Core Points - Digital Ally, Inc. announced the full lineup for the 2026 Country Stampede Music Festival, featuring headliners Treaty Oak Revival, Zach Top, and Rascal Flatts [1][2] - The festival aims to showcase both established artists and emerging talent, with a diverse support lineup including Wyatt Flores, Scotty McCreery, and others [3] - The event will take place on June 25, 26, and 27, 2026, at the Azura Amphitheater in Bonner Springs, Kansas, with various ticketing options available [6] Group 1 - The 2026 Country Stampede will include a pre-party and late-night after parties to enhance fan experiences [4] - An annual Battle of the Bands competition will allow rising artists to compete for a chance to open the Main Stage [5] - Kustom Entertainment emphasizes community engagement and aims to provide a platform for emerging artists alongside established headliners [6] Group 2 - Digital Ally, Inc. operates through subsidiaries engaged in video solution technology, healthcare revenue cycle management, and event production [7] - Kustom Entertainment, a subsidiary of Digital Ally, specializes in producing live entertainment experiences, with the Country Stampede being a flagship event [7]

Company Overview - Digital Ally, Inc. announced its third quarter operating results on November 12, 2025[4] - The company is listed on The Nasdaq Capital Market under the trading symbol DGLY[3] Financial Information - The report does not include specific financial metrics or performance data in the provided content[4] Forward-Looking Statements - The press release includes forward-looking statements that may impact future performance[7]

Core Insights - Digital Ally, Inc. reported significant improvements in its financial performance for the third quarter of 2025 compared to the same period in 2024, highlighting a recovery in revenues and a reduction in operating losses [1][3]. Financial Performance - Total third quarter revenue increased by 12% to $4.5 million, compared to $4.1 million in the third quarter of 2024 [4]. - Selling, general and administrative (SG&A) expenses declined by 72.7% to $2.5 million from $9.1 million in the prior-year period [4]. - The company reported an operating loss of $1,121,782, which is an improvement of $6,260,517 or 84.8% compared to the third quarter of 2024 [4]. - Net loss attributable to common stockholders improved to $1,021,867, or $0.59 per diluted share, compared to a net loss of $3,470,506, or $1,817.02 per diluted share in the previous year [4]. Operational Developments - The company completed a $14.3 million public equity offering earlier in 2025, which significantly improved liquidity and stockholders' equity, exceeding the minimum requirement for continued listing on The Nasdaq Capital Market [3]. - Total stockholders' equity improved to $7,516,665 as of September 30, 2025, compared to a deficit of $(9,013,430) as of December 31, 2024 [4]. Strategic Outlook - The company anticipates continued improvement in its entertainment segment revenues and operating profits, particularly in preparation for the upcoming Country Stampede Music Festival scheduled for June 25-27, 2026 [3]. - Digital Ally is focused on cost reduction, streamlining supply chain logistics, and incentivizing sales efforts to adapt to the competitive market for law enforcement products [3].

Financial Position - The company reported a stockholders' equity deficit of ($2,448,310) as of September 30, 2024, failing to meet the Nasdaq Stockholders' Equity Requirement of $2,500,000[248]. - The company received a notice from Nasdaq on December 20, 2024, regarding non-compliance with the Minimum Bid Price Requirement due to a closing bid price of less than $1 per share for 30 consecutive business days[247]. - The company regained compliance with the Minimum Bid Price Requirement and Stockholders' Equity Requirement as of October 17, 2025, and is now under a one-year Discretionary Panel Monitor[252]. - The company anticipates achieving compliance with Nasdaq requirements and maintaining it, although there are no assurances of continued compliance[251]. - The company has approximately $159,965,000 of federal net operating loss carryforwards available to offset future net taxable income as of September 30, 2025[298]. - The company has a net negative working capital of $115,393 as of September 30, 2025, with accounts receivable and other receivables representing $4,796,447 of net working capital[348]. - Debt obligations totaled $1,003,731 as of September 30, 2025, with current maturities of $865,292[352]. Revenue and Segment Performance - The company entered the revenue cycle management business in the second quarter of 2021, completing four acquisitions of private medical billing companies to enhance service revenues for healthcare organizations[257]. - The video solutions segment generates revenue through subscription models and hardware sales, with revenues recognized upon product delivery and deferred for cloud and warranty subscriptions over 3 to 5 years[256]. - Total net revenues for the three months ended September 30, 2025, were $4,537,157, representing a 12.0% increase from $4,051,711 in 2024[263]. - Entertainment