DISCONTINUED OPERATIONS

6 Months Ended

Jun. 30, 2026

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

Note 22. DISCONTINUED OPERATIONS

During the periods presented, the Company disposed of or committed to dispose of two businesses, each presented as a discontinued operation in accordance with ASC 205-20 for all periods presented: the Revenue-Cycle Management business (Nobility Healthcare), sold in January 2026, and the Video Solutions business, held for sale as of June 30, 2026.

Revenue-Cycle Management Business

On January 8, 2026, Digital Ally Healthcare, Inc., a wholly-owned subsidiary of the Company, completed the sale of its 51% membership interest in Nobility Healthcare to an affiliate of the holders of the remaining 49% interest, effective January 1, 2026. Total consideration was $1,450,000, consisting of $100,000 in cash, $209,501 in closing credits applied against pre-existing intercompany balances, and a promissory note with a face value of $1,140,499, recorded at its estimated fair value of $1,117,303 using an effective interest rate of 8% per annum. The sale resulted in the deconsolidation of Nobility Healthcare, which is presented as a discontinued operation for all periods presented.

During the three months ended March 31, 2026, the Company recognized a loss on the disposition of $4,013,669, consisting of a $1,556,254 loss on sale and a $2,457,415 loss on deconsolidation representing the write-off of parent-level investment basis and intercompany balances upon loss of control, together with an initial provisional earn-out adjustment of $357,919 to the carrying value of the promissory note. During the three months ended June 30, 2026, the Company recognized an additional provisional earn-out adjustment of $81,134, bringing cumulative earn-out adjustments to $439,053 for the six months ended June 30, 2026; no adjustments to the loss on disposition itself have been recorded subsequent to the initial recognition. See the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 for the components of the loss on sale and additional information regarding the deconsolidation.

The promissory note is subject to a quarterly earn-out mechanism during the twelve-month measurement period following issuance, under which the outstanding principal is reduced or increased by 50% of the difference between the annualized cash-basis revenue of Nobility Healthcare and baseline 2025 revenue of $5,421,383. Based on cumulative cash-basis revenue through June 30, 2026, the Company recorded an additional provisional adjustment of $81,134 during the three months ended June 30, 2026, recognized within loss from discontinued operations, bringing the cumulative provisional principal reduction to $429,886 and the face amount of the note to $710,613. The provisional adjustments remain subject to revision upon receipt of the formal measurement statements.

Activity in the note receivable for the six months ended June 30, 2026 was as follows:

SCHEDULE OF NOTE RECEIVABLE

		Amount
Initial fair value at origination (January 8, 2026)		$	1,117,303
Amortization of discount and interest accrued			52,874
Provisional earn-out reduction to principal			(439,053	)
Net carrying value at June 30, 2026		$	731,124

The net carrying value of $731,124 comprises $499,764 classified as current and $231,360 classified as long-term. Interest income on the promissory note, including amortization of the discount, is recognized within interest income in continuing operations. See Note 3, Notes Receivable, and Note 10, Fair Value Measurement.

The following table summarizes the major classes of assets and liabilities of Nobility Healthcare that were classified as held for sale as of December 31, 2025; following the disposition, no assets or liabilities of Nobility Healthcare remain classified as held for sale as of June 30, 2026:

		June 30, 2026				December 31, 2025
Assets:
Cash and cash equivalents		$	—			$	359,304
Accounts receivable, net			—				497,713
Subscriptions receivables, net – short term
Inventories, net
Prepaid expenses			—				54,736
Current assets of revenue-cycle management business held-for-sale			—				911,753

Property, plant, and equipment, net			—				39,831
Goodwill and other intangible assets, net			—				—
Subscriptions receivables, net – long term
Operating lease right of use assets, net			—				373,921
Other Assets
Non-current assets of revenue-cycle management business held-for-sale			—				413,752

Total assets held-for-sale		$	—			$	1,325,505

Liabilities:
Accounts payable		$	—			$	52,102
Accrued expenses			—				11,727
Deferred revenue, current
Operating lease obligation – short term			—				74,200
Current liabilities of revenue-cycle management business held-for-sale			—				138,029

Deferred revenue - long term
Operating lease obligation – long term			—				299,723
Long-term liabilities of revenue-cycle management business held-for-sale			—				299,723

Total liabilities held-for-sale		$	—			$	437,752

The following table presents the results of Nobility Healthcare included in loss from discontinued operations, net of tax, for the three and six months ended June 30, 2026 and 2025. No operating results of Nobility Healthcare are included in any 2026 period; the 2026 amounts consist of the loss on disposition and the provisional earn-out adjustments described above.

