Digital Ally - 10-K annual report

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form10-K

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2025

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

KUSTOM ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (913) 814-7774

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

Securities registered pursuant to Section 12(g) of the Exchange Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 the Exchange Act.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of June 30, 2025, the aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant’s most recently completed second fiscal quarter, computed by reference to the closing price ($7.14)was: $4,111,262.

The number of shares of the registrant’s common stock issued and outstanding as of April 10, 2026, was 2,633,063shares.

Documents Incorporated by Reference: None.

FORM 10-K

KUSTOM ENTERTAINMENT, INC.

DECEMBER 31, 2025

Table of Contents

Part I

References to “Kustom Entertainment,” the “Company,” “we,” “us” and “our” refer to Kustom Entertainment, Inc.

Overview

We were incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc. From that date until November 30, 2004, when we entered into a Plan of Merger with Digital Ally, Inc., a Nevada corporation formerly known as Trophy Tech Corporation (the “Predecessor Registrant”), we had not conducted any operations and were a closely held company. In conjunction with the merger, we were renamed Digital Ally, Inc.

On January 2, 2008, our common stock commenced trading on the Nasdaq Capital Market. We conduct our business from 6366 College Blvd., Overland Park, Kansas 66211. Our telephone number is (913) 814-7774. Our website address is www.digitalallyinc.com. The contents of, or information accessible through, our website are not part of this Annual Report on Form 10-K. We make our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, as well as beneficial ownership filings available free of charge on our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the SEC. Our filings with the SEC are available to the public through the SEC’s website at www.sec.gov.

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.

For the purposes of this Annual Report on Form 10-K, unless the context otherwise requires, (i) the term “our,” or “us” refers to the Predecessor Registrant and its subsidiaries with respect to the period prior to the Effective Time and to the Registrant and its subsidiaries with respect to the period on and after the Effective Time; (ii) as of any period prior to the Effective Time, references to the “directors” mean the directors of the Predecessor Registrant, and, as of any period at and after the Effective Time, the directors of the Registrant, (iii) as of any period prior to the Effective Time, references to “stockholders” mean the holders of Predecessor Common Stock, and, as of any period at and after the Effective Time, the holders of Registrant Common Stock, and (iv) as of any period prior to the Effective Time, references to “Common Stock” means the Predecessor Common Stock, and, as of any period at and after the Effective Time, Registrant Common Stock.

On January 8, 2026, the Company amended its Articles of Incorporation to change its corporate name from Digital Ally, Inc. to Kustom Entertainment, Inc. The Company’s common stock continues to trade on the Nasdaq Capital Market under the symbol “KUST.” This change in corporate name did not affect the Company’s legal structure, subsidiaries, assets, liabilities, or obligations.

The business of Kustom Entertainment, Inc. (together with its wholly owned subsidiaries, including Digital Ally International, Inc., Shield Products, LLC, Digital Ally Healthcare, LLC, TicketSmarter, Inc., Worldwide Reinsurance, Ltd., Digital Connect, Inc., BirdVu Jets, Inc., Kustom 440 and Kustom, collectively, the “Company”) is conducted through two reportable operating segments: (1) the video solutions segment (the “Video Solutions Segment”) and (2) the entertainment segment (the “Entertainment Segment”). The Video Solutions Segment represents the Company’s legacy operations and includes the development, manufacture and sale of digital video imaging and storage products, disinfectant and related safety products for use in law enforcement, security and commercial applications. Revenues are derived from a combination of product sales and recurring service revenues, including subscription-based cloud storage and extended warranty offerings. The Entertainment Segment operates a secondary ticketing platform through TicketSmarter.com, acting as an intermediary between ticket buyers and sellers. The Company also acquires tickets from primary sellers for resale through various distribution platforms. In addition, this segment includes live event production and promotion activities, including the Country Stampede music festival and other entertainment events. The Company previously reported a Revenue Cycle Management Segment, which primarily reflected the operations of Nobility Healthcare, LLC (“Nobility Healthcare”). Following the sale of Nobility Healthcare on January 8, 2026, the results of this business have been classified as discontinued operations, and the segment is no longer reported. Accounting guidance on segment reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected financial information for those segments to be presented. The following table sets forth the Company’s total revenue and revenue derived from each reportable operating segment:

Additional information regarding each reportable operating segment is also included in Note 22, Operating Segments of “Notes to Consolidated Financial Statements”.

Video Solutions Operating Segment

Within our Video Solutions Segment, we supply technology-based products utilizing our portable digital video and audio recording capabilities for the law enforcement and security industries and for the commercial fleet and mass transit markets. We have the ability to integrate electronic, radio, computer, mechanical, and multi-media technologies to create positive solutions to our customers’ requests. Our products include: the EVO-HD, DVM-800 and DVM-800 Lite, which are in-car digital video systems for law enforcement and commercial markets; the FirstVu body-worn camera line, consisting of the FirstVu Pro, FirstVu II, and the FirstVu HD; our patented and revolutionary VuLink product, which integrates our body-worn cameras with our in-car systems by providing hands-free automatic activation for both law enforcement and commercial markets; EVO Web Portal, which is our cloud-based evidence management system for the law enforcement market; the EVO Fleet, FLT-250, DVM-250, and DVM-250 Plus, which are our commercial line of digital video products that serve as “event recorders” for the commercial fleet and mass transit markets; and FleetVu, which is our cloud-based evidence management system for commercial fleets.

Revenue from our Video Solutions Segment is derived from the sale of video recording products and related services to law enforcement and commercial customers, as well as from the sale of our Shield™ disinfectant and personal protective equipment products. This segment generates revenues through 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.

Entertainment Operating Segment

We provide live entertainment and events ticketing services through our wholly owned subsidiary, TicketSmarter, Inc. (“TicketSmarter”), which was formed through the completed acquisitions of Goody Tickets, LLC and TicketSmarter, LLC on September 1, 2021. Through its online marketplace, TicketSmarter.com, TicketSmarter offers ticket sales, resale, and partnership services for over 125,000 live events nationwide, spanning concerts, sporting events, theatre, and performing arts.

Our Entertainment Segment encompasses all services provided through TicketSmarter and TicketSmarter.com. Entertainment Segment revenues include ticketing service charges, generally calculated as a percentage of the face value of the underlying ticket, as well as ticket sales from Company-held inventory, both of which are recognized upon the sale of the underlying tickets. Direct expenses include the cost of tickets purchased for resale and held as inventory, credit card fees, ticketing platform expenses, website maintenance, and other administrative costs.

Revenue Cycle Management Segment (Discontinued Operations)

The Company entered the revenue cycle management business (the “Revenue Cycle Management Segment”) in the second quarter of 2021 through the formation of its wholly owned subsidiary, Digital Ally Healthcare, Inc. (“Digital Ally Healthcare”), and its majority-owned subsidiary, Nobility Healthcare. Through this segment, the Company provided end-to-end revenue cycle management services to medical providers throughout the United States, focusing on claim reimbursement billing, insurance and benefits verification, medical treatment documentation and coding, and collection services.

Nobility Healthcare completed its first acquisition on June 30, 2021, when it acquired a private medical billing company, and subsequently completed additional acquisitions of private medical billing companies. The segment served a diverse customer base across multiple medical specialties, including radiology, oncology, orthopedics, pediatrics, internal medicine and cardiology.

The Revenue Cycle Management Segment operated in a highly competitive environment. Competition included internal revenue cycle management departments within healthcare organizations, as certain providers elected to make internal investments to perform these services in-house. The segment also faced competition from other revenue cycle management providers offering similar services, including software vendors, traditional consulting firms and information technology-based service providers. The Revenue Cycle Management Segment’s ability to compete effectively primarily depends on trade secrets and operational know-how and did not depend heavily on proprietary technology or patents.

On January 8, 2026, the Company completed the sale of Nobility Healthcare. As a result, the operations of the Revenue Cycle Management Segment have been classified as discontinued operations in the Company’s consolidated financial statements for all periods presented.