segment revenue was $1,729,773 for the three months ended September 30, 2025, compared to $1,253,557 in 2024, an increase of 37.9%[263]. - Product revenues for the entertainment segment decreased by 12.6% to $434,793 in 2025 from $497,700 in 2024[274]. - Service and other revenues for the entertainment segment increased by 71.3% to $1,294,980 in 2025 from $755,857 in 2024[273]. - Video solutions segment revenue decreased by 25.0% to $229,629 in 2025 from $306,245 in 2024[274]. - Total net revenues for the nine months ended September 30, 2025, were $14,644,460, a decrease of $552,837 (3.6%) from $15,197,297 in 2024[314]. - Revenue cycle management segment revenues decreased to $4,144,008 for the nine months ended September 30, 2025, down $456,738 (9.9%) from $4,600,745 in 2024[314]. - The entertainment segment generated service revenues of $3,911,068 for the nine months ended September 30, 2025, an increase of $743,860 (23.5%) from $3,167,208 in 2024[314]. Profitability and Loss - Total gross profit for the three months ended September 30, 2025, was $1,371,575, down from $1,739,974 in 2024[263]. - Total operating loss for the company was $1,121,782 for the three months ended September 30, 2025, compared to a loss of $7,382,299 in 2024[263]. - The company recorded a net loss before income tax benefit of $(963,342) for the three months ended September 30, 2025, an improvement of $4,507,370 (82.4%) compared to $(5,470,712) in 2024[296]. - Net income improved to $(963,342) for Q3 2025, a $4,507,370 (82.4%) increase from $(5,470,712) in Q3 2024[299]. - Net loss attributable to common stockholders decreased to $(1,021,867) in Q3 2025, an improvement of $2,448,639 (70.6%) from $(3,470,506) in Q3 2024[301]. - Operating loss improved by $6,260,517 (84.8%) to $1,121,782 for the three months ended September 30, 2025, with operating loss as a percentage of revenues improving to 24.7% from 182%[288]. - Net loss improved by $13,239,067 (91.8%) to $(1,185,464) for the nine months ended September 30, 2025, compared to $(14,424,531) in 2024[340]. - Net loss attributable to common stockholders improved to $(1,303,597) for the nine months ended September 30, 2025, compared to $(12,485,388) for the same period in 2024, representing an improvement of $11,181,791 (89.6%) [342]. Expenses and Cash Flow - Selling, general and administrative expenses decreased by $6,628,916 (72.7%) to $2,493,357 for the three months ended September 30, 2025, primarily due to fewer new advertising sponsorships and headcount reductions[285]. - Selling, general and administrative expenses decreased by $9,907,312 (53.7%) to $8,531,984 for the nine months ended September 30, 2025, from $18,439,296 in 2024[322]. - Interest income increased to $17,887 for the three months ended September 30, 2025, from $13,775 in 2024, reflecting higher cash levels due to recent capital raises[289]. - Interest income increased to $95,808 for the nine months ended September 30, 2025, from $63,064 in 2024, reflecting higher cash levels[326]. - Interest expenses decreased significantly to $960,250 for the nine months ended September 30, 2025, from $2,505,536 in 2024, due to debt repayment[327]. - Net cash used in operating activities was $8,996,431 for the nine months ended September 30, 2025, compared to $4,086,023 for the same period in 2024, indicating a deterioration of $4,910,410[345]. - Net cash provided by financing activities was $9,684,796 for the nine months ended September 30, 2025, compared to $3,330,482 for the same period in 2024, driven by a public equity offering generating $14,308,300 in net cash proceeds[346]. Inventory and Asset Management - The company is actively managing inventory, which represents $2,622,542 of net working capital, with a goal to reduce this level during 2025[348]. - The total inventories as of September 30, 2025, amounted to $2,622,542, compared to $2,586,066 as of December 31, 2024, reflecting a slight increase[371][372]. - The reserve for excess and obsolete inventory decreased to $1,766,885 at September 30, 2025, from $2,169,655 at December 31, 2024, representing a reduction in reserves[373]. - Inventory reserves represented 40% of the gross inventory balance at September 30, 2025, down from 46% at December 31, 2024[373]. Impairment and Valuation - The company recorded a non-cash goodwill impairment charge of $4,322,000 for the revenue cycle management segment and $307,000 for the entertainment segment as of September 30, 2024[384]. - The weighted average cost of capital used in the most recent impairment test ranged from 20.9% to 32.5%[382]. - The fair value of the video solutions reporting unit was substantially in excess of its carrying value, while the revenue cycle management and entertainment segments were determined to be impaired[383]. - The company has fully reserved all of its deferred tax assets as of September 30, 2025, and December 31, 2024, due to overall net operating loss carryforwards available[390]. Market and Economic Conditions - Inflation has not materially affected the company during the past fiscal year, and the entertainment segment is expected to generate higher revenue in the second half of the calendar year[393].

