Good morning, ladies and gentlemen, and welcome to Digital Ally, Inc. Q3 2023 Operating Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. This conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We may use words or other expressions that are predictions of or indicated future events and trends, and that do not relate to historical matters. Rather, they, rather, they represent forward-looking statements. These forward-looking statements are based largely on the expectation or forecast of the 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 forward-looking statements expressed in this conference call. The readers are cautioned not to place undue reliance on such forward-looking statements. We generally do not publicly update or revise any forward-looking statements expressed in this conference call, whether as a result of new information, future events, or otherwise. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate. I would now like to remind everyone that this call is being recorded on November 15, 2023. I would now like to turn over the call to Stan Ross. Please go ahead.
Thank you. Thanks, everybody, for joining us today. I have Brody Green, the President, with me today. Brody also, as many of you know, has been acting as the CFO as well, during this time of our transition that to where we're looking at the spin-off with Kustom Entertainment, and some of the parties will be going that direction, and others will be staying with the legacy business.
But what we're gonna do today, Brody's going to give you a little overview of the numbers and sort of some insight to some of the things that we've done to dramatically reduce some of the expenses that we've been telling you all that we've been working on for some time, and that, I think, is clearly shown on the reduction of some of them that are out there, and you can see that the ship's getting righted again, and so we're real excited about that. And then we're gonna spend a little time. I know that many of you wanna get an update on where we're at on sort of the timing of the spin-off of the Kustom Entertainment.
I will tell you, there's been a little bit of technical difficulties with some of the software being loaded up in regards to this call. Nothing to do with Digital Ally, with this call. So we're gonna do our best that we can to inform you as well as we can, but we will not be able to have a Q&A session at this time. So hopefully, we do a good job of bringing you up to speed and anticipating what those questions may have been and can address them for you. So, Brody, I'll let you give them the highlights on the numbers.
Yes. Thanks, Stan. Like I said, it was, you know, a quarter with a lot of change and a lot of improvements on the SG&A and spending side that, you know, in turn, directly impacts our bottom line. So I'll just flow through the pace of the financials first and then kind of through some other higher-level points we'd like to touch on, and then turn it back over to Stan. So I'll start with the balance sheet. At September 30th, 2023, we had our total current assets at about $19.4 million, a small decrease since December 2022. Total assets was $51.4 million, a similar decrease as compared to year-end 2022.
Our total liabilities at the end of the quarter were $24.1 million, with total current liabilities, rather, and then total liability is about $32.5 million. So we have a stockholders' equity currently sitting at $18.9 million at quarter end for Q3. On the P&L side, revenues were north of $6.3 million. It's a bit of a decrease for the same quarter of 2022, but part of that is part of our right sizing, particularly in the entertainment side with the ticketing. Lessening our pay-per-click and marketing dollars can directly impact our revenues, but positively impact our bottom line. Similarly, with cost of revenue, you'll see a large decrease there that really correlates with the decrease in revenue.
And then as we've been talking about, our gross profit for Q3 of 2023 was north of $1.2 million, compared to the same period in 2022, it was less than $600,000. So we've more than doubled our gross profit, quarterly comparison from 2022 to 2023. Similarly, our SG&A was down about $800,000 to $6.4 million from the same quarter of 2022. And then one other item we'll, we'll call out, the other income, obviously, we have the warrant derivative liabilities, which is just a change in liability for our... The warrants we have out there just due to some accounting nuances. So that was the change in fair value of north of eight point or $1.8 million.
So you'll see a line of gain of extinguishment of liabilities of about $500,000. That is part of the reduction in sponsorship and marketing expenses we've pushed for over the past quarter, in which, you know, we were able to get rid of ourselves of quite a few liabilities and contractual obligations, during the quarter and moving into Q4 as well, as well as terminating future contracts that we weren't seeing the results out of that we wanted. So, you know, it, it shows a $500,000 benefit here, but I think internally, we know about there's several million dollars that we're, we're saving moving forward. That might not necessarily be reflected on the income statement, but they, they will come off in future years on the expense side.
So in short, our net loss for the quarter was about $3.7 million compared to $1.9 million in the same quarter of last year. Comparatively, the same quarter of 2022 had a $3.6 million gain of extinguishment of warrant derivative liabilities and $1.2 million on change of fair value. So it was plus about $4.6 million with the warrant derivative liabilities in 2022. Comparatively, it's still very similar and frankly an improvement since 2022. Quarter-over-quarter, our revenues were down from Q2, but Q2 had the Kustom 440 concert that they put on in May. More of those to come, which will continue to improve revenue along with gross profits.
Our deferred revenue number, as we always like to discuss and point out, is approaching $10 million. It's at $9.9 million at September 30, 2023. That's up over $2 million from December 31, 2022. So we'll just continue to see that increase over time. And obviously, like we always say, really brings our, you know, starting sales number each month and every quarter well above zero. So we'll just continue to recognize those contracts that are, you know, 3-5 years and just continuing to stack those up. At this same point of last year, our deferred revenue was less than $7.2 million, so really a $2.7 million increase from the same period last year. So that's over a 12-month span.
We just, that's only gonna continue to grow and grow, so it's an exciting piece for us to have sitting on the balance sheet. You know, part of our net loss this quarter was due to large inventory write-offs of some expiring products and trying to scrap some older products that have been on, you know, in our warehouse for quite some time. We had some R&D for some new products coming up, and hopefully we'll put those out on the market here in 2024. But obviously, the R&D expenses are incurred now. Obviously, there's several expenses related to this business combination with Clover Leaf that we're pushing through, and we'll have an update on that here shortly.