Refer to Note 22 – Operating Segments and Note 23 – Discontinued Operations in the Notes to Consolidated Financial Statements for additional information regarding the Company’s segments and discontinued operations, including net sales, operating earnings and total assets by segment.

In-Car Digital Video Mirror System for Law Enforcement – EVO-HD, DVM-800 and DVM-800 Lite

In-car video systems for patrol cars are a necessity and have generally become standard. Current systems are primarily digital based systems with cameras mounted on the windshield and the recording device generally in the trunk, headliner, dashboard, console or under the seat of the vehicle.

The Company launched its in-car digital video platform under the name EVO-HD during the second quarter of 2019. The EVO-HD is a revolutionary in-car system that delivers versatility and reliability for law enforcement.

With built-in, patented auto-activation technology, EVO-HD captures multiple recording angles in sync from a FirstVu PRO or FirstVu HD body-worn camera and up to four HD in-car cameras – all from a single trigger. The EVO-HD maximizes space and offers top-end reliability when paired with remote service capabilities. An internal cell modem will allow for connectivity to EVO Web Portal, powered by Amazon Web Services (“AWS”) and real time metadata when in the field.

The Company offers the DVM-800, a continuation in the family of highly successful digital video mirrored (DVM) systems developed by the Company. The DVM-800 is a time-tested, compact, powerful and easy-to-use solution designed for law enforcement. The DVM-800 system has built-in road and driver facing cameras and can record up to two external HD cameras. The DVM-800 is compatible with the patented VuLink® auto-activation technology and can be paired with a FirstVu HD body-worn camera.

The Company also offers the DVM-800 Lite, an entry level system that is a self-contained video recorder, microphone and digital storage system that is integrated into a rear-view mirror and is designed for law enforcement. The system can record up to two internal HD cameras.

In-Car Digital Video “Event Recorder” System – EVO Fleet, DVM-250 Plus and FLT-250 for Commercial Fleets

The Company provides commercial fleets and commercial fleet managers with digital video tools that they need to increase driver safety, track assets in real-time and minimize the company’s liability risk while enabling fleet managers to operate the fleet at an optimal level. We market a product designed to address these commercial fleet markets with our EVO Fleet, DVM-250 Plus and FLT-250 event recorders that provide various types of commercial fleets with features and capabilities that are fully customizable and consistent with their specific application and inherent risks.

The DVM-250 Plus is a part of the DVM family and is designed for commercial fleets featuring built-in digital audio and video recording technology and other features to provide commercial fleet managers unmatched driver and asset management – all while aiming to deliver the return on investment that matters most: the safety and security of drivers and passengers. The DVM-250 Plus is designed to capture events, such as wrecks and erratic driving or other abnormal occurrences, for evidentiary or training purposes. The commercial fleet markets may find our units attractive from both a feature and a cost perspective compared to other providers. Due to our marketing efforts, commercial fleets are beginning to adopt this technology, and in particular, the ambulance and taxi-cab markets.

The FLT-250 offers the same great features of the DVM-250 Plus in a new compact, non-mirrored form factor that allows for multiple mounting options in any vehicle type for commercial fleets. The non-mirror-based aspect of this product allowed the FLT-250 to become more attractive for our potential customers, as it is a much simpler plug and play option compared to mirror-based products.

In the fourth quarter of 2022, Digital Ally released the EVO Fleet, offering a full-featured solution utilizing the latest in telematics technology, including immediate driver-assist feedback by recognizing pedestrians, distracted or drowsy driving, and lane shifting. We believe that, due to the new technology, including the A.I. interface, live tracking capabilities, up to four streams of video, and video on command, this product will become a very prominent product in the market and for our current and potential customers.

The Company offers a suite of data management web-based tools to assist fleet managers in the organization, archival, and management of videos and telematics information. Within the suite, there are powerful mapping and reporting tools that are intended to optimize efficiency, serve as training tools for teams on safety, and, ultimately, generate a significant return on investment for the organization.

The EVO-HD has become the platform for a new family of in-car video solution products for the commercial markets. The innovative EVO-HD technology replaces the current in-car mirror-based systems with a miniaturized system that can be custom-mounted in the vehicle, while offering numerous hardware configurations to meet the varied needs and requirements of our commercial customers. In its commercial market application, the EVO-HD can support up to four HD cameras, with two cameras having pre-event and ECA capabilities to allow customers to review entire shifts. An internal cell modem will allow for connectivity to the FleetVu Manager cloud-based system for commercial fleet tracking and monitoring, which is powered by AWS and real time metadata when in the field.

Body-Worn Digital Video System – FirstVu Pro, FirstVu II, and FirstVu HD for Law Enforcement and Private Security

The Company launched two next generation body-worn cameras and docking stations, refreshing the Company’s complete ecosystem of evidence recording devices. The latest body worn camera launched by the Company is the FirstVu Pro, the Company’s flagship product in its family of next generation of technology. The light weight, one-piece unit captures full HD video and audio, while offering industry leading features such as live streaming, a full-color touchscreen display, an advanced image sensor with IR LEDs, proprietary image distortion reduction, IP67 rated resisting dust and wind and is water submersible for 30 minutes at a depth of 3 feet. It is also MIL-STD-810G compliant capable of handling drops, shock, and vibration, and will function flawlessly in a wide temperature range.

In addition to the FirstVu Pro, Digital Ally also added the FirstVu II to its family of next generation technology. The FirstVu II is a one-piece device offering industry leading technology such as an articulating camera head, a full-color display, an advanced image sensor, and GPS. It can be used in law enforcement, private and event security and commercial segments.

The Company still carries the FirstVu HD, the two-piece body-worn camera which allows for multiple mounting options while minimizing space and weight. It can be used in law enforcement, private and event security and commercial segments. This system is also a derivative of our in-car video systems but is much smaller and lighter and more rugged and water-resistant to handle a hostile outdoor environment. The FirstVu HD can be used in many applications in addition to law enforcement and private security and is designed specifically to be clipped to an individual’s pocket or other outer clothing. The unit is self-contained and requires no external battery or storage devices. Our FirstVu HD integrates with our in-car video systems through our patented VuLink system allowing for automatic activation of both systems.

With the newly introduced body-worn cameras, the company also introduced two new QuickVu docking stations (QuickVu 8 and QuickVu 24) compatible with the FirstVu PRO and FirstVu II body-worn cameras. The QuickVu docking stations provide a comprehensive and elegant solution for storing and charging body cameras while uploading video evidence to the cloud. QuickVu also allows for rapid reviewing of footage right from the interactive touchscreen display and is available in eight or twenty-four individual docking bays. For docking with the FirstVu HD body-worn cameras, the company offers a 12-bay docking station and Mini-Docks. The 12-bay docking station includes a 1TB local memory hard drive which simultaneously uploads 4 hours of video from 12 FirstVu HD cameras within a 15-minute shift change and push configuration updates. The Mini-Dock is a single unit, portable smart dock that uploads video evidence to VuVault from a FirstVu HD body camera.

Auto-activation and Interconnectivity Between In-car Video Systems and Body-worn Camera Products – VuLink for Law Enforcement

Recognizing a critical limitation in law enforcement camera technology, we pioneered the development of our VuLink ecosystem that provides intuitive auto-activation functionality as well as coordination between multiple recording devices. The United States Patent and Trademark Office (the “USPTO”) has recognized these pioneering efforts by granting us multiple patents with claims covering a variety of triggers, including emergency lights and sirens, extreme acceleration or braking, g-force or any 12-volt relay. Additionally, the awarded patent claims cover automatic coordination between multiple recording devices. Prior to our VuLink ecosystem, officers had to manually activate each device while responding to emergency scenarios, a requirement that both decreased the usefulness of the existing camera systems and diverted officers’ attention during critical moments.