Core Insights - Digital Ally, Inc. is focusing on live entertainment event production and ticket brokering services, with a presentation scheduled at the LD Micro Main Event XIX on October 20, 2025 [1][3][8] Company Overview - Digital Ally, Inc. develops and markets advanced video recording products and safety products for various industries, including law enforcement and emergency management [1][6] - The company is expanding its operations through its Kustom Entertainment subsidiary, emphasizing live entertainment and ticket brokering [3][6] Event Details - The LD Micro Main Event XIX will take place from October 19 to 21, 2025, at the Hotel del Coronado in San Diego, California, featuring around 120 companies presenting in half-hour increments [4][5] - The event will include registration, keynote speakers, company presentations, and one-on-one investor meetings, concluding with a closing reception [4][5]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements.) The financial statements show improved equity and reduced net loss, despite ongoing operating losses and a significant Entertainment segment gross loss, supported by capital raises and debt reduction [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section provides the company's condensed consolidated balance sheets, statements of operations, and cash flows Condensed Consolidated Balance Sheets | Financial Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $25,963,663 | $27,736,573 | | Total Liabilities | $17,811,958 | $36,750,003 | | **Total Equity (Deficit)** | **$8,151,705** | **($9,013,430)** | Condensed Consolidated Statements of Operations (Three Months Ended June 30) | Income Statement (Three Months Ended June 30) | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenue | $5,632,039 | $5,616,235 | | Gross Profit (Loss) | ($632,625) | $242,392 | | Operating Loss | ($4,095,073) | ($3,914,221) | | Net Loss Attributable to Common Stockholders | ($4,545,201) | ($5,083,861) | | Diluted EPS | ($3.21) | ($3,479.71) | Condensed Consolidated Statements of Operations (Six Months Ended June 30) | Income Statement (Six Months Ended June 30) | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenue | $10,107,303 | $11,145,586 | | Gross Profit | $968,874 | $1,763,830 | | Operating Loss | ($5,069,753) | ($7,553,193) | | Net Loss Attributable to Common Stockholders | ($281,730) | ($9,014,882) | | Diluted EPS | ($0.54) | ($6,234.36) | Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Cash Flow (Six Months Ended June 30) | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($8,644,106) | ($3,408,757) | | Net Cash (Used in) Provided by Investing Activities | ($313,041) | $36,504 | | Net Cash Provided by Financing Activities | $9,125,653 | $3,208,817 | [Note 1: Nature of Business, Policies, and Going Concern](index=12&type=section&id=Note%201%3A%20Nature%20of%20Business%2C%20Policies%2C%20and%20Going%20Concern) This note details the company's operating segments, recent reverse stock splits, and management's assessment of its going concern status - The company operates in three reportable segments: Video Solutions, Revenue Cycle Management, and Entertainment[24](index=24&type=chunk) - The company executed two reverse stock splits in May 2025: a **1-for-20 split** on May 6, and a **1-for-100 split** on May 22[25](index=25&type=chunk)[26](index=26&type=chunk) - The company acknowledges that substantial operating losses raise doubt about its ability to continue as a going concern, however, management believes its cost-cutting measures and recent equity offerings (raising **$14.3 million** in Feb 2025) mitigate this doubt, having improved working capital and stockholders' equity to positive balances as of June 30, 2025[63](index=63&type=chunk)[64](index=64&type=chunk)[69](index=69&type=chunk) [Note 4: Goodwill and Other Intangible Assets](index=21&type=section&id=Note%204%3A%20Goodwill%20and%20Other%20Intangible%20Assets) This note details the company's goodwill and intangible assets, including a significant impairment charge taken in late 2024 - As of June 30, 2025, the company held net goodwill and other intangible assets of **$9,972,472**, a decrease from **$10,654,325** at year-end 2024[72](index=72&type=chunk) - An interim impairment test as of September 30, 2024, resulted in a non-cash goodwill impairment charge of **$4.32 million** for the Revenue Cycle Management segment and **$307,000** for the Entertainment segment, driven by declines in service demand, economic uncertainty, and a decrease in stock price[78](index=78&type=chunk)[81](index=81&type=chunk) - No