542,959
Payment to acquisition purchase price	$ 400,000

v3.24.4

SCHEDULE OF SEGMENT REPORTING (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Segment Reporting Information [Line Items]
Total Net Revenues	$ 4,051,711	$ 6,337,699	$ 15,197,297	$ 22,314,519
Total Gross Profit	1,739,974	1,226,149	3,503,804	5,507,978
Total Operating Income (Loss)	(7,382,299)	(5,148,043)	(14,935,492)	(16,261,554)
Total Depreciation and Amortization			1,578,246	1,656,627
Total identifiable assets	32,263,169		32,263,169		$ 47,028,809
Video Solutions [Member]
Segment Reporting Information [Line Items]
Total identifiable assets	16,876,673		16,876,673		26,396,559
Revenue Cycle Management [Member]
Segment Reporting Information [Line Items]
Total identifiable assets	1,969,225		1,969,225		2,260,376
Entertainment Segment [Member]
Segment Reporting Information [Line Items]
Total identifiable assets	6,037,666		6,037,666		6,324,211
Corporate Segment [Member]
Segment Reporting Information [Line Items]
Total identifiable assets	7,379,605		7,379,605		$ 12,047,663
Operating Segments [Member]
Segment Reporting Information [Line Items]
Total Net Revenues	4,051,711	6,337,699	15,197,297	22,314,519
Total Gross Profit	1,739,974	1,226,149	3,503,804	5,507,978
Total Operating Income (Loss)	(7,382,299)	(5,148,043)	(14,935,492)	(16,261,554)
Total Depreciation and Amortization	499,246	565,585	1,578,246	1,656,627
Operating Segments [Member] | Video Solutions [Member]
Segment Reporting Information [Line Items]
Total Net Revenues	1,196,362	1,797,348	4,500,325	5,596,300
Total Gross Profit	769,063	426,795	1,622,558	1,740,397
Total Operating Income (Loss)	(89,055)	(1,311,143)	(1,909,246)	(4,639,316)
Total Depreciation and Amortization	133,246	219,955	520,970	629,677
Operating Segments [Member] | Revenue Cycle Management [Member]
Segment Reporting Information [Line Items]
Total Net Revenues	1,601,792	1,636,543	4,600,745	5,142,904
Total Gross Profit	666,723	625,114	1,731,860	2,203,220
Total Operating Income (Loss)	(4,085,224)	43,202	(3,955,761)	299,010
Total Depreciation and Amortization	26,735	26,328	80,164	69,066
Operating Segments [Member] | Entertainment Segment [Member]
Segment Reporting Information [Line Items]
Total Net Revenues	1,253,557	2,903,808	6,096,227	11,575,315
Total Gross Profit	304,188	174,240	149,386	1,564,361
Total Operating Income (Loss)	(1,516,934)	(1,256,681)	(3,987,415)	(2,818,617)
Total Depreciation and Amortization	339,265	319,302	977,112	957,884
Operating Segments [Member] | Corporate Segment [Member]
Segment Reporting Information [Line Items]
Total Operating Income (Loss)	$ (1,691,086)	$ (2,623,421)	$ (5,083,070)	$ (9,102,631)

v3.24.4

SEGMENT DATA (Details Narrative)	9 Months Ended
	Sep. 30, 2024 USD ($) Segments
Segment Reporting Information [Line Items]
Number of operating segments | Segments	3
Video Solutions [Member]
Segment Reporting Information [Line Items]
Inventory reserve	$ 4,144,749
Entertainment Segment [Member]
Segment Reporting Information [Line Items]
Inventory reserve	$ 78,241

v3.24.4

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023	Oct. 02, 2023	Sep. 22, 2023
Related Party Transaction [Line Items]
Notes payable current	$ 2,800,000		$ 2,800,000		$ 2,700,000
Nobility LLC [Member]
Related Party Transaction [Line Items]
[custom:AccruedReimbursableExpensesPayable]	294,715		404,483	$ 265,241
Nobility LLC [Member] | Operating Agreement [Member]
Related Party Transaction [Line Items]
Management Fee Expense	6,877	$ 36,502
Payment for Management Fee			29,280	$ 20,062
Related Party [Member]
Related Party Transaction [Line Items]
Notes payable current	2,700,000		2,700,000				$ 2,325,000
Business combination, contingent consideration, asset						$ 375,000
Interest rate							13.25%
Accrued interest	$ 384,545		$ 384,545