EVO Web and FleetVu Manager

EVO Web is a web-based software, powered by and hosted on the AWS GovCloud platform, which enables police departments and security agencies to manage digital video evidence quickly and easily. EVO Web is capable of playing back, reviewing, downloading, archiving, unit configuration and management, running customizable reports and maintaining a chain of custody logs. AWS is the most secure cloud platform on the market with features that go beyond simply storing and reviewing video evidence. AWS GovCloud platform is trusted by the Department of Justice, Defense Digital Services for the US Air Force, U.S. Department of Treasury, and U.S. Department of Homeland Security. Our products that are compatible with EVO Web include: FirstVu Pro, FirstVu II, FirstVu HD, QuickVu, EVO-HD, DVM-800 and DVM-800 Lite.

FleetVu Manager is a web-based software that provides commercial fleet managers with tools to increase driver safety, track assets in real-time and minimize their companies’ liability risks. FleetVu Manager is able to generate driver reports, identify at risk behaviors before an incident takes place, and enable commercial fleet managers to manage the entire fleet through a single, easy to use platform. Our products compatible with FleetVu Manager include EVO Fleet, DVM-250 Plus and FLT-250.

Our Entertainment Operating Segment Products and Services

Through our entertainment operating segment, we provide customers with access to live event tickets via our online marketplace, TicketSmarter.com. With over 48 million tickets available across more than 125,000 live events, TicketSmarter operates as a national ticketing marketplace offering tickets for sports, concerts, and theatre events throughout the United States. TicketSmarter serves as the official ticket resale partner of more than 35 collegiate conferences, over 300 universities, and hundreds of events and venues nationwide.

Established in late 2022, Kustom 440 further supports our entertainment segment through the production and promotion of live music, sports, and private events at third-party venues across the country. Kustom 440 provides end-to-end event services, including artist booking, ticketing, staging, vendor sourcing, on-site operations, and day-of production management, for events ranging from small corporate gatherings to large-scale, multi-day stadium productions.

Revenues within our entertainment operating segment are derived primarily from service charges calculated as a percentage of the face value of tickets sold, as well as from the sale of tickets obtained through direct purchase or received in exchange for sponsorship and partnership arrangements with venues, events, and rights holders. Direct expenses include the cost of tickets purchased for resale and held as inventory, credit card fees, ticketing platform expenses, website maintenance fees, and other associated administrative costs.

Market and Industry Overview – Video Solutions Operating Segment

Our Video Solutions segment has historically focused on serving domestic and international law-enforcement agencies. Over time, we have expanded our market presence to include the commercial fleet and mass-transit industries and have also entered the event-security market, where we provide integrated hardware and software solutions that support private-security operations at large public gatherings, such as NASCAR races, football games, concerts, and other live events.We continue to broaden our focus to include private-security, homeland-security, mass-transit, healthcare, retail, education, consumer, and other commercial markets. Our products have been deployed in a variety of private security settings, including cruise-ship operations, demonstrating the versatility and adaptability of our technology. Our EVO Fleet, DVM-250 Plus, and FLT-250 video systems, along with our FleetVu Manager platform, continue to gain traction within the commercial-fleet and ambulance-service markets. In addition, our body-worn camera solutions are used across law-enforcement, private-security, and event-security applications. Through the acquisitions completed in 2021 and 2022, we plan to leverage our expanded relationships within live-event, stadium, arena, and medical markets to further strengthen our presence and expand our revenue opportunities.

Market and Industry Overview – Entertainment Operating Segment

Our Entertainment Segment refers to the sale of event tickets primarily through our online and mobile platforms. We will buy inventory of event tickets to then sell tickets through various platforms, including our own. Our resale services refer to the sale of tickets by a holder, who originally obtained the tickets directly from a venue or entity, through our platform in which we then collect services fees on the transaction. This is commonly referred to as secondary ticketing. We work directly with consumers looking to buy or sell event tickets for particular shows, concerts, games, and other events, allowing a simple and effective platform to move tickets. 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.

Competition - Video Solutions Operating Segment

Our Video Solutions Segment, consisting of law enforcement and security surveillance markets, is extremely competitive. Competitive factors in these industries include ease of use, quality, portability, versatility, reliability, accuracy and cost. There are direct competitors with technology and products in the law enforcement and surveillance markets for all of our products, including those that are in development. Many of these competitors have significant advantages over us, including greater financial, technical, marketing and manufacturing resources, more extensive distribution channels, larger customer bases and faster response times to adapt new or emerging technologies and changes in customer requirements. Our primary competitors in the in-car video systems market include L-3 Mobile-Vision, Inc., Coban Technologies, Inc., Enforcement Video, LLC d/b/a WatchGuard Video (“WatchGuard”), Kustom Signals, Panasonic System Communications Company, International Police Technologies, Inc. and a number of other competitors who sell, or may in the future sell, in-car video systems to law enforcement agencies. Our primary competitors in the body-worn camera market include Axon Enterprises, Inc. (“Axon”), Reveal Media, WatchGuard, and VieVU, Inc., which was acquired by Axon in 2018. We face similar and intense competitive factors for our event recorders in the commercial fleet and private security markets as we do in the law enforcement and security surveillance markets. There can be no assurance that we will be able to compete successfully in these markets. Further, there can be no assurance that new and existing companies will not enter the law enforcement and security surveillance markets in the future. The commercial fleet security and surveillance markets likewise are also very competitive. There are direct competitors for our FLT-250 and DVM-250 Plus “event recorders,” which may have greater financial, technical marketing, and manufacturing resources than we do. Our primary competitors in the commercial fleet sector include Lytx, Inc. (previously DriveCam, Inc.), Samsara and SmartDrive Systems, among others.

Competition – Entertainment Operating Segment

Our Entertainment Segment operates in a highly competitive market across multiple service lines. The continued growth of online and mobile ticketing has lowered barriers to entry, enabling an increasing number of technology-based companies to offer ticketing services and marketplace platforms. Our ticketing operations compete with numerous established online and mobile platforms serving a broad range of live event categories, many of which have greater name recognition, larger customer bases, and more substantial financial and marketing resources than we currently possess.

The expansion of the digital ticketing market has enabled resale marketplaces to reach significantly larger audiences while offering consumers greater convenience and selection. We seek to differentiate our platform through strategic partnerships and sponsorships with collegiate conferences, universities, venues, and events throughout the United States, with the objective of establishing TicketSmarter as a preferred destination for live event ticket purchases.

The event production operations conducted through Kustom 440 face competition from a broad spectrum of producers and promoters, ranging from independent and regional festival production companies to large-scale national concert production firms and established venue operators. There can be no assurance that we will be able to compete successfully against current or future competitors in either of these service areas.

Intellectual Property – Video Solutions Operating Segment

Our Video Solutions Segment’s ability to compete effectively will depend on our success in protecting our proprietary technology, both in the United States and abroad. We have filed for patent protection in the United States and certain other countries to cover certain design aspects of our products.

Some of our patent applications are still under review by the USPTO and, therefore, we have not yet been issued all the patents that we applied for in the United States. We were issued several patents in recent years, including a patent on our VuLink product that provides automatic triggering of our body-worn camera and our in-car video systems. No assurance can be given which, or any, of the patents relating to our existing technology will be issued from the United States or any foreign patent offices. Additionally, no assurance can be given that we will receive any patents in the future based on our continued development of our technology, or that our patent protection within and/or outside of the United States will be sufficient to deter others, legally or otherwise, from developing or marketing competitive products utilizing our technologies.

We have entered into supply and distribution agreements with several companies that produce certain of our products, including our FirstVu Pro & FirstVu II body cameras, QuickVu docking stations, EVO Fleet, DVM-250 and DVM-800 products. These supply and distribution agreements contain certain confidentiality provisions that protect our proprietary technology, as well as those of the third-party manufacturers.