additional impairment was noted during the annual test as of December 31, 2024, or in the first two quarters of 2025[75](index=75&type=chunk) [Note 5: Debt Obligations](index=24&type=section&id=Note%205%3A%20Debt%20Obligations) This note outlines the company's debt structure and significant reductions achieved through public offering proceeds Debt Obligations Summary | Debt Obligations | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Debt Obligations | $742,805 | $5,102,526 | | Current Maturities | $603,476 | $4,961,443 | | Long-Term Debt | $139,329 | $141,083 | - The company significantly reduced its debt, paying off **$3.6 million** in Senior Secured Promissory Notes in full on February 13, 2025, using proceeds from its public equity offering[100](index=100&type=chunk) - In February 2025, the Entertainment Segment entered into a new **$600,000** unsecured promissory note[88](index=88&type=chunk) [Note 9: Commitments and Contingencies](index=29&type=section&id=Note%209%3A%20Commitments%20and%20Contingencies) This note details Nasdaq listing compliance issues and the status of significant legal proceedings - The company received multiple notifications from Nasdaq regarding non-compliance with listing rules, including the Minimum Bid Price Requirement, the Stockholders' Equity Requirement, and the Low Priced Stocks Rule[120](index=120&type=chunk)[121](index=121&type=chunk)[125](index=125&type=chunk) - On May 1, 2025, a Nasdaq Hearings Panel granted the company's request for continued listing, subject to meeting certain conditions by specific dates, and management believes it has regained compliance with the key requirements as of June 30, 2025[127](index=127&type=chunk) - In the Culp McAuley lawsuit, the court entered a judgment in favor of the Company for approximately **$4.0 million** against Culp McAuley and two individuals, though the company is uncertain about the amount it will ultimately recover[114](index=114&type=chunk) [Note 12: Stockholders' Equity](index=40&type=section&id=Note%2012%3A%20Stockholders%27%20Equity) This note details the significant increase in stockholders' equity primarily due to a public equity offering in February 2025 - On February 13, 2025, the company completed an underwritten public offering of units and pre-funded units, raising aggregate net proceeds of approximately **$14.3 million**[150](index=150&type=chunk)[156](index=156&type=chunk) - The proceeds were used for working capital, to repay a short-term merchant advance, and to pay off the **$3.6 million** senior secured promissory notes issued in November 2024[152](index=152&type=chunk) [Note 13: Related Party Transactions](index=42&type=section&id=Note%2013%3A%20Related%20Party%20Transactions) This note outlines modifications to a related-party note payable and repayment of loans from the CEO - A related-party note payable to a trust associated with an officer of TicketSmarter was modified multiple times in 2025, with these modifications, including principal reduction and interest elimination, ultimately treated as deemed capital contributions totaling **$1,871,994**, rather than gains on debt extinguishment[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk) - The company's CEO provided loans totaling **$140,000** in late 2024, which were paid off in full during the first six months of 2025[172](index=172&type=chunk) [Note 17: Operating Segments](index=45&type=section&id=Note%2017%3A%20Operating%20Segments) This note presents detailed financial performance data for the company's Video Solutions, Revenue Cycle Management, and Entertainment operating segments Segment Performance (Three Months Ended June 30, 2025) | Segment Performance (Three Months Ended June 30, 2025) | Net Revenues | Operating Income (Loss) | | :--- | :--- | :--- | | Video Solutions | $1,340,672 | ($172,646) | | Revenue Cycle Management | $1,432,294 | $114,281 | | Entertainment | $2,859,073 | ($2,567,886) | | Corporate | N/A | ($1,468,822) | | **Total** | **$5,632,039** | **($4,095,073)** | Segment Performance (Six Months Ended June 30, 2025) | Segment Performance (Six Months Ended June 30, 2025) | Net Revenues | Operating Income (Loss) | | :--- | :--- | :--- | | Video Solutions | $2,262,954 | ($5,365) | | Revenue Cycle Management | $2,782,845 | $121,651 | | Entertainment | $5,061,504 | ($2,872,465) | | Corporate | N/A | ($2,313,574) | | **Total** | **$10,107,303** | **($5,069,753)** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=50&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses operational and financial events, highlighting