v3.24.4

SUBSEQUENT EVENTS (Details Narrative)							3 Months Ended	9 Months Ended
	Dec. 17, 2024 $ / shares shares	Dec. 16, 2024 $ / shares	Nov. 06, 2024 USD ($) shares	Oct. 22, 2024 USD ($)	Jun. 24, 2024 $ / shares shares	Feb. 06, 2023	Jun. 30, 2024 USD ($) shares	Sep. 30, 2024 USD ($) $ / shares	Dec. 20, 2024 $ / shares shares	Aug. 31, 2024 $ / shares	Mar. 14, 2024 $ / shares	Dec. 31, 2023 USD ($) $ / shares	Jun. 02, 2023 USD ($)
Subsequent Event [Line Items]
Debt outstanding obligation | $								$ 3,580,859				$ 6,113,750
Issuance of stock, value | $							$ 2,529,448
Common stock, par value | $ / shares								$ 0.001			$ 0.001	$ 0.001
Warrant term										5 years
Principal amount | $								$ 145,328				$ 147,781	$ 125,000
Reverse stock split						1-for-20 reverse stock split
Common Stock [Member]
Subsequent Event [Line Items]
Issuance of stock, value | $							$ 622
Shares issued | shares							622,211
Exercise price | $ / shares										$ 0.0001
Senior Secured Promissory Notes [Member]
Subsequent Event [Line Items]
Promissory notes description								The Notes mature ninety (90) days following their issuance date (the “Maturity Date”) and shall accrue no interest unless and until an Event of Default (as defined in the Notes) has occurred, in which case interest shall accrue at a rate of 14% per annum during the pendency of such Event of Default. In addition, upon customary Events of Default, the Purchasers may require the Company to redeem all or any portion of the Notes in cash with a 125% redemption premium. The Purchasers may also require the Company to redeem all or any portion of the Notes in cash upon a Change of Control, as defined in the Notes, at the prices set forth therein. Upon a Bankruptcy Event of Default (as defined in the Notes), the Company shall immediately pay to the Purchasers an amount in cash representing 100% of all outstanding principal, accrued and unpaid interest, if any, in addition to any and all other amounts due under the Notes, without the requirement for any notice or demand or other action by the Purchaser or any other person.
Percentage of gross proceeds								100.00%
Private Placement [Member]
Subsequent Event [Line Items]
Shares issued | shares					1,195,219
Share price | $ / shares					$ 2.51
Pre-funded unit price | $ / shares					0.0001
Common stock, par value | $ / shares					$ 0.001
June 2024 Private Placement [Member]
Subsequent Event [Line Items]
Shares issued | shares					1,195,219
Share price | $ / shares					$ 2.51
Pre-funded unit price | $ / shares					0.00001
Common stock, par value | $ / shares					$ 0.001
Subsequent Event [Member]
Subsequent Event [Line Items]
Shares issued | shares			808,377
Exercise price | $ / shares									$ 1.00
Exercise of warrant	Dec. 17, 2024
Common stock issuable under the warrants | shares									698,000
Principal amount | $			$ 3,600,000
Gross proceeds | $			$ 3,000,000.0
Stock issued and outstanding description			The Bylaws were amended to reduce the quorum requirement at any meeting of the Company’s stockholders to thirty-three and one-third percent (33 1/3%) of the stock issued and outstanding and entitled to vote at such meeting.
Subsequent Event [Member] | Series A Warrants [Member]
Subsequent Event [Line Items]
Number of warrants outstanding | shares	5,976,095
Subsequent Event [Member] | Series B Warrants [Member]
Subsequent Event [Line Items]
Number of warrants outstanding | shares	4,780,877
Subsequent Event [Member] | Common Stock [Member]
Subsequent Event [Line Items]
Common stock, par value | $ / shares		$ 0.001
Floor reset price per share | $ / shares	0.502
Common stock issuance percentage		20.00%
Reverse stock split		ranging from one-for-five (1:5) to one-for-twenty (1:20)
Subsequent Event [Member] | Series A Common Stock Purchase Warrant [Member]
Subsequent Event [Line Items]
Exercise of warrant		Jun. 25, 2024
Subsequent Event [Member] | Series B Common Stock Purchase Warrant [Member]
Subsequent Event [Line Items]
Exercise of warrant		Jun. 25, 2024
Default Notice [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Payment of debt | $				$ 100,000
Debt outstanding obligation | $				$ 1,600,000
Securities Purchase Agreement [Member] | Subsequent Event [Member] | Private Placement [Member]
Subsequent Event [Line Items]
Issuance of stock, value | $			$ 3,600,000
Shares issued | shares			808,377
Proceeds from private placement | $			$ 3,000,000.0
Net proceeds from private placement | $			$ 2,015,623

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