In addition to seeking patent protection, we rely on trade secrets, know-how and continuing technological advancement to seek to achieve and thereafter maintain a competitive advantage. Although we have entered into or intend to enter into confidentiality and invention agreements with our employees, consultants and advisors, no assurance can be given that such agreements will be honored or that we will be able to effectively protect our rights to our unpatented trade secrets and know-how. Moreover, no assurance can be given that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and know-how.

Intellectual Property – Entertainment Operating Segment

Our Entertainment Segment’s ability to compete effectively primarily depends on our trade secrets and know-how and does not depend heavily on any proprietary technology or patents.

Human Capital

As of December 31, 2025, Kustom Entertainment, Inc, and its subsidiaries, had approximately 30 full-time employees spread throughout the country, representing the core values and objectives of the Company. These employees are spread amongst our operating segments as follows:

Our employees are our most important assets, and they set the foundation for our ability to achieve our strategic objectives. All of our employees contribute to Kustom Entertainment’s success and, in particular, the employees in our manufacturing, sales, research and development, and quality assurance departments are instrumental in driving operational execution and strong financial performance, advancing innovation and maintaining a strong quality and compliance program.

Our employees are not covered by any collective bargaining agreement, and we have never experienced a work stoppage. We strive to create a culture and work environment that enables us to attract, train, promote, and retain a diverse group of talented employees who together can help us gain a competitive advantage. Our key programs and initiatives that are focused on attracting, developing and retaining our diverse workforce include:

SOURCES AND AVAILABILITY OF RAW MATERIAL

The Company purchases its raw materials from multiple suppliers and maintains a minimum of two suppliers for most of its material requirements. The largest supplier in the fiscal years ended December 31, 2025 and 2024 represented less than 5% of total purchases. Due to a diminishing number of sources for certain components and packaging materials, combined with rising prices for semiconductors and other key components, the Company has been obligated to pay higher prices, resulting in increased costs of goods sold. Additionally, recently enacted or proposed tariffs on imported goods, including components and raw materials sourced from foreign suppliers, have introduced further pricing uncertainty and may continue to exert upward pressure on the Company’s cost of goods sold. The Company continues to monitor developments in trade policy and evaluate opportunities to mitigate the impact of tariffs through supplier diversification, alternative sourcing arrangements, and other cost management strategies. There can be no assurance, however, that such measures will fully offset the financial impact of tariff-related cost increases.

Recent Developments

Non-Binding Memorandum of Understanding for Potential Divestiture - On January 22, 2026, the Company entered into a non-binding Memorandum of Understanding (“MOU”) with Cycurion, Inc. (“Cycurion”) regarding the contemplated divestiture of the Company’s Video Solutions Segment. The MOU outlines the parties’ intent to pursue a transaction pursuant to which Cycurion acquires the Video Solutions business for consideration expected to range between approximately $6.0 million and $8.5 million, consisting of a combination of cash and preferred equity of Cycurion. The MOU is non-binding and subject to the negotiation and execution of definitive agreements, the completion of due diligence, receipt of any required approvals, and satisfaction of customary closing conditions. There can be no assurance that a definitive agreement will be entered into or that the contemplated transaction will be completed on the terms described, or at all. Accordingly, the potential transaction is not reflected in the Company’s consolidated financial statements as of December 31, 2025.

Sale of Revenue Cycle Management Business Segment - On January 8, 2026, Digital Ally Healthcare (the “Seller”) entered into and closed a Unit Purchase Agreement with Nobility LLC, (the “Buyer”), and Nobility Healthcare,

Pursuant to the Agreement, the Buyer purchased all of the Seller’s units of ownership interest in Nobility Healthcare, for Closing Funds (as defined in the Agreement) and a promissory note, totaling $1,450,000, due upon closing. The Note issued by the Buyer at closing is in the principal amount of $1,140,499 to the Seller. Nobility Healthcare has historically issued a total of one hundred thousand (100,000) Units with Seller owning fifty-one thousand (51,000) of such Units. The Buyer is an affiliate of the owner of the remaining forty-nine thousand (49,000) Units. The Closing Funds are equal to the sum of (i) $100,000 in immediately available funds to be paid to the Seller at closing and (ii) certain credits totaling $209,501, which closing credits consist of (a) $200,000, the total of two advances made by the Buyer to the Seller on December 18, 2024 and January 15, 2025 and (b) $9,501 due to the Buyer from Nobility Healthcare for net working capital advances paid to the Buyer upon signing. The effective date of the Agreement was January 1, 2026. The Parties made customary representations, warranties and covenants in the Agreement. There is no material relationship between the Company or its affiliates and any of the other Parties to the Agreement, other than in connection with Nobility Healthcare.

Not applicable.

None.

Risk management and strategy

Governance

Our management and the board of directors (the “Board”) recognize the critical importance of maintaining the trust and confidence of our business partners and employees, including the importance of managing cybersecurity risks as part of our larger risk management program. While all of our personnel play a part in managing cybersecurity risks, one of the key functions of our Board is informed oversight of our risk management process, including risks from cybersecurity threats. Our Board is responsible for monitoring and assessing strategic risk exposure, and our executive officers are responsible for the day-to-day management of the material risks that we face. In general, we seek to address cybersecurity risks through a cross-functional approach that is focused on preserving the confidentiality, integrity, and availability of the information that we collect and store by identifying, preventing, and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur.

On April 30, 2021, the Company closed on the purchase and sale agreement to acquire a 71,361 square feet commercial office building located in Lenexa, Kansas which is intended to serve as the Company’s future office and warehouse needs for executive offices and for management and warehouse operations for the video solutions operating segment. The building contains approximately 30,000 square feet of office space and the remainder warehouse space. The total purchase price was approximately $5.3 million. The Company funded the purchase price with cash on hand, without the addition of external debt or other financing.

On October 26, 2023, the Company entered into a Loan and Security Agreement (the “Kompass Loan Agreement”) by and between the Company, Digital Ally Healthcare, and Kompass Kapital Funding, LLC, a Kansas limited liability company (“Kompass”). In connection with the Kompass Loan Agreement, on October 26, 2023, the Company entered into a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing by and between the Company, as grantor, and Kompass, as grantee, and mortgaged its real property having an address of 14001 Marshall Drive, Lenexa, KS 66215.

During the year ended December 31, 2024, the Company sold its building for $5,900,000 less closing costs of $36,634. The carrying amount of the building on the date of sale was $5,461,623. As a result of the sale the Company recorded a gain of $401,743 in the Consolidated Statement of Operations during the year ended December 31, 2024. As part of the sale agreement the Company leased the space back for a period of 6 months ending February 12, 2025. The Company is searching for suitable facilities for its long-term needs.

On October 16, 2024, the Company entered into an operating lease with a third party for office space used by the Video Solutions Segment and temporarily by the Entertainment Segment. The lease provides for 36 monthly payments of $7,251.92 and matures on October 31, 2027. As of December 31, 2025, the remaining lease term was approximately twenty-two months.

On September 1, 2021, the Company completed the acquisition of Goody Tickets, LLC and TicketSmarter, LLC through TicketSmarter. Upon completion of this acquisition, the Company became responsible for the operating lease for TicketSmarter’s office space. The lease provided for monthly payments ranging from $7,211 to $7,364 and was originally scheduled to terminate in December 2022. Following the expiration of the original lease term, the Company continued to occupy the space on a month-to-month basis. The lease was formally terminated in September 2025. TicketSmarter now occupies office space provided by the entertainment segment, and no separate lease obligation related to this location remained outstanding as of December 31, 2025. During the period of occupancy, the Company was responsible for property taxes, utilities, insurance, and its proportionate share of common area maintenance costs.