improved liquidity from a public offering, reduced SG&A, and a lower net loss despite gross profit declines from the Entertainment segment [Results of Operations - Comparison of Three Months Ended June 30, 2025 and 2024](index=53&type=section&id=Results%20of%20Operations%20-%20Comparison%20of%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section analyzes the company's financial performance for the three months ended June 30, 2025, compared to the prior year - Total revenue was flat at **~$5.6 million**, with Video Solutions product revenue falling **29.4%** due to competition and inventory shortages, while Entertainment product revenue grew **9.7%** driven by the Country Stampede music festival[217](index=217&type=chunk)[223](index=223&type=chunk) - Gross profit swung from a **$242k profit** in Q2 2024 to a **($633k) loss** in Q2 2025, primarily caused by the Entertainment segment's gross loss widening significantly to **($1.55 million)**, largely due to negative margins from the 2025 Country Stampede Music Festival[233](index=233&type=chunk) - Selling, General and Administrative (SG&A) expenses decreased by **17%** to **$3.5 million** from **$4.2 million**, reflecting significant cost-cutting in R&D and selling/advertising[234](index=234&type=chunk) - Net loss attributable to common stockholders improved to **($4.5 million)** from **($5.1 million)**, mainly due to a non-cash gain of **$857k** from the change in fair value of warrant derivative liabilities[249](index=249&type=chunk)[257](index=257&type=chunk) [Results of Operations - Comparison of Six Months Ended June 30, 2025 and 2024](index=64&type=section&id=Results%20of%20Operations%20-%20Comparison%20of%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section analyzes the company's financial performance for the six months ended June 30, 2025, compared to the prior year - Total revenue decreased **9.3%** to **$10.1 million** from **$11.1 million**, driven by a **63.3%** drop in Video Solutions product revenue[262](index=262&type=chunk)[264](index=264&type=chunk) - Gross profit decreased to **$0.97 million** from **$1.76 million**, with the Entertainment segment's gross loss widening from **($155k)** to **($974k)**[273](index=273&type=chunk) - Operating loss improved by **32.9%** to **($5.1 million)** from **($7.6 million)**, a direct result of a **35% ($3.3 million)** reduction in SG&A expenses from company-wide right-sizing efforts[274](index=274&type=chunk)[277](index=277&type=chunk) - Net loss attributable to common stockholders improved dramatically to **($282k)** from **($9.0 million)**, primarily due to a **$3.4 million** non-cash gain on warrant derivative liabilities and a **$2.2 million** gain on extinguishment of liabilities[282](index=282&type=chunk)[283](index=283&type=chunk)[292](index=292&type=chunk) [Liquidity and Capital Resources](index=72&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, operating cash flows, and significant capital raising activities - Cash and cash equivalents increased to **$622,820** at June 30, 2025, from **$454,314** at year-end 2024[295](index=295&type=chunk) - Net cash used in operating activities was **$8.6 million** for the six-month period, a significant increase from **$3.4 million** in the prior year, mainly due to repayment of accounts payable[299](index=299&type=chunk) - Financing activities provided **$9.1 million** in cash, primarily from the February 2025 public equity offering which raised **$14.3 million** in net proceeds, with these funds used to repay debt and fund operations[299](index=299&type=chunk) - The company's recurring losses and accumulated deficit raise substantial doubt about its ability to continue as a going concern[294](index=294&type=chunk) [Critical Accounting Estimates](index=75&type=section&id=Critical%20Accounting%20Estimates) This section identifies key accounting estimates requiring significant management judgment, including goodwill impairment and warrant derivative valuations - Management identifies several critical accounting estimates, including Revenue Recognition, Allowance for Excess and Obsolete Inventory, Goodwill and other intangible assets, Warranty Reserves, Fair value of assets and liabilities acquired in business combinations, Fair value of warrant derivative liabilities, Stock-based Compensation Expense, and Accounting for Income Taxes[308](index=308&type=chunk) - Goodwill impairment testing requires significant judgment regarding future cash flows and discount rates, with an interim test in Q3 2024 leading to a significant impairment