But, you know, there, there's several kind of one-off pieces in these numbers this quarter and likely in 2024 as well, or in Q4 as well, as we work towards this transition and this transaction being completed. And then from there, I think we'll really see an improvement on all sides. Some subsequent events I'd like to touch on. We appointed a new board of director, Duke Daugherty. We appointed him October 17th, and filed an 8-K, so please reference that if you'd like more information on it. We completed on October 26th, a loan agreement and mortgage to take out the convertible notes we had outstanding of $3 million. So we resolved those and put a mortgage on our building here currently, that was free and clear and paid for in cash several years ago.
So, and again, this is all in the 10-Q, and I encourage you guys to go into the Q and take a full look at all this as well, in greater detail. And lastly, a brief update on the business combination with Clover Leaf. That's S-4 of those filed in October. We've since received comments back from the SEC, and we're working to provide responses to those as soon as we can. We'll have to throw in Q3 numbers, as Q2 numbers are out of scale, so we'll get, hopefully, responses here as soon as possible back to the SEC to move this forward. With that, I'll turn it back over to Stan and let you touch on some more.
Yeah. Thanks, Brody. So as you can tell, you know, in regards to the numbers, I mean, I think, you know, the fact that the recurring or the deferred revenue continues to grow, it's almost at $10 million, says an awful lot of the ability and longevity of what the legacy businesses are continuing to build. Medical billing is continuing to plug right along. No surprises there. Continues to kick off good cash flow for us as well. And then you've got the new products that are really starting to get out there. New budgets are coming up.
Companies that have had long-term contracts with other vendors are now getting to see the new Digital Ally products and, you know, again, been very well received at all the shows we've been to. And those are reflected in the recurring revenue or slash deferred revenue that we're continuing to see and building upon a subscription model for the video side of things. We do anticipate seeing and going into the tail end of this year and obviously in 2024 some real nice improvements on the commercial lines. We've been out there with the new product. It's been well received. A lot of T&Es have been going on. So again, I think the legacy business is...
poised real well to continue to be bringing in new customers and continuing to retain their existing ones with the quality of the new products that we're bringing along. Also, as Brody pointed out, you know, the revenues quarter-over-quarter, and again, that was because of the concert that Kustom 440 put on. I think it generated almost $1.1 million, which was, you know, really nice out of the box small concert that we did somewhat in our backyard here. We do have anticipated additional concerts that we'd look to do quite a few of, you know, obviously not just one-offs, quite a few in 2024.
So while that may be more of an impact on the Kustom Entertainment, and then at that point in time, the spin out, that still should be looked at as a very positive, because at the end of the day, you know, upon the completion of this merger, you're gonna, you know, all the Digital Ally shareholders will also be Kustom Entertainment shareholders. So, excited, you know, for that to continue to move forward. I know that many of you may know this, but some of you may not. I'm just trying to give you an indication of timing on how these things work. But originally, the S-4 was filed. The SEC had 30 days to get back to us. They did.
Comments have been addressed, and now it's just a matter of plugging in the new third quarter numbers, you know, because Q2's is stale in their eyes. So Q3 numbers will get plugged in, and then that will be filed with the SEC. At that point in time, they have 10 days to essentially respond, and hopefully, you know, at that point, they come back with very few comments, if any, and should be fairly quick to respond. There shouldn't be any financial issues by any means, as far as the numbers and just clarification.
But their role is really just to try to do the best they can to make sure that all investors have a real clear understanding, you know, idea of the investments that they may be making. So it's more about making sure that all the disclosures are in there, and we have no problems with that, with both companies being publicly held. We've been doing that for some time. So excited about, you know, getting close to the finish line on the Kustom Entertainment spin-off. Of course, I will be going with Kustom Entertainment, using a little bit of my background, as far as, you know, I guess, what I was raised with. Very familiar with the markets, and so that, I'll be going. Duke will be joining me as one of our board members.
We were able to recently, we have identified a CFO that should be coming on board for Kustom Entertainment. So that's getting all the, all the management people are getting put in place. So it's closer than we think. You know, especially with the holidays, the way they're coming up, this will fly by, and we'll, before we know it, we'll be making the announcement. And so what'll happen on that too is, you know, at that point in time, we'll make sure that, you know, obviously, everyone will know, Clover will be the one making the announcement. They have- there'll be a quick shareholder vote slash hopefully approval to go ahead and finish what was started here.
Meanwhile, we will continue to move forward on building Kustom Entertainment, both the ticketing platform and the production platform, you know, in the coming weeks, coming months, and I think you'll see some announcements on that. I really apologize, we're unclear on why we can't bring up the board and everything to go into a Q&A. So, not sure where the problem is, but if there is some questions that come up or anything that we can answer, you know, and that is already out there, that you just need a little more clarification on, please reach out to Brody and/or I, and we'll do the best we can to help explain anything that may be out there that we haven't addressed.
Brody, you got any final comments on anything or?
No, I don't think so. Like I said earlier, I would encourage you guys to take a look at this 10-Q. It has all the, all the details you could want. So I would dig in there. If you have further questions and comments, obviously, reach out to us, but I think 10-Q is a great source to really see where the company's at and where we're, where we're heading. So other than that, I'm good.
All right. Well, listen, thanks, everybody, for getting on. Again, deepest apologies for not being able to get into the Q&A side of things, but we will be back in touch, I'm sure, very soon, and then we'll do a, we'll keep you guys abreast of the timing of the merger with Clover and Kustom Entertainment. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.