On May 8, 2025, the Company entered into an operating lease with a third party for a warehouse and office used by the Entertainment Segment. The lease has a five-year term expiring in May 2030 and provides for base monthly rent of $16,035, subject to annual increases of 2.5%, with May 2025 rent prorated. The Company prepaid one year of rent, real estate taxes, and insurance totaling $247,105, which is applied to the first and final six months of the lease term, and also provided a $20,000 security deposit. The lease is structured as a triple-net lease, under which the Company is responsible for all real estate taxes, insurance, utilities, and other operating costs associated with the premises; real estate taxes for the period from lease commencement through December 31, 2025 were approximately $3,748 per month and insurance costs were approximately $432 per month, both subject to annual adjustment. The lease includes renewal options and an option to purchase the property after the 33rd month of the lease term. As of December 31, 2025, the remaining lease term was approximately 52 months.

From time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us. It is our policy not to disclose the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on us. After carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damage or relief demanded, we vigorously defend any lawsuit filed against us. We record a liability when losses are deemed probable and reasonably estimable. 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.

Culp McAuley, Inc. et al.

On May 31, 2022, the Company filed a lawsuit against Culp McAuley, Inc. (“Culp McAuley”) and four individuals (Brandon Culp, Campbell McAuley, Mark Depew and Larry Roberts) (collectively the “defendants”) in the United States District Court for the District of Kansas, seeking monetary damages and injunctive relief based on certain conduct by the defendants. 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. The Company continues to explore for sources of assets as a possible source of collection from the judgment debtors.

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.

As of December 31, 2025, the Company holds an unsatisfied judgment of $3,999,984 against Culp McAuley, Brandon Culp, and Campbell McAuley, jointly and severally. The Company continues to explore available sources of assets from the judgment debtors; however, collection of the judgment remains uncertain and no assurance can be given that any amounts will be recovered. The Company recorded a loss of $1,959,396 on this matter during the year ended December 31, 2024, which, together with losses recorded in prior years, reduced the Company’s cumulative net exposure to zero as of December 31, 2024. No additional losses were recorded on this matter during the year ended December 31, 2025, and the Company’s net exposure remained zero as of December 31, 2025. The Company’s estimate with respect to the aggregate reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties. As a result, actual results may vary significantly from the current estimate.

Larry Roberts

In March 2024, the Company filed a complaint against Larry Roberts in the Superior Court of the State of California, County of Orange, Case No. 30-2024-01385012-CU-FR-CJC. The lawsuit arises from the defendant’s alleged theft and misapplication of funds that were intended for the purchase of goods on behalf of the Company. The Company seeks monetary damages based on certain conduct by the defendant. On May 28, 2024, the defendant filed a motion to strike portions of the complaint and a motion for demurrer. On October 4, 2024, the Court sustained in part and overruled in part defendant’s motion for demurrer. The Court further denied the defendant’s motion to strike in its entirety. Discovery is ongoing. A jury trial has been scheduled for October 19, 2026. The Company is not able to provide an estimate of the likelihood of success at this time. The matter remains open.

Pharmaxx Medical, Inc.

The Company filed a complaint against Pharmaxx Medical, Inc. in the Superior Court of the State of California, County of Riverside, Case No. CVSW2300198, alleging breach of contract arising from the failure to deliver pharmaceutical gloves. After the court struck the defendant’s answer, the Company submitted the default package to obtain a default judgment against the defendant. The default package remains pending with the court.

First Insurance Funding Corp. — Johnson County Collection Case

The Company is a defendant in a collection case filed in the District Court of Johnson County, Kansas limited actions department. This is a collection lawsuit claiming the Company owed money for insurance premium funding on a cancelled policy totaling $165,890.08. The Company disputes that it owes the money as they cancelled the insurance policy through their insurance broker. An answer was filed denying the claim. The matter remains open. 

Gregory Johnson — Kansas Department of Labor

Gregory Johnson filed a claim with the State of Kansas, Wage and Hour Division, Claim No. 240591, seeking $30,000 for alleged severance pay. Mr. Johnson was laid off in a reduction in force and did not have a severance agreement. An answer denying the claim has been filed. A hearing was held on October 27, 2025 before an Administrative Law Judge, with the matter being dismissed in the Company’s favor.

Kustom 440 — Former Consultant

A former consultant has filed a claim against Kustom 440, Inc., a wholly owned subsidiary of the Company, seeking to compel payment under an alleged consulting agreement. The Company is currently engaged in settlement negotiations. The matter remains open.

While certain legal proceedings described above remain ongoing, management believes, based on currently available information and the status of each proceeding, that the resolution of these matters will not have a material adverse effect on the Company’s operations, financial condition, or cash flows. The Company has evaluated its exposure related to these matters and has recorded appropriate amounts where losses were determined to be probable and estimable. However, litigation is inherently uncertain, and there can be no assurance that the final resolution of any matter will not result in expenses, liabilities, or damages in excess of amounts currently accrued or anticipated.

Not applicable.

PART II

Market Information

Our common stock (the “Common Stock”) trades on the Nasdaq Capital Market under the symbol “KUST”.

Holders of Common Stock

As of April 8, 2026, we had approximately 157 shareholders of record for our Common Stock.

Dividend Policy

To date, we have not declared or paid cash dividends on our shares of Common Stock. The holders of our Common Stock will be entitled to non-cumulative dividends on the shares of Common Stock, when and as declared by the Board in its discretion. We intend to retain all future earnings, if any, for our business and do not anticipate paying cash dividends in the foreseeable future.

Any future determination to pay cash dividends will be at the discretion of our Board and will be dependent upon our financial condition, results of operations, capital requirements, general business conditions and such other factors as our Board may deem relevant.

Recent Sales of Unregistered Securities

Except as previously reported by the Company on its Quarterly Reports on Form 10-Q or its Current Reports on Form 8-K, as applicable, we did not sell any securities during the period covered by this Annual Report on Form 10-K that were not registered under the Securities Act.

This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue,” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. 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.

You should read the following discussion together with our financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that are based on our current expectations, estimates and projections about our business and operations

Current Trends and Recent Developments for the Company

Segment Overview

Video Solutions Operating Segment – Within our Video Solutions Segment, we supply technology-based products utilizing our portable digital video and audio recording capabilities for the law enforcement and security industries and for the commercial fleet and mass transit markets. We have 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 II, and the FirstVU HD; our patented and revolutionary VuLink product integrates our body-worn cameras with our in-car systems by providing hands-free automatic activation for both law enforcement and commercial markets; EVO Web Portal, which is our cloud-based evidence management system for Law enforcement market; the EVO Fleet, FLT-250, DVM-250, and DVM-250 Plus, which are our commercial line of digital video products that serve as “event recorders” for the commercial fleet and mass transit markets; and FleetVu, which is our cloud-based evidence management systems.

Our Video Solutions Segment revenue encompasses sales of video recording products and related services for law enforcement and commercial customers, as well as sales of Shield™ disinfectant and personal protective products. This segment generates revenue through both product sales and subscription-based models that offer cloud storage, evidence management, and extended warranty solutions. Revenues from product sales are recognized upon delivery, while revenues associated with subscription and service plans are deferred and recognized over the respective contract term, typically 3 to 5 years. Recent trends reflect continued demand from law enforcement and commercial fleet customers for integrated body-worn and in-car video solutions, offset by a decline in disinfectant-related sales compared to prior periods. Management continues to focus on enhancing recurring revenue through subscription and cloud-based service offerings while aligning production and inventory levels with current demand trends

Entertainment Operating Segment - We continue to operate our live entertainment and ticketing services through our wholly owned subsidiary, TicketSmarter, which was established following the Company’s acquisitions of Goody Tickets, LLC and TicketSmarter, LLC on September 1, 2021. TicketSmarter provides primary and secondary ticketing, partnerships, and resale services through its online ticketing marketplace, TicketSmarter.com. The platform offers tickets to more than 125,000 live events nationwide, including concerts, sporting events, theatre productions, and performing arts. In addition to ticketing, we produce and promote live music and entertainment events in third-party venues across the United States. These services include all aspects of event logistics, such as artist booking, ticketing, staging, vendor sourcing, on-site operations, and day-of-event production management.