charge[329](index=329&type=chunk)[332](index=332&type=chunk) - Warrant derivative liabilities are accounted for at fair value using the Black-Scholes model, which includes subjective inputs that can materially affect fair value estimates and result in non-cash gains or losses[334](index=334&type=chunk)[335](index=335&type=chunk) - The company maintains a full valuation allowance against its deferred tax assets due to a history of operating losses, meaning it is not recognizing any potential future tax benefits from its losses[337](index=337&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=80&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) As a smaller reporting company, the company is not required to provide disclosures on market risk - Not Applicable[341](index=341&type=chunk) [Item 4. Controls and Procedures](index=80&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and procedures were ineffective as of June 30, 2025, with a remediation plan currently in progress - The CEO and CFO have concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025[342](index=342&type=chunk) - A remediation plan is in progress, involving a full review of internal controls, hiring additional personnel, and establishing more robust processes[343](index=343&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=81&type=section&id=Item%201.%20Legal%20Proceedings.) The company refers to Note 9 for legal proceedings and does not expect current claims to materially affect its financial condition - Information regarding legal proceedings is incorporated by reference from Note 9 – Commitments and Contingencies[346](index=346&type=chunk) - Management does not expect pending lawsuits to have a material adverse effect on the company's operations, financial condition, or cash flows[347](index=347&type=chunk) [Item 1A. Risk Factors](index=81&type=section&id=Item%201A.%20Risk%20Factors.) As a smaller reporting company, the company is not required to provide information on risk factors - As a smaller reporting company, the company is not required to provide the information required by this Item[348](index=348&type=chunk)

Core Insights - Digital Ally, Inc. has signed a Master Distribution Agreement with Redwood Scientific Technologies, granting exclusive global rights to distribute Redwood's nicotine cessation products, including TBX-Free and TBX Vape-Free [1][2] - The TBX Vape-Free product is designed to help users overcome vape-related nicotine dependency and is expected to be the first of its kind in the market [2][4] - Digital Ally aims to launch the product following the successful completion of Redwood's final-stage clinical trial, with preparations for full-scale distribution already underway [6] Product Overview - Redwood's product suite includes TBX-Free, an oral thin-film strip aimed at helping cigarette smokers overcome nicotine addiction, utilizing natural active ingredients [3] - TBX Vape-Free is a first-to-market oral thin-film strip specifically developed for vape users, filling a critical gap in addiction treatment [4] Market Context - According to the CDC, approximately 11.6% of U.S. adults are current cigarette smokers, equating to about 28.8 million individuals, while 4.5% of adults aged 18 and over report current e-cigarette use [5] - Cigarette smoking is the leading cause of preventable disease and death in the U.S., responsible for over 480,000 deaths annually [5]

Core Insights - Digital Ally, Inc. has made significant progress in reducing its backlog and securing high-value contracts, indicating operational improvements and strong market demand for its products [1][3]. Group 1: Backlog Reduction - The company has successfully reduced its backlog to $1.7 million from $2.2 million at the end of Q1 2025, reflecting its commitment to optimizing processes [2]. - Digital Ally aims to continue reducing its backlog while enhancing operational efficiency to ensure faster turnaround times and improved customer satisfaction [4]. Group 2: Contract Acquisition - Recently, Digital Ally finalized at least seven notable contracts expected to generate revenues exceeding $800,000, reinforcing its industry leadership [3]. - The contracts highlight the growing demand for the company's advanced video surveillance technology across various sectors [3]. Group 3: Operational Focus - The company is focused on streamlining production and enhancing operational efficiency to better serve clients and strengthen its market presence [5]. - Digital Ally is dedicated to advancing its portfolio of innovative safety solutions and driving sustainable growth [5].