		2026				2025				2026				2025
		For the Three Months Ended June 30,								For the Six Months Ended June 30,
		2026				2025				2026				2025
Revenue:		$	—			$	1,432,294			$	—			$	2,782,845
Cost of revenue:			—				883,231				—				1,766,119
Gross profit			—				549,063				—				1,016,726

Operating expenses			—				434,782				—				895,075
Research and development expense
Selling, advertising and promotional expense
General and administrative expense
Income from operations			—				114,281				—				121,651
Loss on disposal of Nobility Healthcare			—				—				(4,013,669	)			—
Provisional earn-out adjustment			(81,134	)			—				(439,053	)			—
Other income (expense)
Income tax expense (benefit)			—				—				—				—
Net income (loss) from discontinued operations		$	(81,134	)		$	114,281			$	(4,452,722	)		$	121,651

The following table summarizes the cash flows of Nobility Healthcare included in the condensed consolidated statements of cash flows within discontinued operations for the six months ended June 30, 2026 and 2025. No cash flows of Nobility Healthcare are included in the 2026 period, as the disposition was effective January 1, 2026, and the related loss consisted of non-cash items.

		June 30, 2026				June 30, 2025
Cash Flows from Operating Activities:
Net income (loss)		$	(4,452,722	)		$	121,651
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization			—				50,360
Loss on disposal of Nobility Healthcare			4,013,669				—
Provisional earn-out adjustment to carrying value			439,053				—
Provision for doubtful accounts receivable			—				(10,439	)
Change in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable – trade			—				28,705
Prepaid expenses			—				10,510
Operating lease right of use assets			—				32,779
Increase (decrease) in:
Accounts payable			—				(328,932	)
Accrued expenses			—				(9,125	)
Operating lease obligations			—				(32,779	)

Net cash used in operating activities – discontinued operation			—				(137,270	)

Cash Flows from Investing Activities:
Purchases of leasehold improvements			—				(9,919	)
Proceeds from improvement allowance			—				—

Net cash used in investing activities – discontinued operation			—				(9,919	)

Cash Flows from Financing Activities:

Payments of contingent consideration promissory notes			—				—

Net cash used in financing activities – discontinued operation			—				—

Net decrease in cash, cash equivalents and restricted cash			—				(147,189	)

Cash and cash equivalents, beginning of period			—				235,003

Cash and cash equivalents, end of period		$	—			$	87,814

Video Solutions Business

On June 24, 2026, the Company entered into an Asset Purchase Agreement (the “APA”) with Cycurion, Inc. (“Cycurion”), pursuant to which the Company agreed to sell the assets and transfer certain specified liabilities of its Video Solutions business, which develops, sells, and services video hardware, camera products, software and related solutions for law enforcement, public safety and commercial customers. Total consideration consists of $1,250,000 in cash, a secured promissory note in the principal amount of $4,250,000 bearing interest at 7% per annum over a three-year term, shares of Cycurion’s Series H Preferred Stock, and a revenue-based earn-out and clawback arrangement based on 2026 and 2027 performance, each capped at $500,000 per year and $1,000,000 in the aggregate. The transaction is structured as a sale of assets and assumption of specified liabilities. The transaction is structured as a sale of assets and assumption of specified liabilities. The sale was subsequently completed on August 3, 2026; see Note 23, Subsequent Events. There is no material relationship between the Company or its affiliates Cycurion other than in connection with the transaction.

The assets and liabilities of the Video Solutions business were classified as held for sale as of June 30, 2026 in accordance with ASC 205-20; the December 31, 2025 condensed consolidated balance sheet has been recast to present those assets and liabilities as held for sale for comparative purposes. Because the fair value of the disposal group, less costs to sell, exceeds its carrying value, no loss was recognized upon classification as held for sale. Any gain on the sale will be recognized upon closing. Depreciation and amortization of the disposal group’s long-lived assets ceased upon classification as held for sale.