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

Revenue Cycle Management Segment (Discontinued Operations) - The Company entered the revenue cycle management business in the second quarter of 2021 through the formation of its wholly owned subsidiary, Digital Ally Healthcare, and its majority-owned subsidiary, Nobility Healthcare. Nobility Healthcare completed its first acquisition in June 2021, when it acquired a private medical billing company, and subsequently completed additional acquisitions of private medical billing companies. Through this segment, the Company provided end-to-end revenue cycle management services to medical providers throughout the United States, including claim reimbursement billing, insurance and benefits verification, medical treatment documentation and coding, and collection services.

The Revenue Cycle Management Segment consisted primarily of medical billing subsidiaries. Revenues within this segment were derived from service arrangements performed and billed monthly, generally calculated as a contractual percentage of customer collections. Revenue was recognized as services were performed, and net service fees were recorded in accordance with applicable revenue recognition guidance.

On January 8, 2026, the Company completed the sale of Nobility Healthcare. As a result, the operations of the Revenue Cycle Management Segment have been classified as discontinued operations in the Company’s consolidated financial statements.

Refer to Note 22 – Operating Segments and Note 23 – Discontinued Operations in the Notes to Consolidated Financial Statements for additional information regarding the Company’s segments and discontinued operations, including net sales, operating earnings and total assets by segment.

Comparison of the Year Ended December 31, 2025 and 2024

Summary Financial Data

Summarized financial information for the Company’s reportable business segments is provided for the years ended December 31, 2025, and 2024:

The segments recorded noncash items affecting the gross profit and operating income (loss) through the established inventory reserves based on estimates of excess and/or obsolete current and non-current inventory. The Company recorded a reserve for excess and obsolete inventory in the Video Solutions Segment of $1,849,124 and $2,037,252 and a reserve for the Entertainment Segment of $69,817 and $132,403 as of December 31, 2025 and 2024.

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

Total identifiable assets for 2025 and 2024 include amounts related to the discontinued Revenue Cycle Management Segment, which are included in the Corporate and Other category. See Note 23, Discontinued Operations, for additional information.

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.

We are a party to operating leases and license agreements that represent commitments for future payments (described in Note 14, Operating Lease, and Note 15, Commitments and Contingencies, to our consolidated financial statements) and we have issued purchase orders in the ordinary course of business that represent commitments to future payments for goods and services.

For the Years Ended December 31, 2025 and 2024

Results of Operations

Summarized immediately below and discussed in more detail in the subsequent sub-sections is an analysis of our operating results for the years ended December 31, 2025 and 2024, represented as a percentage of total revenues for each respective year:

Revenues

Revenues by Type and by Operating Segment

Our operating segments generate two types of revenues:

Product revenues primarily include video solutions operating segment hardware sales of in-car and body-worn cameras, along with sales of our ThermoVu^TM units, disinfectants, and personal protective equipment. 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 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.

The following table presents revenues by type and segment:

Our Video Solutions Segment sells our products and services to customers in the following manner:

Our Entertainment Segment sells our products and services to customers in the following manner:

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:

Product revenues for the years ended December 31, 2025 and 2024 were $4,337,276 and $5,404,317, respectively, representing a decrease of $1,067,041 (19.7%), driven by the following factors:

Service and other revenues by operating segment is as follows:

Service and other revenues for the years ended December 31, 2025 and 2024 were $9,416,879 and $8,114,835, respectively, representing an increase of $1,302,044, or 16.0%, driven by the following factors:

Total revenues for the years ended December 31, 2025 and 2024 were $13,754,155 and $13,519,152, respectively, representing an increase of $235,003 (1.7%).

Cost of Product Revenue

Overall cost of product revenues for the years ended December 31, 2025 and 2024 was $6,333,622 and $5,899,130, respectively, representing an increase of $434,492 (7.4%). Overall cost of product revenues as a percentage of total product revenues for the years ended December 31, 2025 and 2024 was approximately 146% and 109%, respectively. Cost of products sold by operating segment is as follows:

The decrease in Video Solutions Segment cost of product revenues to $1,523,613 for the year ended December 31, 2025 from $1,780,284 for the year ended December 31, 2024 was primarily attributable to lower product volumes and changes in inventory reserve activity, including reduced charges related to excess and obsolete inventory compared to the prior year. Cost of product revenues as a percentage of product revenues for the video solutions segment increased to approximately 129% for the year ended December 31, 2025 from approximately 89% for the year ended December 31, 2024, reflecting the decline in product revenues during the period and the impact of fixed manufacturing and overhead costs.

The increase in Entertainment Segment cost of product revenues reflects higher absolute costs, with cost of product revenues increasing to $4,810,009 for the year ended December 31, 2025 from $4,118,846 for the year ended December 31, 2024. This represents an increase of $691,163 (16.8%), which was primarily driven by changes in ticket inventory mix and higher write-offs of ticket inventory sold below cost or unsold following event dates. Cost of product revenues as a percentage of product revenues increased to approximately 153% for the year ended December 31, 2025 compared to approximately 121% for the year ended December 31, 2024.

The Company recorded a reserve for excess and obsolete inventory in the Video Solutions Segment of $1,849,124 and $2,037,252 as of December 31, 2025 and 2024, respectively, representing a decrease of $188,128, or 9.2%. The decrease in the reserve balance was primarily attributable to the disposal and utilization of inventory that had been fully reserved in prior periods, as well as improved inventory management and lower on-hand inventory levels during 2025. The Company also recorded a reserve for excess and obsolete inventory in the entertainment operating segment of $69,817 and $132,403 as of December 31, 2025 and 2024, respectively, representing a decrease of $62,586 (47.3%). The reserve relates primarily to ticket inventory, where certain items may sell below cost or become unsellable following the related event date and therefore require write-off. The decrease in the reserve balance reflects reduced ticket inventory levels and management’s continued evaluation of inventory recoverability within the entertainment operating segment. The Company evaluates inventory reserves on a regular basis, considering factors such as historical sales activity, expected future demand, inventory aging, and realizable value. Management believes the recorded reserves for excess and obsolete inventories are appropriate based on inventory levels and operating conditions as of December 31, 2025.

Cost of Service Revenue

Overall cost of service revenues for the years ended December 31, 2025 and 2024 was $6,071,478 and $4,496,004, respectively, representing an increase of $1,575,474 (35.0%). Cost of service revenues as a percentage of total service revenues increased to approximately 64.5% for the year ended December 31, 2025 compared to approximately 55.4% for the year ended December 31, 2024. Cost of service revenues by operating segment is as follows:

The Video Solutions Segment cost of service revenues remained relatively stable, increasing slightly to $1,259,293 for the year ended December 31, 2025 from $1,252,213 for the year ended December 31, 2024, an increase of $7,080 (0.6%). Cost of service revenues as a percentage of service revenues for the Video Solutions Segment decreased to approximately 32.1% for the year ended December 31, 2025 compared to approximately 33.3% for the year ended December 31, 2024. This improvement reflects increased operating leverage, as service revenues grew at a faster rate than the associated service delivery costs, driven primarily by higher utilization of the Company’s cloud-based solutions and extended warranty services.

The increase in entertainment operating segment cost of service revenues was primarily driven by higher transaction volumes and increased service activity within the TicketSmarter platform, including payment processing, fulfillment, and other transaction-based costs. Cost of service revenues increased to $4,812,185 for the year ended December 31, 2025 from $3,243,791 for the year ended December 31, 2024, an increase of $1,568,394 (48.3%). Cost of service revenues as a percentage of service revenues for the entertainment operating segment increased to approximately 87.5% for the year ended December 31, 2025 compared to approximately 74.5% for the year ended December 31, 2024. The increase in cost as a percentage of service revenues reflects changes in transaction mix, higher variable processing costs, and continued investments to support platform scale. Management is focused on right-sizing the business and improving operational efficiency to support long-term profitability and operational stability.