Financial Data and Key Metrics Changes - Year-over-year revenues decreased by over $1 million or 19% for the first quarter of 2025 compared to the first quarter of 2024 [10] - Despite the revenue decline, gross margin dollars improved by $78,000 to 5%, and overall gross margin percentage increased to 36% from 28% year-over-year [13] - Operating loss improved to almost $1 million from $3.6 million in the prior year, representing a 73% improvement [16] - Net income for the first quarter of 2025 was $4.2 million or $1.41 per share, a turnaround of over $8 million from a loss of $3.9 million in 2024 [17] Business Line Data and Key Metrics Changes - Video product sales were down significantly year-over-year, but service revenue increased, indicating a positive trend [11] - The entertainment segment saw a decrease in revenues due to shedding uneconomical sponsorships, but profits improved [12] - The Custom 440 event production group has not had any events in 2025 yet, with the first event scheduled for June 29 [12] Market Data and Key Metrics Changes - The company reported a backlog of over $2 million, which is expected to be fulfilled in the upcoming quarters [11] - Deferred revenue remains strong at over $10 million, indicating growth potential in the subscription model [30] Company Strategy and Development Direction - The company is focused on core businesses and aims to rebuild its legacy, particularly in video solutions and customer entertainment [4][5] - Plans to explore new products and patents are in place, with announcements expected in the coming quarters [31] - The company is working on regaining compliance with NASDAQ, having improved its equity position significantly [23][24] Management's Comments on Operating Environment and Future Outlook - Management described the first quarter of 2025 as a watershed moment, marking a shift from previous challenges [9] - There is optimism about the future, with expectations for improved revenue figures in the second quarter due to upcoming events [12][18] - The company is excited about securing headliners for future events, which is expected to enhance cash flow and growth [33] Other Important Information - The company successfully completed a $14 million public offering, which significantly improved its liquidity and balance sheet [19][20] - Accounts payable were reduced by $6.7 million during the quarter, contributing to a positive working capital position [20] - The company executed two reverse stock splits to regain compliance with NASDAQ, which was deemed necessary to avoid delisting [26][27] Q&A Session Summary Question: What are the expectations for future revenue growth? - Management expressed optimism about the second quarter revenue figures turning around due to upcoming events and a strong backlog [12][18] Question: How is the company addressing NASDAQ compliance issues? - The company has improved its equity position and is working on meeting the minimum bid price requirement for NASDAQ compliance [23][24][25] Question: What is the outlook for new product developments? - Management indicated that new products and patents will be announced in the coming quarters, with positive market reception anticipated [31]

Financial Data and Key Metrics Changes - Year-over-year revenues decreased by over $1 million or 19% in Q1 2025 compared to Q1 2024, primarily due to a significant drop in video product sales [11][12] - Despite the revenue decline, gross margin dollars improved by $78,000 to 5%, with overall gross margin percentage increasing to 36% from 28% year-over-year [14] - Operating loss improved to nearly $1 million from $3.6 million in the prior year, marking a 73% improvement [17] - Net income for Q1 2025 was $4.2 million or $1.41 per share, a turnaround of over $8 million from a loss of $3.9 million in 2024 [18][19] - Cash on the balance sheet increased to $3.8 million from $400,000 at the end of 2024, with working capital turning positive at $3.4 million [20][21] Business Line Data and Key Metrics Changes - Video product sales saw a significant decline year-over-year, but service revenue increased, indicating a positive trend in service offerings [12] - The entertainment segment's revenues decreased, but profits increased due to the refocusing of TicketSmarter to eliminate uneconomical sponsorships [13] - The Custom 440 event production group has not held any events in 2025 yet, with the first event scheduled for June 29, which is expected to positively impact second-quarter revenues [13][14] Market Data and Key Metrics Changes - The company has a backlog of over $2 million, which is expected to be fulfilled in the upcoming quarters, positively affecting future revenue figures [12][30] - Deferred revenue remains strong at over $10 million, indicating a healthy subscription model that is growing [31] Company Strategy and Development Direction - The company is focused on core businesses and aims to rebuild its legacy, particularly in video solutions and customer entertainment [5][6] - Plans to explore new products and patents are in place, with announcements expected in the coming quarters [32] - The company is working on regaining compliance with NASDAQ, having addressed previous noncompliance issues related to equity and share price [24][26] Management's Comments on Operating Environment and Future Outlook - Management views Q1 2025 as a watershed moment, indicating a significant turnaround and a focus on operational improvements [19] - There is optimism about the future, with expectations of growth in both the legal solutions and entertainment sectors [32][36] - The company is excited about upcoming events and partnerships, which are anticipated to enhance cash flow and market presence [34][36] Other Important Information - The company executed two reverse stock splits to regain compliance with NASDAQ, which was deemed necessary to avoid delisting [27][28] - The total common shares outstanding are now 1,668,735, with a market capitalization of over $7 million [29] Q&A Session Summary Question: What are the company's plans for future growth? - The company is focusing on fulfilling back orders and leveraging its deferred revenue from the subscription model, which remains attractive and is expected to grow [30][31] Question: How is the company addressing NASDAQ compliance? - The company has resolved previous noncompliance issues and is currently working on meeting the $1 minimum bid price requirement [24][26] Question: What is the outlook for the entertainment segment? - The company anticipates significant growth in the entertainment segment, with plans for multiple events in 2026 and a clear path for development [34][36]