The following table summarizes the major classes of assets and liabilities of the Video Solutions business classified as held for sale:

		June 30, 2026				December 31, 2025
Assets:
Accounts receivable, net		$	86,812			$	382,082
Subscriptions receivables, net – short term			2,690,503				3,219,647
Inventories, net			1,498,601				2,129,453
Prepaid expenses			268,971				417,396
Current assets of video solutions business held-for-sale			4,544,887				6,148,578
Current assets of business held-for-sale			4,544,887				6,148,578

Property, plant, and equipment, net			63,834				87,368
Goodwill and other intangible assets, net			168,024				182,211
Subscriptions receivables, net – long term			2,178,923				2,976,758
Operating lease right of use assets, net			109,711				147,937
Other Assets			82,216				125,249
Non-current assets of video solutions business held-for-sale			2,602,708				3,519,523
Non-current assets of business held-for-sale			2,602,708				3,519,523

Total assets held-for-sale		$	7,147,595			$	9,668,101

Liabilities:
Accounts payable		$	193,935			$	319,652
Accrued expenses			199,878				204,163
Deferred revenue, current			3,009,194				3,239,340
Operating lease obligation – short term			81,180				78,007
Current liabilities of video solutions business held-for-sale			3,484,187				3,841,162
Current liabilities of business held-for-sale			3,484,187				3,841,162

Deferred revenue - long term			3,613,846				4,739,356
Operating lease obligation – long term			28,531				69,930
Long-term liabilities of video solutions business held-for-sale			3,642,377				4,809,286
Long-term liabilities of business held-for-sale			3,642,377				4,809,286

Total liabilities held-for-sale		$	7,126,564			$	8,650,448

The Video Solutions business was owned and operated by the Company throughout each of the periods presented. Accordingly, the results below reflect a full period of operations for each period presented, and no gain on the sale is included in any period. The sale was completed on August 3, 2026, with the purchase price determined by reference to the financial position of the Video Solutions business as of June 30, 2026. See Note 23, Subsequent Events. The following tables present the results of the Video Solutions business included in loss from discontinued operations, net of tax:

		2026				2025
		Three months ended June 30,
		2026				2025
Net revenues:
Product		$	249,398			$	438,132
Service			892,743				902,540
Total net revenues			1,142,141				1,340,672
Less significant expenses:
Cost of Revenue - Product			776,183				584,457
Cost of Revenue – Service and other			304,184				385,438
Research and development expense			131,749				183,811
Selling, advertising and promotional expense			107,093				183,694
General and administrative expense			498,234				451,325

Loss from discontinued operations - Video Solutions			(675,302	)			(448,053	)

Other income (expense)			—				—
Income tax expense (benefit)			—				—
Net loss from discontinued operations - Video Solutions		$	(675,302	)		$	(448,053	)

		2026				2025
		Six months ended June 30,
		2026				2025
Net revenues:		$				$
Product			475,518				492,364
Service			1,775,102				1,770,590
Total net revenues			2,250,620				2,262,954
Less significant expenses:
Cost of Revenue - Product			1,177,774				649,009
Cost of Revenue – Service and other			625,542				687,406
Cost of Revenue			625,542				687,406
Research and development expense			274,838				268,228
Selling, advertising and promotional expense			238,129				204,211
General and administrative expense			874,400				990,336

Loss from discontinued operations - Video Solutions			(940,063	)			(536,236	)
Loss from discontinued operations			(940,063	)			(536,236	)

Other income (expense)			—				—
Income tax expense (benefit)			—				—
Net loss from discontinued operations - Video Solutions		$	(940,063	)		$	(536,236	)
Net loss from discontinued operations		$	(940,063	)		$	(536,236	)

The Video Solutions Business historically operated as an integrated operating segment of the Company rather than as a separate legal entity, and was not accounted for as a standalone reporting entity with its own balance sheet or cash accounts. Its cash receipts and disbursements were administered through the Company’s centralized cash management function. As a result, the cash flows of the Video Solutions Business cannot be presented as those of a separate cash-generating entity. The operating and investing cash flows directly attributable to the Video Solutions Business, which are included within the Company’s condensed consolidated statements of cash flows, have been derived from the Company’s accounting records and are summarized below on a basis consistent with the Company’s discontinued operations presentation.

		2026				2025
		Six months ended June 30,
		2026				2025
Net cash provided by (used in) operating activities — discontinued operation - Video Solutions		$	68,635			$	(2,243,004	)
Net cash provided by (used in) operating activities — discontinued operation		$	68,635			$	(2,243,004	)
Net cash provided by (used in) investing activities — discontinued operation - Video Solutions			(12,074	)			(73,862	)
Net cash provided by (used in) investing activities — discontinued operation			(12,074	)			(73,862	)
Net cash provided by (used in) financing activities — discontinued operation - Video Solutions			—				—
Net cash provided by (used in) financing activities — discontinued operation			—				—