Gross Profit

Overall gross profit for the years ended December 31, 2025 and 2024 was $1,349,055 and $3,124,018, respectively, representing a decrease of $1,774,963, or 56.8%. Gross profit by operating segment was as follows:

The decrease in gross profit is commensurate with the decline in overall revenues and the increase in cost of revenue across both the Video Solutions Segment and Entertainment Segment for the year ended December 31, 2025. Cost of revenue as a percentage of overall revenues increased to approximately 90% for the year ended December 31, 2025 compared to approximately 77% for the year ended December 31, 2024, resulting in a corresponding decline in gross margin. This increase was driven primarily by lower product margins within the Entertainment Segment, including ticket inventory sold below cost or written off when unsold following event dates, as well as continued pricing pressure within the video solutions operating segment. During the year ended December 31, 2025, the Company implemented several cost-containment and margin improvement initiatives, including workforce reductions, right-sizing of recent acquisitions, and a continued transition toward a service and subscription-based revenue model within the Video Solutions Segment. Management’s longer-term objective is to improve gross margins through a more favorable revenue mix, increased adoption of higher-margin service offerings, and operational efficiencies across the organization. We plan to continue initiatives focused on more efficient management of our supply chain, including outsourcing production where appropriate, optimizing purchase quantities, and implementing more effective purchasing practices.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the years ended December 31, 2025 and 2024 were $12,231,476 and $14,506,944, respectively, representing a decrease of $2,275,468 (15.7%). Selling, general and administrative expenses consist primarily of research and development expenses, selling, advertising and promotional expenses, general and administrative expenses, and goodwill and intangible asset impairment charges. The significant components of selling, general and administrative expenses are as follows:

Research and development expense. Our research and development expenses totaled $551,447 and $1,339,673 for the years ended December 31, 2025 and 2024, respectively, representing a decrease of $788,226, or 58.8%. The Company focused on controlling expenditures related to the development of new products and enhancements to existing products during the year. Research and development activities include engineering costs, product design, testing, and related development efforts.

Selling, advertising and promotional expenses. Selling, advertising and promotional expenses totaled $721,690 and $2,120,965 for the years ended December 31, 2025 and 2024, respectively, representing a decrease of $1,399,275 (66%). 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 totaled $8,424,672 and $10,538,306 for the years ended December 31, 2025 and 2024, respectively, representing a decrease of $2,113,634 (20.1%). The decrease in general and administrative expenses in the year ended December 31, 2025 compared to the same period in 2024 is primarily attributable to a decrease in administrative salaries and reductions in headcount in order to right-size our expenses in this area with our revenues.

Goodwill and intangible asset impairment charge. During the third fiscal quarter of 2024, management determined that triggering events had occurred, including an additional decline in demand for services, prolonged economic uncertainty, the failure of a planned split-off transaction to occur when and as expected, and a further decrease in our stock price. As a result, we performed an interim impairment test as of September 30, 2024. Based on that interim test, we recorded a non-cash goodwill impairment charge of $307,000 related to the entertainment segment and a non-cash trademark impairment charge of $201,000 related to the entertainment segment, for total continuing operations impairment charges of $508,000 for the year ended December 31, 2024. An additional non-cash goodwill impairment charge of $4,322,000 related to the revenue cycle management segment was recorded within discontinued operations during the same period. No additional impairment was identified in the December 31, 2024 annual roll-forward assessment.

We performed our annual goodwill and intangible asset impairment test as of December 31, 2025 on a full quantitative basis. The Revenue Cycle Management Segment (Nobility Healthcare) was classified as discontinued operations prior to the measurement date and excluded from the analysis. Based on the results of the annual test, we concluded that no impairment existed with respect to the Video Solutions Segment, where the indicated fair value of equity of $2,580,000 exceeded the segment’s carrying value of approximately $595,000.

With respect to the Entertainment Segment, we concluded that the carrying amounts of certain goodwill and intangible assets exceeded their estimated fair values and recorded total non-cash impairment charges of $2,533,667 for the year ended December 31, 2025, included in goodwill and intangible asset impairment charge on our consolidated statements of operations. We recorded a goodwill impairment charge of $1,428,000, representing the amount by which the carrying value of the Entertainment Segment’s equity exceeded its estimated fair value, leaving a remaining goodwill balance of $4,377,507 as of December 31, 2025. We recorded a full impairment charge of $746,667 related to the Sponsorship Agreement Network intangible asset, which failed the ASC 360 undiscounted cash flow recoverability test, reducing its carrying value to $0. We also recorded a trademark impairment charge of $189,000 related to the TicketSmarter trade name, leaving a remaining carrying value of $210,000, and a trademark impairment charge of $170,000 related to the Country Stampede trade name, leaving a remaining carrying value of $130,000, each as of December 31, 2025. The Entertainment Segment impairment charges were primarily driven by the segment’s continued operating losses, the fixed cost structure of festival operations, the structural cost challenges within certain entertainment revenue streams, and the declining revenue contribution of the Sponsorship Agreement Network.

Operating Loss

For the reasons previously stated, our operating loss was $10,882,421 and $11,382,926 for the years ended December 31, 2025 and 2024, respectively, representing an improvement of $500,505 (4.4%). Operating loss as a percentage of revenues was approximately 79% for the year ended December 31, 2025 compared to approximately 84% for the year ended December 31, 2024.

Interest Income

Interest income increased to $116,545 for the year ended December 31, 2025 from $69,509 in 2024, representing an increase of $47,036 (67.7%).

Interest Expense

We incurred interest expense of $1,102,352 and $3,816,317 during the years ended December 31, 2025 and 2024, respectively, representing a decrease of $2,713,965 (71.1%). Interest expense primarily consists of stated interest and the amortization of debt discounts associated with convertible debt, revolving loan arrangements, and merchant advances.

Other income (expense)

Other income (expense) increased to $346,024 for the year ended December 31, 2025 from $26,733 during the year ended December 31, 2024, representing an increase of $319,291 (1,194.4%). Other income (expense) includes items such as income related to facility subleases, gains or losses on asset disposals, and other non-operating items.

Loss on Litigation

The Company recognized a loss on litigation of $0 and $1,959,396 during the years ended December 31, 2025 and 2024, respectively. This relates to the lawsuit with Culp McAuley, Inc. and primarily the collectability of the default judgment. Based on amounts recorded in 2024 and prior years, the Company had reduced its net exposure related to this matter to zero as of December 31, 2025.

Loss on Disposal of Intangible assets

During the year ended December 31, 2025, the Company did not recognize any gain or loss on the disposal of intangible assets. During the year ended December 31, 2024, the Company’s video solutions segment disposed of its personal protection product line, which held various EPA licenses, resulting in a loss on disposal of intangible assets of $125,561. This loss was partially offset by a gain of $5,582 recognized by the Company’s entertainment segment related to the disposal of certain personal seat licenses during the same period.

Change in Fair Value of Derivative Liabilities

The change in fair value of the warrant derivative liabilities for the years ended December 31, 2025 and 2024, respectively totaled a gain of $3,331,616 during the year ended December 31, 2025 as compared to a loss of $1,240,407 during the year ended December 31, 2024.

The Company has issued various detachable warrants in connection with capital raises during 2024 and 2025 that were required to be treated as warrant derivative liabilities. Warrant derivative liabilities are required to be marked-to-market at each balance sheet date with the change in fair value recorded as a gain or loss in the Consolidated Statement of Operations.

Gain on Extinguishment of Liabilities

The Company recorded a gain on the extinguishment of liabilities for the year ended December 31, 2025 of $2,234,658, which reflects income related to the Video Solutions Segment’s and Entertainment Segment’s ability to negotiate down payables and contract liabilities during the year ended December 31, 2025.

The gain on extinguishment of liabilities was $917,935 for the year ended December 31, 2024, which reflects income related to the Video Solutions Segment’s and Entertainment Segment’s ability to negotiate down payables and contract liabilities during the year ended December 31, 2024, including a gain of $9,385 on the termination of its former headquarters lease.

Loss on Extinguishment of Debt

On March 1, 2024, the Company obtained a short-term merchant advance for its entertainment segment, which totaled $1,000,000, from a single lender to fund operations. The Company modified/amended the underlying loan agreement twice during the year ended December 31, 2024. The modifications were both deemed to be extinguishments of debt resulting in a $310,505 total loss during the year ended December 31, 2024.

On November 7, 2024 the Company raised sufficient funds through a private placement which closed on November 7, 2024, to repay the short-term merchant advance for its entertainment segment in full. The Company’s full repayment of the outstanding obligations under such amended note which effectively cured all then existing defaults and resulted in a loss of $374,007 from the extinguishment of this debt during the year ended December 31, 2024.

During the year ended December 31, 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 year ended December 31, 2024.

Gain on Sale of Property, Plant and Equipment

The Company reported a gain on sale of property, plant and equipment of $— and $360,082 during the years ended December 31, 2025 and 2024, respectively.

During the year ended December 31, 2024, the Company sold its building for $5,900,000 less closing costs of $36,634. The carrying amount of the building on the date of sale was $5,461,623. As a result of the sale the Company recorded a gain of $401,743 in the consolidated statement of operations during the year ended December 31, 2024. This amount was offset by a separate loss on sale of fixed assets of $41,661 for the year ended December 31, 2024, resulting in a net gain of $360,082 included in the consolidated statement of operations.

Loss from continuing operations before Income Tax Benefit

As a result of the above, we reported a net loss before income tax benefit of $5,955,930 and $17,898,105 for the years ended December 31, 2025 and 2024, respectively, representing an improvement of $11,942,175 (66.7%).

Income Tax Benefit

We recorded an income tax benefit of $0 for the years ended December 31, 2025 and 2024, respectively. The effective tax rate for both 2025 and 2024 varied from the expected statutory rate due to our continuing to provide a 100% valuation allowance on net deferred tax assets. We determined that it was appropriate to continue the full valuation allowance on net deferred tax assets as of December 31, 2025 and 2024 primarily because of the recurring operating losses.

We have further determined to continue providing a full valuation reserve on our net deferred tax assets as of December 31, 2025.

We had approximately $168,405,000 of federal net operating loss carryforwards and $1,685,000 of research and development tax credit carryforwards as of December 31, 2025 available to offset future net taxable income.

Net Loss from continuing operations

As a result of the above, we reported a net loss from continuing operations of $5,955,930 and $17,898,105 for the years ended December 31, 2025 and 2024, respectively, representing an improvement of $11,942,175 (66.7%).

Net Income (Loss) Attributable to Noncontrolling Interests – Discontinued Operations

The Company owned 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 income (loss) attributable to noncontrolling interests of consolidated subsidiary of $(687,516) and $(1,871,578) for the years ended December 31, 2025 and 2024, respectively. Nobility Healthcare was subsequently sold in January 2026.

Net Loss Attributable to Common Stockholders

As a result of the above, we reported a net loss attributable to common stockholders of $6,671,508 and $19,844,147 for the years ended December 31, 2025 and 2024, respectively, representing an improvement of $13,172,639 (66.4%).

Basic and Diluted Income/(Loss) per Share

The basic and diluted loss per share from continuing operations was $(15.38) and $(30,204.62) for the years ended December 31, 2025 and 2024, respectively. The basic and diluted loss per share from discontinued operations was $(1.85) and $(3,284.12) for the years ended December 31, 2025 and 2024, respectively, resulting in a net basic and diluted loss per share attributable to common stockholders of $(17.23) and $(33,488.74) for the years ended December 31, 2025 and 2024, respectively. All outstanding stock options and common stock purchase warrants were considered antidilutive and therefore excluded from the calculation of diluted loss per share for the years ended December 31, 2025 and 2024.

Liquidity and Capital Resources

Overall:

Management’s Liquidity Plan. The Company has incurred net losses and negative cash flows from operating activities since inception. Based on current operating forecasts, management expects that the Company will need to restore positive operating cash flows and/or obtain additional capital in the near term to fund operations, meet ongoing obligations, and execute its business plan over the next twelve months. Management is actively engaged in discussions to raise additional capital, which may include equity and debt financing arrangements; however, there can be no assurance that such efforts will be successful. These conditions, including recurring losses, cash used in operations, and uncertainty regarding the Company’s ability to raise additional capital, raise substantial doubt about the Company’s ability to continue as a going concern.

Cash, cash equivalents: As of December 31, 2025, we had cash and cash equivalents of $1,116,673, compared to $454,314 as of December 31, 2024, representing a net increase of $662,359. The December 31, 2024 cash balance includes $235,003 attributable to the discontinued Revenue Cycle Management Segment. The changes in cash during the year ended December 31, 2025 resulted from the following consolidated cash flow activities, which include cash flows from both continuing and discontinued operations.

The net result of these activities was an increase in cash of $662,359 for the year ended December 31, 2025, reflecting consolidated cash flows from both continuing and discontinued operations.

Working Capital

As of December 31, 2025, the Company had $757,369 of cash and cash equivalents and net negative working capital of $(2,270,311) related to its continuing operations, excluding $911,753 of current assets and $138,029 of current liabilities classified as held for sale in connection with the discontinued Revenue Cycle Management Segment. Accounts receivable and other receivables represented $3,702,264 of net working capital at December 31, 2025. Management intends to collect outstanding receivables on a timely basis and reduce overall receivable balances during 2026, which is expected to provide additional cash flow to support continuing operations. Inventory represented $2,330,492 of net working capital as of December 31, 2025. The Company is actively managing inventory levels, and management’s objective is to reduce inventory during 2026 through sales activities. A reduction in inventory levels is expected to generate additional cash flow to support the Company’s continuing operations.

Lease Commitments and Other Contractual Obligations:

Total lease expense under the Company’s operating leases related to continuing operations was approximately $274,272 during the year ended December 31, 2025. The following sets forth the operating lease right-of-use assets and liabilities associated with continuing operations as of December 31, 2025:

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

During the year ended December 31, 2025, the Company incurred capital expenditures of $258,050, consisting primarily of purchases of production equipment and building improvements. The Company does not currently have any material commitments for capital expenditures beyond normal course of business activity.

In January 2026, Kustom 440, Inc. entered into a non-cancellable artist performance agreement for the 2026 Country Stampede music festival with aggregate payment obligations totaling $750,000, payable in installments of $187,500 upon execution, $187,500 due no later than May 27, 2026, and $375,000 payable following the performance. See Note 15, Commitments and Contingencies, for additional details.

Debt obligations - We have the following outstanding debt related to continuing operations as of December 31, 2025, which requires future principal payments:

Debt obligations mature on an annual basis as follows as of December 31, 2025:

The table above excludes the related party note payable to a TicketSmarter officer trust with a net carrying value of $400,110 as of December 31, 2025 ($0 current, $400,110 long-term). See Note 19, Related Party Transactions, for additional details.

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

While the ultimate resolution is unknown, we do not expect that these lawsuits will individually, or in the aggregate, have a material adverse effect to our results of operations, financial condition or cash flows. However, the outcome of any litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from the resolution of these matters will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance coverage and will not have a material adverse effect on our operating results, financial condition or cash flows. See Item 3, “Legal Proceedings,” of this Annual Report on Form 10-K for information on our litigation.

401 (k) Plan.

The Company sponsors a 401(k) retirement savings plan for the benefit of its employees. The plan, as amended, requires it to provide 100% matching contributions for employees, who elect to contribute up to 3% of their compensation to the plan and 50% matching contributions for employees’ elective deferrals on the next 2% of their contributions. The Company made matching contributions totaling $80,083 and $144,589 for the years ended December 31, 2025 and 2024, respectively. Each participant is 100% vested at all times in employee and employer matching contributions.

Critical Accounting Estimates

Our significant accounting policies are summarized in Note 1, Nature of Business and Summary of Significant Accounting Policies, to our consolidated financial statements. 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: