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What changed in DUOS TECHNOLOGIES GROUP, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of DUOS TECHNOLOGIES GROUP, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+348 added−204 removedSource: 10-K (2025-03-31) vs 10-K (2024-04-01)

Top changes in DUOS TECHNOLOGIES GROUP, INC.'s 2024 10-K

348 paragraphs added · 204 removed · 147 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

39 edited+116 added−15 removed14 unchanged
Biggest changeGovernment sectors. · Offer both CAPEX (one-time sale) and Subscription pricing models that seek to increase recurring revenue and improve profitability. · Form strategic partnerships that improve market access and credibility. · Improve policy, processes, and toolsets to become a viable platform for internal growth and for mergers and acquisitions. · Thoughtfully execute mergers and acquisitions to expand offerings and/or capabilities. · Promote a performance-based work force where employees enjoy their work and are incentivized to excel and innovate. 4 Organic Growth Our organic growth strategy is to continue our focus and prioritization in the rail, logistics and intermodal market space.
Biggest changeObjectives The Company has set itself the following objectives to support this vision: • Significantly grow our revenue for 2025 and beyond by engaging in additional markets for data center deployment and associated power delivery. • Achieve breakeven and profitability in 2025 by rationalizing our operating costs over a larger revenue base. • Form strategic partnerships that improve market access and credibility. • Improve policy, processes, and toolsets to become a viable platform for internal growth and for mergers and acquisitions. • Thoughtfully execute mergers and acquisitions to expand offerings and/or capabilities. • Promote a performance-based workforce where employees enjoy their work and are incentivized to excel and innovate.
The Company’s primary customers are all governed by regulations related to the safe and effective transportation of goods and passengers, primarily by rail, but in future scenarios by air, road and sea. While changes in the regulatory environment could impact the Company in future years, we believe any changes will be overall positive for the Company.
The Company’s rail customers are all governed by regulations related to the safe and effective transportation of goods and passengers, primarily by rail, but in future scenarios by air, road and sea. While changes in the regulatory environment could impact on the Company in future years, we believe any changes will be generally positive for the Company.
Employees We have a current staff of 71 employees, of which 66 are full-time, the majority of which work in the Jacksonville area, none of which are subject to a collective bargaining agreement. We have not experienced any work stoppages and we consider our relationship with our employees to be good.
Employees We have a current staff of 86 employees, of which 79 are full-time, the majority of which work in the Jacksonville area, none of which are subject to a collective bargaining agreement. We have not experienced any work stoppages and we consider our relationship with our employees to be good. 11
These same Artificial Intelligence applications have begun to open up other opportunities for the Company to provide revenue producing solutions with potentially high market adoption. In 2021, the Company ended support of its IT Asset Management (ITAM) solution which cataloged results for data center asset inventory and audit services.
These same Artificial Intelligence applications are creating other opportunities for the Company to provide revenue producing solutions with potentially high market adoption. In 2021, the Company ended support of its IT Asset Management (ITAM) solution which cataloged results for data center asset inventory and audit services.
We inspect railcars traveling through our inspection portal at speeds of up to 70 mph and report mechanical anomalies detected by our system to the inbound train yard, well ahead of the train entering the yard.
We inspect railcars traveling through our inspection portal at speeds of up to 70 mph for freight and up to 125 mph for high-speed transit and report mechanical anomalies detected by our system to the inbound train yard, well ahead of the train entering the yard.
We believe our Railcar Inspection Portal has the potential to reduce this inspection to minutes while the train is moving at speed, improving safety, reducing dwell time and optimizing maintenance. 2 Our system combines high-definition image and data capture technologies with our AI-based analytics applications that are typically installed on active tracks located between two rail yards.
Our RIP reduces this inspection to minutes while the train is moving at speed, improving safety, reducing dwell time and optimizing maintenance. Our system combines high-definition image and data capture technologies with our AI-based analytics applications that are typically installed on active tracks located between two rail yards.
If not manufactured internally, we use third-party manufacturing partners to produce our hardware related components and hardware products and we most often complete final assembly, testing and quality control processes for these components and products.
Our internal manufacturing operations consist primarily of materials procurement, assembly, testing and quality control by our engineers. If not manufactured internally, we use third-party manufacturing partners to produce our hardware related components and hardware products and we most often complete final assembly, testing and quality control processes for these components and products.
This solution incorporates a similar set of sensors, data processing and artificial intelligence to streamline the customer’s logistics transactions and tracking and can also automate the security and safety inspection if called for.
This solution incorporates a similar set of sensors, data processing and artificial intelligence to streamline the customer’s logistics transactions and tracking and can also automate the security and safety inspection if called for. The Company has previously deployed this system with one large North American retailer.
Other companies that participate in the visual and optical (laser) based railcar inspection systems market include Wabtec (Beena Vision), KLD Labs, WID, IEM, and Camlin Rail. Some Class 1 railroads have stated that they are developing “in-house” solutions.
Nonetheless, competitors are unique to each market and are described below as they relate to those market segments. Duostech Railcar Inspection Portal Companies that participate in the visual and optical (laser) based railcar inspection systems market include Wabtec (Beena Vision), Ensco (KLD Labs), WID, IEM, and Camlin Rail. Some Class 1 railroads have stated that they are developing “in-house” solutions.
We are currently evaluating using our current operations experience within “edge data centers” (as deployed for our Railcar Inspection Portal) to drive additional revenues within other markets requiring this type of solution although no specific offering has been developed at this time.
We are now using our current operations experience within “edge data centers” (as deployed for our Railcar Inspection Portal) to drive additional revenues within other markets requiring this type of solution.
Founded in 1934, the Association of American Railroads (AAR) is responsible for setting the standards for the safety and productivity of the U.S./North American freight rail industry, and by extension, has established the inspection parameters for the rail industry’s rolling stock.
Federal regulations require each railcar/train to be inspected for mechanical defects prior to leaving a rail yard. Founded in 1934, the Association of American Railroads (AAR) is responsible for setting the standards for the safety and productivity of the U.S./North American freight rail industry, and by extension, has established the inspection parameters for the rail industry’s rolling stock.
Its technology focus is within the Vision Technology market sector and, more specifically, the Machine Vision subsector. Machine Vision companies provide imaging-based automatic inspection and analysis for process control for industry with potential expansion into other markets.
Machine Vision companies provide imaging-based automatic inspection and analysis for process control for industry with potential expansion into other markets.
Rapid technological advances in hardware and software development, evolving standards in computer hardware and software technology, and changing customer requirements characterize the markets in which we compete.
Internal development allows us to maintain technical control over the design and development of our products. Rapid technological advances in hardware and software development, evolving standards in computer hardware and software technology, and changing customer requirements characterize the markets in which we compete.
On-site installations are performed using a combination of in-house project managers and engineers and using third-party sub-contractors as needed. Throughout the process of design, develop, deploy and operate, the Company maintains responsibility for all aspects. Our internal manufacturing operations consist primarily of materials procurement, assembly, testing and quality control by our engineers.
This methodology will continue and be applied to our new subsidiaries where on-site installations are performed using a combination of in-house project managers and engineers and using third-party sub-contractors as needed. Throughout the process of design, develop, deploy and operate, the Company maintains responsibility for all aspects.
This transaction was completed on April 1, 2015, whereby duostech™ became a wholly owned subsidiary of ISA. After the merger was completed, ISA changed its corporate name to Duos Technologies Group, Inc.
This transaction was completed on April 1, 2015, whereby duostech™ became a wholly owned subsidiary of ISA. After the merger was completed, ISA changed its corporate name to Duos Technologies Group, Inc. (“Duos” or “the Company”). During 2024, the Company began a major expansion into new markets, leveraging the developments previously undertaken and the experience of its management team.
Duos is currently developing industry solutions for its target markets which will address rail, trucking, aviation and other vehicle-based processes. Duos’ initial offering, the Railcar Inspection Portal (RIP), provides both freight and transit railroad customers and select government agencies the ability to conduct fully remote railcar inspections of trains while they are moving at full speed.
As Duos’ initial offering, the RIP provides both freight and transit railroad customers and select government agencies the ability to conduct fully remote railcar inspections of trains while they are moving at full speed.
We also actively engage in monitoring activities with respect to infringing uses of our intellectual property by third parties. 3 Specific Areas of Competition One of our primary commercial goals is to develop innovative technology solutions and target potential “greenfield” market spaces in order to maximize our business footprint and give us the ability to help define the market parameters for the future.
Specific Areas of Competition One of our primary commercial goals is to develop innovative technology solutions and target potential “greenfield” market spaces in order to maximize our business footprint and give us the ability to help define the market parameters for the future. More recently, we have expanded our operations into two additional markets as described previously.
Under this new model, the Company will build, own and operate its RIP product and offer the data access for each portal to potential customers. This expansion of the RIP offering would potentially open up the addressable market to other railroads, railcar owners, and car lessors.
Under this new model, the Company may also build, own and operate its RIP product and offer the data access for each portal to potential customers.
This shift increases the pool of potential customers by lowering the entry point for the RIP and would reshape the Company’s working capital needs to invest in the construction of a RIP ahead of customer revenue inflows. The Company continues to explore this expansion on the long-term effects it may have on future cash flows.
While this shift could increase the pool of potential customers by lowering the entry point for the RIP and potentially reshape the Company’s working capital needs to invest in the construction of a RIP ahead of customer revenue inflows, the Company is still evaluating the potential market for this offering.
The Company has already deployed this system with one large North American retailer and anticipates increased demand from other large retailers, railroad intermodal operators and select government agencies that manage logistics and border crossing points.
While Duos originally anticipated increased demand from other large retailers, railroad intermodal operators and select government agencies that manage logistics and border crossing points, the Company has been resource constrained to effectively market this offering.
We protect our intellectual property rights by relying on federal, state, and common law rights, as well as contractual restrictions. We control access to our proprietary technology by entering into confidentiality and invention assignment agreements with all of our employees and contractors, and confidentiality agreements with third parties.
We control access to our proprietary technology by entering into confidentiality and invention assignment agreements with all of our employees and contractors, and confidentiality agreements with third parties. We also actively engage in monitoring activities with respect to infringing uses of our intellectual property by third parties.
At this time, we believe our offerings are complementary to the current and evolving standards and that we will adapt to any new regulations as they are promulgated.
At this time, we believe our offerings are complementary to the current and evolving standards and that we will adapt to any new regulations as they are promulgated. We also work closely with state and local governments, particularly in the provision of Edge Data Centers to make sure that we comply with local zoning ordinances and other regulatory requirements.
Research and Development The Company’s R&D and software development teams design and develop all systems and software applications with a combination of full-time in-house software engineers and outside contractors. Internal development allows us to maintain technical control over the design and development of our products.
The Company will continue to monitor the situation and update shareholders as the project progresses. Research and Development The Company’s R&D and software development teams design and develop all systems and software applications with a combination of full-time in-house software engineers and outside contractors, although the use of outside contractors was substantially reduced in 2024.
Although we are now adapting to these challenges, previous bids that have been submitted could be challenging to execute within the financial framework and execution times originally envisaged. We continue to have dialogue with our customers regarding potential price increases and implementation delays, but we may suffer some economic impacts as a result of this.
Although we are now adapting to these new markets, previous bids that have been submitted in the rail industry could be challenging to execute within the financial framework and execution times originally envisaged due to significant delays by one of our major customers.
Furthermore, we believe we have the ability to upgrade and scale our solutions with additional technologies in the future. We believe that the current market for our technologies is substantial. At the same time, we recognize that the technology life cycle is fast and evolving.
In particular, we have expanded our IP portfolio by the addition of 3 new patents in 2024 alone, with the total number of patents now at 11. Furthermore, we believe we have the ability to upgrade and scale our solutions with additional technologies in the future. We believe that the current market for our technologies is substantial.
In this regard, the Company has made significant changes in the senior management team to include a new Chief Executive Officer, who joined the Company in September 2020 and has years of experience successfully leading start-up and turn-around companies.
In this regard, the Company has made significant changes in the senior management team to include a new divisional President, who joined the Company in July 2024 as the senior leader of our new subsidiary Duos Edge AI and has more than 30 years of experience successfully leading start-up ventures in the data center industry.
The new leadership team’s focus is to improve operational and technical execution which will in turn enable the commercial side of the business to expand RIP and ALIS delivery into existing and new customers.
The joint leadership team’s focus is to oversee operational and technical execution which will in turn enable the commercial side of the business to expand the Company’s business into new markets and customers. Manufacturing and Assembly The Company designs and develops technology solutions using a combination of in-house fabrication, commercial off-the-shelf technology, and outsourced manufacturing.
Another market we are pursuing as our second priority is using our Automated Logistics and Information Systems solution ( a l is ™ ) . Potential customers include commercial retail logistics and intermodal operators, Class 1 rail intermodal operators that are moving large amounts of automobiles, and U.S.
Potential customers include commercial retail logistics and intermodal operators, Class 1 rail intermodal operators that are moving large amounts of automobiles, and U.S. Government agencies such as the Department of Defense and the Department of Homeland Security.
Our Automated Logistics Information System (ALIS) also represents an opportunity to expand into a mature market that we believe has a significant technology gap. While most facilities, such as distribution centers, that process commercial trucks in and out have sophisticated software management applications for logistics control, they have most often not implemented an advanced gatehouse automation solution.
While most facilities, such as distribution centers, that process commercial trucks in and out have sophisticated software management applications for logistics control, they have most often not implemented an advanced gatehouse automation solution. Historically, this category was referred to as “Automated Gate Systems” or AGS. The purpose of AGS technology is to streamline entry in and exit out of facilities.
We plan to continue to dedicate significant resources to research and development efforts, including software development, to maintain and improve our current product and services offerings. 5 Government Regulations The Company has worked with various agencies of the federal government for more than 10 years including the Department of Homeland Security (“DHS”).
We plan to continue to dedicate resources to research and development efforts, including software development, to maintain and improve our current product and services offerings.
The Company’s headquarters are located at 7660 Centurion Parkway, Suite 100, Jacksonville, Florida 32256 and main telephone number is (904) 296-2807. Overview The Company, operating under its brand name duos tech , develops and deploys technology systems with focus on inspecting and evaluating moving vehicles.
Overview The Company, operating under its brand name duos tech , develops and deploys technology systems with focus on inspecting and evaluating moving vehicles. Its technology focus is within the Vision Technology market sector and, more specifically, the Machine Vision subsector.
Potential competitors could move into this sector, and it is possible that some Class 1 railroads could develop their own solutions that limit our total addressable market. In late 2022, the Company announced it will pursue a subscription platform for the RIPs.
At the same time, we recognize that the technology life cycle is fast and evolving. Potential competitors are moving into this sector, and some Class 1 railroads are developing their own solutions that could limit our total addressable market.
Revenue recognition could be delayed as a result of these factors and profitability could be impacted due to higher costs for materials and other services. The Company will continue to monitor the situation and update shareholders as the situation unfolds.
We continue to have dialogue with that customer regarding potential price increases and implementation delays, but we may suffer some economic impacts because of this. Revenue recognition could be delayed as a result of these factors and profitability could be impacted due to higher costs for materials and other services in that specific subsidiary.
The Company is evaluating other solutions for moving vehicles including aircraft, which could provide similar benefits in terms of safety and efficiency for required inspections as part of an operations process. 1 We have developed two proprietary solutions that operate our software and artificial intelligence. cen t raco ® is an Enterprise Information Management Software platform that consolidates data and events from multiple sources into a unified and distributive user interface.
However, the Company continues to perform research and development in evaluating other solutions for moving vehicles including aircraft, which could provide similar benefits in terms of safety and efficiency for required inspections as part of an operations process.
The Company continues to expand its detection capabilities through the development and integration of additional sensor technologies to include laser, infrared, thermal, sound and x-ray to process AI-based analytics of inspection points. Currently the Company has a high-reliability catalog of over 48 artificial intelligence algorithms which can be integrated into the RIP to enhance mechanical anomalies detections.
Currently, three Class 1 railroads and several transit and international railroads use have deployed RIP with one of those railroads broadly deploying the technology across its network. The Company continues to expand its detection capabilities through the development and integration of additional sensor technologies to include laser, infrared, thermal, sound and signal detection to process AI-based analytics of inspection points.
The Company has deployed RIPs in Canada, Mexico and the United States and anticipates expanding this solution into Europe, Asia and the Middle East in coming years. The Company has also developed the Automated Logistics Information System (ALIS) which automates gatehouse operations where transport trucks enter and exit large logistics and intermodal facilities.
The Company has previously notified certain third parties of the existence of these patents to secure its rights in regard to this intellectual property. The Company has also developed the Automated Logistics Information System (ALIS) which can automate gatehouse operations where transport trucks enter and exit large logistics and intermodal facilities.
In the last quarter of 2022, the Company elected not to renew a support contract for its Integrated Correctional Automation System (iCAS) for one customer. The Company subsequently sold its iCAS assets to a buyer during the second quarter of 2023 for $165,000 via a convertible note. The year 2023 ushered in a new phase in the Company’s development.
The Company subsequently sold its iCAS assets to a buyer during the second quarter of 2023 for $165,000 via a convertible note. Our current CFO is a related party of the buyer as their non-Executive Chairman.
Government agencies such as the Department of Defense and the Department of Homeland Security. Today, we currently have 20 production systems in use, but we believe the greenfield opportunity here to be substantial. We have identified over 900 lanes of traffic within nearly 300 facilities as potential business opportunities in the near-term.
Although we have previously identified over 900 lanes of traffic within nearly 300 facilities as potential business opportunities in the near-term, we are not actively pursuing this at this time, but rather deploying our resources to the new markets described above.
The Company, based in Jacksonville, Florida, oversees its wholly owned subsidiary, duostech™ and employs approximately 71 people and is a technology company which designs, develops, deploys and operates intelligent technology solutions with a focus on software applications and artificial intelligence (“AI”). The Company has a strong portfolio of intellectual property.
Duos also continues to operate as a technology company which designs, develops, deploys and operates intelligent technology solutions with a focus on software applications and artificial intelligence (“AI”) in addition to large project, consulting, implementation and asset management.
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Although we continue to see an extension of challenges faced in 2022, we also see positive changes and opportunities for our business that will be discussed in greater detail herein.
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Still headquartered in Jacksonville, Florida, Duos now manages three, wholly owned subsidiaries, duostech™, Duos Edge AI Inc., (“Duos Edge”) and Duos Energy Corporation (“Duos Energy”).
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They include: · Introducing a new “subscription” based offering for access to data and images by a much broader target market including Class 1 railroads, railcar owners and lessors, and short-line railroads. · Owning and operating a network of RIPs with multiple subscribers outside of the Company’s traditional customer base. · Selling customized RIPs to Class 1, short-line and other industrial companies where specialized applications or routes demand a bespoke solution. duos tech™ Railcar Inspection Portal ( r i p ® ) Federal regulations require each railcar/train to be inspected for mechanical defects prior to leaving a rail yard.
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In its current operations it now employs approximately 84 people in management, operations, engineering, software development, customer support and project implementation and management across three major market segments including rail technology deployment, Data Center co-location facilities and behind the meter electrical power provision.
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Currently, three Class 1 railroads and several transit and international railroads use our r i p ® technology with one of those railroads broadly deploying the technology across its network.
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The Company has a strong and growing portfolio of intellectual property including significant patent awards in the areas of railcar scanning technology for the identification of defects. The Company’s headquarters are located at 7660 Centurion Parkway, Suite 100, Jacksonville, Florida 32256 and main telephone number is (904) 296-2807.
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These detections support railroads in the active maintenance and overall safety of their railcar fleet and networks. Markets We believe the opportunity for our Railcar Inspection Portal business is substantial and continues to be our number one priority.
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In 2024, the Company’s management team determined that it would be in the best interests of the Company and its shareholders to leverage the skills and expertise that have been built up since 2021 to expand into complimentary and naturally adjacent markets.
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Currently, we are focused on the North American market, but plan to expand globally in the future with interest from Europe, Asia and the Middle East. Patents and Trademarks The Company holds a number of patents and trademarks for our technology solutions.
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Duos will continue to develop industry solutions for its target markets addressing rail, trucking, aviation and other vehicle-based processes. In addition, the Company elected to develop new offerings based on its existing technology and formed a new subsidiary in July 2024, Duos Edge AI.
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Historically, this category was referred to as “Automated Gate Systems” or AGS. The purpose of AGS technology is to streamline entry in to and exit out of facilities. The marketplace for this was mostly seaports and intermodal transfer facilities and was relatively expensive technology to deploy.
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The objective of this new subsidiary is to market a special part of the Railcar Inspection Portal (“RIP”) for the provision of high-speed and function processing of data and applications with a focus on reducing latency in response times to end-users.
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Our Growth Strategy Vision The Company designs, develops, deploys and operates intelligent technology solutions for inspecting and evaluating moving objects. Its technology application focus is within the rail and intermodal markets which offers imaging-based automatic inspection and analysis for process control for industry with potential expansion into other markets.
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Duos has many years of experience via its expert staff in bringing these types of capabilities to remote locations, also known as “the edge”. Edge processing can be an extremely efficient and lower cost alternative to traditional data centers.
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Objectives · Improve our operational and technical execution, customer satisfaction and implementation speed. · Expand Rail Inspection Portal and Automated Logistics Information System with current and future customers in Rail, Logistics and U.S.
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The strategy for Duos Edge is to serve rural communities, also known as Tier 3 and 4 markets, and install Edge data centers in these locations thereby providing access to high-speed communications and advanced processing capabilities as a substitute for solutions where large amounts of data are “backhauled” using “the Cloud”.
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In addition, a key account executive from one of Duos’ competitors joined the team during late 2022 to support the continued revenue growth of the business bringing significant sales experience focused around the rail market.
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Duos developed these capabilities as an adjunct to its RIP offerings due to the need for fast results (less than 60 seconds) in identifying defects and maintenance issues on moving railcars.
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In the third quarter of 2023, the Company also brought on a new Chief Commercial Officer bringing significant experience from the sales and operations aspects of the intermodal and power industries. In 2021, the Company also hired a new Chief Technology Officer bringing 25 years of experience in designing and delivering value driven technologies.
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The Company has deployed RIPs in Canada, Mexico and the United States and anticipates expanding this solution into Europe, Asia and the Middle East in coming years. 1 Duos has been successful in patenting much of its technology and specifically for the rail industry offerings.
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Our new CTO has already led the team through instrumental changes to its approach to software and artificial intelligence development. The team also saw a change in CFO in late 2022 with the new CFO bringing significant experience in growth for asset-intensive businesses which aligns with the subscription format the Company will expand into.
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Key patents include: · Use of Artificial Intelligence (“AI”) to detect defects in trains and method to use.
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Even though supply chain issues are expected to continue in 2024, the Company’s primary customers have indicated readiness to order more equipment and services based upon the Company’s current performance and the new subscription offerings expands the universe of potential customers.
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(US 11,891,098 B1) · Device to Capture High Resolution Images of a train as it passes through an inspection portal (US 11,974,035 B1) · Device to Capture High Resolution Images of the undercarriage of a freight car (US 12,188,846 B2) These three recent patents, in conjunction with 8 other patents, put Duos in a dominant position for this type of scanning technology (also known as “Wayside Technology”) and the Company expects to both deploy systems and, where appropriate, license to users or manufacturers.
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Additionally, the CEO has directed that the Company make continual engineering and software upgrades to the RIP to meet anticipated Federal Railroad Association (FRA) and Association of American Railroad (AAR) standards. Manufacturing and Assembly The Company designs and develops technology solutions using a combination of in-house fabrication, commercial off-the-shelf technology, and outsourced manufacturing.
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The Company will continue to evaluate its resource commitments in future years in conjunction with the expected growth in revenues and cash flow to support additional investments in these areas.
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For 2024 and possibly beyond, we expect to face significant challenges with macro-economic impacts, specifically inflation and supply chain disruption. Although these started to be identified in late 2021, we believe they continue to manifest themselves in ways that could challenge our business growth in the future.
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Also in late 2024, Duos formed a third subsidiary, Duos Energy Corporation (“Duos Energy”) with the express purpose of providing consulting services and solutions for the rapidly growing demand for electrical power outside of traditional utilities.
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Specifically, the ability to source key components and certain implementation services will dictate just how quickly the Company can meet desired installation deadlines. In the industries in which we operate, the time from concept to contract can be substantial.
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As an outgrowth of its new Edge Data Center subsidiary, and the current expert staff on-hand, Duos has engaged with multiple third parties to act in a consulting and asset management capacity whereby Duos staff will be engaged directly to supply this type of power solutions for multiple uses including for large data centers supporting AI “hyperscalers”.
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In late 2024, Duos also engaged with Fortress Investment Group (“FIG”) to assist in FIG’s purchase of approximately 850 Mega Watts of electrical generation capacity (consisting of 30 mobile gas turbine generators) and associated equipment to support their installation and operation (“balance of plant”), certain trademarks and domain names and certain contracts.
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In late November, Sawgrass Buyer, LLC (“Sawgrass”), an entity formed and owned by FIG, executed an asset purchase agreement with Atlas Corporation, APR Energy Holdings Limited and a number of its wholly-owned affiliates (collectively “APR”). From 2018 to 2020, Chuck Ferry was formerly the CEO of APR. The transaction closed on December 31, 2024.
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At Closing, Sawgrass entered into an Asset Management Agreement (“AMA”) with Duos under which a substantial portion of Duos staff and some members of the management team (including Mr. Ferry), would oversee operations of Sawgrass. The AMA term is up to two years and is expected to generate approximately $42 million in revenue for Duos over that period.
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At Closing, Duos also took a 5% ownership stake in Sawgrass APR Holdings LLC, the ultimate parent company of Sawgrass. Subsequent to Closing, Sawgrass changed its name to New APR Energy, LLC (“New APR”).
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Under the terms of the AMA, Duos staff will conduct all operations for commercial engagement, planning and project management, installation and operations of the New APR assets.
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The new entity will share certain management functions with Duos including the CEO, COO, Chief Commercial Officer and General Counsel and other services will be provided by Duos in a combination of direct staffing with specific experience in the power generation industry and other functions as necessary via a “shared services” agreement.
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New APR over time will develop its own accounting and administrative functions.
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There are significant synergies between Duos and New APR, particularly in the areas of Data Center power generation and related business development. 2 Intelligent Technologies Duos has developed two proprietary solutions that continue to form the basis for the operations of our data capture, user interface software and artificial intelligence based analytics. cen t raco ® is an Enterprise Information Management Software platform that consolidates data and events from multiple sources into a unified and distributive user interface.
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As previously discussed, the formation of a new subsidiary, Duos Edge focuses on this rapidly growing market, and is well suited to contribute to the growth of the Company’s revenues and predicted future profitability. In the last quarter of 2022, the Company elected not to renew a support contract for its Integrated Correctional Automation System (iCAS) for one customer.
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The year 2024 was a transformative year for Duos with the addition of two new subsidiaries addressing the adjunct Edge Data Center market and the power generation market, utilizing much of the skills and expertise inherent in the staff that has been built up in the past 24 months.
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All three businesses made significant progress during 2024 including: · Execution of a long-term agreement with a major Class 1 railroad for the support of the “subscription” based offering, giving access to data and images by a much broader target market including Class 1 railroads, railcar owners and lessors, and short-line railroads. · Development of a modular “RIP” allowing the capability of much greater customization of desired images and an overall lower cost to potential purchasers. · Sales of customized RIPs to industrial companies where specialized applications or routes demand a bespoke solution. · Entrance into the market for edge computing by targeting key opportunities within the Tier 3 and 4 markets for education and supplying specialized data centers to serve those markets in conjunction with providing computing and telecommunications capacity to commercial customers outside of the rail industry. · Offering consulting, asset management including full organizational implementation and support, with operational capabilities for the power generation market focusing on data center operations Operating Subsidiaries duos tech™ The Company is currently as of the date of this report operating in three distinct but related segments.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

22 edited+13 added−10 removed70 unchanged
Biggest changeEach contract covers an agreement to deliver a rail inspection portal which, once accepted, must be paid in full, with 30% or more being due and payable prior to delivery. The balances of the contracts are for service and maintenance which is paid annually in advance with revenues recorded ratably over the contract period.
Biggest changeFor the year ended December 31, 2023, three customers accounted for 48%, 30%, and 11% of revenues. In all cases, there are no minimum contract values stated. Each contract covers an agreement to deliver a rail inspection portal which, once accepted, must be paid in full, with 30% or more being due and payable prior to delivery.
If an active market for our common stock develops, there is a significant risk that our stock price may fluctuate in the future in response to any of the following factors, some of which are beyond our control: · Variations in our quarterly operating results; · Announcements that our revenue or income are below analysts’ expectations; · General economic downturns; · Sales of large blocks of our common stock; and · Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments. 11 You may experience dilution of your ownership interest due to future issuances of our securities.
If an active market for our common stock develops, there is a significant risk that our stock price may fluctuate in the future in response to any of the following factors, some of which are beyond our control: • Variations in our quarterly operating results; • Announcements that our revenue or income are below analysts’ expectations; • General economic downturns; • Sales of large blocks of our common stock; and • Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments. 16 You may experience dilution of your ownership interest due to future issuances of our securities.
Potential causes of future fluctuations in our operating results may include: · Period-to-period fluctuations in financial results · Issues in manufacturing products · Unanticipated potential product liability claims · The introduction of technological innovations or new commercial products by competitors · The entry into, or termination of, key agreements, including key strategic alliance agreements · The initiation of litigation to enforce or defend any of our intellectual property rights · Regulatory changes · Failure of any of our products to achieve commercial success 12 We are subject to the Florida anti-takeover provisions, which may prevent you from exercising a vote on business combinations, mergers or otherwise.
Potential causes of future fluctuations in our operating results may include: • Period-to-period fluctuations in financial results • Issues in manufacturing products • Unanticipated potential product liability claims • The introduction of technological innovations or new commercial products by competitors • The entry into, or termination of, key agreements, including key strategic alliance agreements • The initiation of litigation to enforce or defend any of our intellectual property rights • Regulatory changes • Failure of any of our products to achieve commercial success 17 We are subject to the Florida anti-takeover provisions, which may prevent you from exercising a vote on business combinations, mergers or otherwise.
This litigation, whether successful or unsuccessful, could result in substantial costs and diversion of resources, which could have a material adverse effect on our business, financial condition, and results of operations. 9 If we are unable to apply technology effectively in driving value for our clients through technology-based solutions or gain internal efficiencies and effective internal controls through the application of technology and related tools, our operating results, client relationships, growth and compliance programs could be adversely affected.
This litigation, whether successful or unsuccessful, could result in substantial costs and diversion of resources, which could have a material adverse effect on our business, financial condition, and results of operations. 14 If we are unable to apply technology effectively in driving value for our clients through technology-based solutions or gain internal efficiencies and effective internal controls through the application of technology and related tools, our operating results, client relationships, growth and compliance programs could be adversely affected.
Our operating results may be adversely affected if the market opportunity for our products and services does not develop in the ways that we anticipate or if other technologies become more accepted or standard in our industry or disrupt our technology platforms. 7 Our revenues are dependent on general economic conditions and the willingness of enterprises to invest in technology.
Our operating results may be adversely affected if the market opportunity for our products and services does not develop in the ways that we anticipate or if other technologies become more accepted or standard in our industry or disrupt our technology platforms. 12 Our revenues are dependent on general economic conditions and the willingness of enterprises to invest in technology.
Although there are periodic volume spikes from time to time, we cannot give an assurance that a consistent, active trading market will develop.
Although there are periodic volume spikes from time to time, we cannot give assurance that a consistent, active trading market will develop.
Failure to obtain registrations could compromise our ability to protect fully our trademarks and brands and could increase the risk of challenge from third parties to our use of our trademarks and brands. 8 We may be required to incur substantial expenses and divert management attention and resources in defending intellectual property litigation against us.
Failure to obtain registrations could compromise our ability to protect fully our trademarks and brands and could increase the risk of challenge from third parties to our use of our trademarks and brands. 13 We may be required to incur substantial expenses and divert management attention and resources in defending intellectual property litigation against us.
Our success depends substantially on the efforts and abilities of our senior management and certain key personnel. The competition for qualified management and key personnel, especially engineers, is intense. Although we maintain non-competition and non-disclosure covenants with all our key personnel, we do not have employment agreements with most of them.
Our success depends substantially on the efforts and abilities of our senior management and certain key personnel. The competition for qualified management and key personnel, especially engineers, is intense. Although we maintain non-competition and non-disclosure covenants with all our key personnel, we do not have employment agreements with many of them.
As a result, we may require additional funds from future equity or debt financings, including potential sales of preferred shares or convertible debt, to complete the development of new projects and pay the general and administrative costs of our business.
As a result, we may require additional funds from future equity or debt financing, including potential sales of preferred shares or convertible debt, to complete the development of new projects and pay the general and administrative costs of our business.
The Company believes that this presents a short-term capital risk but will, long-term, improve the overall performance of the business. Some of our competitors are larger and have greater financial and other resources than we do. Some of our product offerings compete and will compete with other similar products from our competitors.
The Company believes that this presents a short-term capital risk but is expected, long-term, to improve the overall performance of the business. Some of our competitors are larger and have greater financial and other resources than we do. Some of our product offerings compete and will compete with other similar products from our competitors.
In certain instances where the Company would build, own and operate its own assets, it may require a different working capital and capitalization strategy whereby the Company will be required to make upfront investments without significant customer milestone payments to offset the investment.
In certain instances where the Company plans to build, own and operate its own assets, it will require a different working capital and capitalization strategy whereby the Company will be required to make upfront investments without significant customer milestone payments to offset the investment.
These competitive products could be marketed by well-established, successful companies that possess greater financial, marketing, distributional, personnel and other resources than we possess.
These competitive products could be marketed by well-established, successful companies that possess greater financial, marketing, distribution, personnel and other resources than we possess.
Our products and services may fail to keep pace with rapidly changing technology and evolving industry standards. The market in which we operate is characterized by rapid, and sometimes disruptive, technological developments, evolving industry standards, frequent new product introductions and enhancements and changes in customer requirements.
Our products and services may fail to keep pace with rapidly changing technology and evolving industry standards. The markets in which we operate are characterized by rapid, and sometimes disruptive, technological developments, evolving industry standards, frequent new product introductions and enhancements and changes in customer requirements.
Our operating losses may continue as we continue to expend resources to further develop and enhance our technology offering, to complete prototyping for proof-of-concept, obtain regulatory clearances or approvals as required, expand our business development activities and finance capabilities and conduct further research and development.
Our operating losses may continue as we continue to expend resources to further develop and enhance our market expansion, to complete prototyping for proof-of-concept, obtain regulatory clearances or approvals as required, expand our business development activities and finance capabilities and conduct further research and development.
We have a history of losses and our growth plans may lead to additional losses and negative operating cash flows in the future. Our accumulated deficit was approximately $64 million as of December 31, 2023.
We have a history of losses and our growth plans may lead to additional losses and negative operating cash flows in the future. Our accumulated deficit was approximately $74 million as of December 31, 2024.
In addition, the Company hires employees and contractors to perform most (if not all) of the work required to complete a contract. We are beginning to experience the impacts of inflation upon previously forecasted costs including employees that require higher salaries, contractors demanding higher prices for jobs and higher costs for materials necessary to complete contracts.
In addition, the Company hires employees and contractors to perform most (if not all) of the work required to complete a contract. We have experienced, and expect to continue to experience, impacts of inflation upon previously forecasted costs including employees that require higher salaries, contractors demanding higher prices for jobs and higher costs for materials necessary to complete contracts.
Our Articles of Incorporation authorize the issuance of up to 10,000,000 shares of "blank check" preferred stock, with such designations rights and preferences as may be determined from time to time by the Board of Directors.
Our Articles of Incorporation authorize the issuance of up to 10,000,000 shares of “blank check” preferred stock, with such designation rights and preferences as may be determined from time to time by the Board of Directors.
In the case of insolvency by one of our significant customers, accounts receivable with respect to that customer might not be collectible, might not be fully collectible, or might be collectible over longer than normal terms, each of which could adversely affect our financial position.
In the case of insolvency by one of our significant customers, accounts receivable with respect to that customer might not be collectible, might not be fully collectible, or might be collectible over longer than normal terms, each of which could adversely affect our financial position. This concentration of credit risk makes us more vulnerable economically.
The loss of services of key employees, or the inability to hire, train, and retain key personnel, especially engineers and technical support personnel, could delay the development and sale of our products, disrupt our business, and interfere with our ability to execute our business plan. 10 Due to our dependence on a limited number of customers, we are subject to a concentration of credit risk.
The loss of services of key employees, or the inability to hire, train, and retain key personnel, especially engineers and technical support personnel, could delay the development and sale of our products, disrupt our business, and interfere with our ability to execute our business plan.
If we encounter integration challenges or discover errors in our solutions late in our development cycle, it may cause us to delay our launch dates.
If we encounter integration challenges or discover errors in our solutions late in our development cycle, it may cause us to delay our launch dates. Any major integration or interoperability issues or launch delays could have a material adverse effect on our revenues, operating income and reputation.
Additionally, our largest customer accounted for approximately 48% of our total revenues for the year ended December 31, 2023. This concentration of credit risk makes us more vulnerable economically. The loss of any of these customers could materially reduce our revenues and net income, which could have a material adverse effect on our business.
The loss of any of these customers could materially reduce our revenues and net income, which could have a material adverse effect on our business. We expect this concentration risk will increase due to the significance of the anticipated revenues under the AMA with New APR.
In the event of such issuances, the preferred stock could be used, under certain circumstances, as a method of discouraging, delaying, or preventing a change in control of our Company. We do not expect to pay dividends and investors should not buy our common stock expecting to receive dividends.
In the event of such issuances, the preferred stock could be used, under certain circumstances, as a method of discouraging, delaying, or preventing a change in control of our Company. We recently completed an “At the Market” (ATM) offering and may consider registering additional shares using our S3 shelf registration facility. We currently have an active shelf registration statement (S-3).
Removed
Any major integration or interoperability issues or launch delays could have a material adverse effect on our revenues, operating income and reputation. 6 We face risks as a result of the coronavirus (COVID-19 pandemic) lingering effects which could significantly disrupt our research and development, operations, sales, and financial results.
Added
Under the Asset Management Agreement, New APR will share certain management functions with the Company and its subsidiaries, including the Chief Executive Officer, Chief Operating Officer, Chief Commercial Officer and General Counsel, and other services will be provided by the Company in a combination of direct staffing with specific experience in the power generation industry and other functions as necessary via a “shared services” agreement.
Removed
Our business has been adversely impacted by the effects of the COVID-19 pandemic. In addition to global macroeconomic effects, the COVID-19 pandemic and related adverse public health developments caused disruption and/or delays to our operations and sales activities.
Added
This may at times affect such employees’, including members of senior management, ability to devote time, attention, and effort to the Company. 15 Due to our dependence on a limited number of customers, we are subject to a concentration of credit risk. For the year ended December 31, 2024, four customers accounted for 34%, 31%, 13% and 12% of revenues.
Removed
Our third-party manufacturers and our customers were disrupted by worker absenteeism, quarantines and restrictions on employees’ ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel or health-related restrictions.
Added
The balances of the contracts are for service and maintenance which is paid annually in advance with revenues recorded ratably over the contract period. As of December 31, 2024, three customers accounted for 73%, 17% and 10% of our accounts receivable.
Removed
Depending on the magnitude of such effects on our activities or the operations of our third-party manufacturers and third-party distributors, the supply of our products, in some cases, continue to be delayed, which could continue to adversely affect our business, operations and customer relationships.
Added
Our anticipated business growth is highly dependent on an Asset Management Agreement with New APR Energy. The Company is expecting to report improved revenues and potentially achieve profitability during fiscal year 2025. That expectation is based on substantial revenues being achieved from the AMA with New APR.
Removed
In addition, the pandemic or other disease outbreak have had and may continue to have over the longer term a material adverse effect on the economies and financial markets of many countries, resulting in an economic downturn that will affect demand for our products and services and impact our operating results.
Added
Although the Company has some influence on that agreement, we are dependent on the market for “behind the meter” power growing as anticipated.
Removed
There can be no assurance that any decrease in sales resulting from the pandemic slowdown will be offset by increased sales in subsequent periods.
Added
If the market should not grow as anticipated or due to some other circumstances either within or beyond our control, revenues recognized from this agreement could be substantially less than expected which would have a material impact on the agreement or lead to its cancellation.
Removed
Although the magnitude of the impact of the COVID-19 outbreak on our business and operations remains uncertain, the continued spread of COVID-19 and the related public health measures and travel and business restrictions may adversely impact our business, financial condition, operating results and cash flows.
Added
In addition, New APR’s business may be affected by new technologies or changes in the industry, regulations, and customer requirements, which may render its existing power, generating solutions obsolete, excessively costly or otherwise unmarketable. Its competitive position may then be impaired, which could have a material adverse effect on the Company’s business.
Removed
In addition, w e have experienced and may in the future experience disruptions to our business operations resulting from quarantines, self-isolations, or other restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design our products and services in a timely manner or meet required milestones or customer commitments.
Added
The term of the AMA is for two years and it may be extended at the option of New APR. There is no assurance, however, that it will be extended and it may be terminated under certain circumstances.
Removed
For the year ended December 31, 2023, three customers accounted for 48%, 30%, and 11% of revenues. For the year ended December 31, 2022, four customers accounted for 42%, 18%, 14% and 14% of revenues. In all cases, there are no minimum contract values stated.
Added
Changes in the Availability of Government Financing May Adversely Affect Our Customer’s Ability to Enter Into Major Capital Projects, such as Data Centers. The strategy of our Duos Edge subsidiary is to serve rural communities, also known as Tier 3 and 4 markets, and install Edge data centers in these locations.
Removed
As of December 31, 2023, two customers accounted for 83%, and 11% of our accounts receivable.
Added
The customers for which we might build these Edge data centers may be dependent on Government grants or financing to assist them to complete these projects. Any reductions in the availability of such grants or financing may adversely affect the ability of these parties to enter into such projects.
Added
We are able to file a supplement to raise potentially as much as $16.5 million under the “baby shelf” rules and use a new ATM to raise additional capital.
Added
The future issuance of a substantial number of shares of common stock into the public market, or the perception that such issuance could occur, could adversely affect the prevailing market price of our common shares.
Added
A decline in the price of our common stock could make it more difficult to raise funds through future offerings of our common stock or securities convertible into common stock. We do not expect to pay dividends and investors should not buy our common stock expecting to receive dividends.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company has applied the FASB issued ASU No. 2016-02 Leases (Topic 842) (“ASU 2016-02”) in the fourth quarter of 2021 The Company now has a total of office and warehouse space of 40,000 square feet. Rental expense for the office lease during 2023 and 2022 was $781,638 and $782,591, respectively. 13
Biggest changeThe Company has applied the FASB issued ASU No. 2016-02 Leases (Topic 842) (“ASU 2016-02”) in the fourth quarter of 2021 The Company now has a total of office and warehouse space of 40,000 square feet. Rental expense for the office lease during 2024 and 2023 was $781,638 and $781,638, respectively. 18

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 4. Mine Safety Disclosures. Not Applicable. 14 PART II
Biggest changeItem 4. Mine Safety Disclosures. Not Applicable. 19 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 14 PART II Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 15 Item 6. [Reserved] 18 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation 19
Biggest changeItem 4. Mine Safety Disclosures 19 PART II Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 20 Item 6. [Reserved] 24 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation 25

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

37 edited+8 added−2 removed26 unchanged
Biggest changeThe Registration Rights Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties. On May 16, 2023 Series D Convertible Preferred received approval at the shareholders meeting for conversion to common stock. On March 22, 2024, the Company entered into Securities Purchase Agreements with certain accredited investors.
Biggest changeAt the Annual Meeting on May 16, 2023, the stockholders approved the convertibility of the Series D Preferred Stock into common stock. On March 22, 2024, March 28, 2024, and April 3, 2024, the Company entered into Securities Purchase Agreements (the “Purchase Agreements”) with certain existing and other accredited investors (the “2024 Purchasers”).
We received the shareholder approval at the meeting held on July 15, 2021. 15 In connection with the Purchase Agreement, the Company also entered into a Registration Rights Agreement with the Purchasers.
We received the shareholder approval at the meeting held on July 15, 2021. In connection with the Purchase Agreement, the Company also entered into a Registration Rights Agreement with the Purchasers.
The investor’s Purchase Agreement also provided that the Company would not, with certain exceptions, sell or issue common stock or Common Stock Equivalents (as defined in the Purchase Agreement) on or prior to December 31, 2023 that entitled any person to acquire shares of common stock at an effective price per share less than the then conversion price of the Series E Convertible Preferred Stock without the consent of the Purchaser.
The existing investor’s Purchase Agreement also provided that the Company would not, with certain exceptions, sell or issue common stock or Common Stock Equivalents (as defined in the Purchase Agreement) on or prior to December 31, 2023 that entitled any person to acquire shares of common stock at an effective price per share less than the then conversion price of the Series E Convertible Preferred Stock without the consent of the Purchaser.
The purchase agreement relating to the shares of Series F Preferred Stock required the consent of the holders in the event the Company were to issue common stock or rights to acquire common stock prior to December 31, 2023 at an effective price per share less than the then conversion price of the Series F Preferred Stock, which was $6.20 per share.
The purchase agreement relating to the shares of Series F Convertible Preferred Stock required the consent of the holders in the event the Company were to issue common stock or rights to acquire common stock prior to December 31, 2023 at an effective price per share less than the then conversion price of the Series F Convertible Preferred Stock, which was $6.20 per share.
As a result, on November 10, 2023 the Company and the holders of the Series F Preferred Stock entered into Exchange Agreements pursuant to which the holders of Series F Preferred Stock exchanged their 5,000 shares of Series F Preferred Stock for an equal number of shares of Series E Preferred Stock.
As a result, on November 10, 2023 the Company and the holders of the Series F Convertible Preferred Stock entered into Exchange Agreements pursuant to which the holders of Series F Convertible Preferred Stock exchanged their 5,000 shares of Series F Convertible Preferred Stock for an equal number of shares of Series E Convertible Preferred Stock.
Each share of Series E Preferred Stock has 333 votes (subject to adjustment); provided that in no event may a holder of Series E Preferred Stock be entitled to vote a number of shares in excess of such holder’s Beneficial Ownership Limitation.
Each share of Series E Convertible Preferred Stock has 333 votes (subject to adjustment); provided that in no event may a holder of Series E Convertible Preferred Stock be entitled to vote a number of shares in excess of such holder’s Beneficial Ownership Limitation.
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is quoted on the Nasdaq Capital Markets (“Nasdaq”) under the trading symbol “DUOT”.
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is quoted on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “DUOT”.
Dividend To date, we have not paid any dividends on our common stock and do not anticipate paying any such dividends in the foreseeable future.
Dividends To date, we have not paid any dividends on our common stock and do not anticipate paying any such dividends in the foreseeable future.
As of December 31, 2023 and 2022, there are 0 and 0 shares of Series C Convertible Preferred Stock issued and outstanding, respectively. Under the Purchase Agreement, the Company was required to hold a meeting of shareholders at the earliest practical date, and such meeting occurred on July 15, 2021.
As of December 31, 2024 and 2023, there are 0 and 0 shares of Series C Convertible Preferred Stock issued and outstanding, respectively. Under the Purchase Agreement, the Company was required to hold a meeting of shareholders at the earliest practical date, and such meeting occurred on July 15, 2021.
Holders of Series B Convertible Preferred Stock voted on an as converted basis on all matters on which the holders of common stock are entitled to vote, subject to beneficial ownership limitations. As of December 31, 2023 and 2022, there are 0 and 0 shares of Series B Convertible Preferred Stock issued and outstanding, respectively.
Holders of Series B Convertible Preferred Stock voted on an as converted basis on all matters on which the holders of common stock are entitled to vote, subject to beneficial ownership limitations. As of December 31, 2024 and 2023, there are 0 and 0 shares of Series B Convertible Preferred Stock issued and outstanding, respectively.
Pursuant to the Purchase Agreement, the Purchaser purchased 4,000 shares of a newly authorized Series E Convertible Preferred Stock at a price of $1,000 per share, and the Company received proceeds of $4,000,000. The Purchase Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties.
Pursuant to the Purchase Agreement, the Purchasers purchased 4,000 shares of a newly authorized Series E Convertible Preferred Stock at a price of $1,000 per share, and the Company received proceeds of $4,000,000. The Purchase Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties.
As a result of that agreement, upon the issuance of 2,500 shares of Series E Preferred Stock (which have a conversion price of $3.00 per share) on November 10, 2023, the holders exchanged their 5,000 shares of Series F Preferred Stock for 5,000 shares of Series E Preferred Stock.
As a result of that agreement, upon the issuance of 2,500 shares of Series E Preferred Stock (which had a conversion price of $3.00 per share) on November 10, 2023, the holders exchanged their 5,000 shares of Series F Preferred Stock for 5,000 shares of Series E Preferred Stock.
Each share of Series F Preferred Stock has 161 votes (subject to adjustment); provided that in no event may a holder of Series F Preferred Stock be entitled to vote a number of shares in excess of such holder’s ownership limitation.
Each share of Series F Preferred Stock had 161 votes (subject to adjustment); provided that in no event may a holder of Series F Preferred Stock be entitled to vote a number of shares in excess of such holder’s ownership limitation.
Series A Redeemable Convertible Preferred Stock Our board of directors has designated 500,000 of the 10,000,000 authorized shares of preferred stock as Series A Convertible Preferred Stock. As of December 31, 2023 and 2022, we have no shares of Series A Convertible Preferred Stock issued and outstanding, respectively.
Series A Redeemable Convertible Preferred Stock Our board of directors has designated 500,000 of the 10,000,000 authorized shares of preferred stock as Series A Convertible Preferred Stock. As of December 31, 2024 and 2023, we have no shares of Series A Convertible Preferred Stock issued and outstanding, respectively.
Unregistered Sales of Equity Securities There were no unregistered sales of the Company’s equity securities during 2023 that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.
Unregistered Sales of Equity Securities There were no unregistered sales of the Company’s equity securities during 2024 that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.
The Registration Rights Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties. The Company’s Board of Directors has designated 5,000 shares as the Series C Convertible Preferred Stock. Each share of the Series C Convertible Preferred Stock has a stated value of $1,000.
The Registration Rights Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties. 20 The Company’s Board of Directors had designated 5,000 shares as the Series C Convertible Preferred Stock. Each share of the Series C Convertible Preferred Stock had a stated value of $1,000.
All holders of the Series E Convertible Preferred Stock elected the 19.99% Beneficial Ownership Limitation The Company on March 27, 2023 entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an existing investor in the Company (the “Purchaser”).
All but one of the holders of the Series E Preferred Stock elected the 19.99% Beneficial Ownership Limitation. The Company on March 27, 2023 entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an existing investor in the Company (the “Purchaser”).
Each share of Series F Preferred Stock was convertible, at any time and from time to time, at the option of the holder, into that number of shares of common stock (subject to the beneficial ownership limitation described below) determined by dividing the stated value of such share ($1,000) by the conversion price, which was $6.20 (subject to adjustment).
Each share of Series F Preferred Stock was convertible, at any time and from time to time, at the option of the holder, into that number of shares of common stock (subject to the beneficial ownership limitation described below) determined by dividing the stated value of such share ($1,000) by the conversion price, which is $6.20 (subject to adjustment) which equates to 161 common shares for each converted Series F preferred share.
The Company reserves and keeps available out of its authorized and unissued Common Stock, solely for the issuance upon the conversion of the Series D Convertible Preferred Stock, such a number of shares of Common Stock as shall from time to time be issuable upon the conversion of all of the shares of the Series D Convertible Preferred Stock then outstanding.
The Company shall reserve and keep available out of its authorized and unissued Common Stock, solely for the issuance upon the conversion of the Series D Convertible Preferred Stock, such a number of shares of Common Stock as shall from time to time be issuable upon the conversion of all of the shares of the Series D Convertible Preferred Stock then outstanding.
Pursuant to the Purchase Agreement on August 2, 2023, the Purchaser purchased 5,000 shares of a newly authorized Series F Convertible Preferred Stock (the “Series F Convertible Preferred Stock”), and the Company received proceeds of $5,000,000. The Purchase Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties.
Pursuant to the Purchase Agreement, the Purchasers purchased 5,000 shares of a newly authorized Series F Convertible Preferred Stock (the “Series F Convertible Preferred Stock”), and the Company received proceeds of $5,000,000. The Purchase Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties.
Additionally, the Series D Convertible Preferred Stock does not have the right to dividends (other than any dividends payable on the common stock on an as converted basis) and in the event of an involuntary liquidation, the Series D shares shall be treated as a pro rata equivalent of common stock outstanding at the date of the liquidation event and have no liquidation preference.
Additionally, the Series D Convertible Preferred Stock does not have the right to dividends and in the event of an involuntary liquidation, the Series D shares shall be treated as a pro rata equivalent of common stock outstanding at the date of the liquidation event and have no liquidation preference.
All holders of the Series D Preferred Stock have elected the 19.99% Beneficial Ownership Limitation.
All but one of the holders of the Series D Preferred Stock elected the 19.99% Beneficial Ownership Limitation.
The November Purchase Agreement also provides that the Company will not, with certain exceptions, sell or issue common stock or Common Stock Equivalents (as defined in the November Purchase Agreement) on or prior to June 30, 2024 that entitles any person to acquire shares of common stock at an effective price per share less than the then conversion price of the Series E Preferred Stock without the consent of the Purchasers.
The November Purchase Agreement also provided that the Company would not, with certain exceptions, sell or issue common stock or Common Stock Equivalents (as defined in the November Purchase Agreement) on or prior to June 30, 2024 that entitled any person to acquire shares of common stock at an effective price per share less than the then conversion price of the Series E Convertible Preferred Stock (which was $3.00) without the consent of the Purchasers.
Each share of Series E Convertible Preferred Stock is convertible, subject to shareholder approval (which has not yet been granted); at any time and from time to time, at the option of the holder, into that number of shares of common stock (subject to the Beneficial Ownership Limitation) determined by dividing the stated value of such share ($1,000) by the conversion price, which is $3.00 (subject to adjustment).
Each share of Series E Convertible Preferred Stock is convertible at any time and from time to time, at the option of the holder, into that number of shares of common stock (subject to the Beneficial Ownership Limitation) determined by dividing the stated value of such share ($1,000) by the conversion price, which was $3.00 (subject to adjustment) (see adjustment below).
On November 9, 2023, the Company entered into a Securities Purchase Agreement (the "November Purchase Agreement") with certain existing investors in the Company (the "Purchasers"). Pursuant to the November Purchase Agreement, the Purchasers purchased an aggregate of 2,500 shares of Series E Preferred Stock and the Company received aggregate proceeds of $2,500,000.
On November 9, 2023, the Company entered into a Securities Purchase Agreement (the “November Purchase Agreement”) with existing investors in the Company (the “Purchasers”). Pursuant to the Purchase Agreement, the Purchasers purchased 2,500 shares of Series E Convertible Preferred Stock, at a price of $1,000 per share, and the Company received proceeds of $2,500,000.
The purchasers of the Series F Preferred Stock elected that their ownership limitation would be 19.99%. 17 The holders of the Series F Preferred Stock, the holders of the common stock and the holders of any other class or series of shares entitled to vote with the common stock shall vote together as one class on all matters submitted to a vote of shareholders of the Company.
The holders of the Series F Preferred Stock, the holders of the common stock and the holders of any other class or series of shares entitled to vote with the common stock shall vote together as one class on all matters submitted to a vote of shareholders of the Company.
In connection with the Purchase Agreement, the Company also entered into a Registration Rights Agreement with the Purchasers. Pursuant to the Registration Rights Agreement, the Company filed with the SEC a registration statement covering the resale by the Purchasers of the shares of common stock into which the shares of Series D Convertible Preferred Stock are convertible.
In connection with such Purchase Agreements, the Company entered into Registration Rights Agreements and filed registration statements with the SEC covering the resale by the Purchasers of the shares of common stock into which the shares of Series D Convertible Preferred Stock are convertible.
As a result of the November Purchase Agreement and the Exchange Agreements, the Company issued a total of 7,500 shares of Series E Preferred Stock and the 5,000 shares of Series F Preferred Stock were cancelled. On March 22, 2024, the Company entered into Securities Purchase Agreements with certain accredited investors.
As a result of the November Purchase Agreement and the Exchange Agreements, the Company issued a total of 7,500 shares of Series E Convertible Preferred Stock and the 5,000 shares of Series F Convertible Preferred Stock were cancelled.
As of December 31, 2023 and 2022 there are 1,299 and 1,299 shares of Series D Convertible Preferred Stock issued and outstanding, respectively. 16 Series E Convertible Preferred Stock The Company’s Board of Directors has designated 30,000 shares as the Series E Convertible Preferred Stock (the “Series E Convertible Preferred Stock”).
As of December 31, 2024, and 2023 there are 1,299 and 1,299 shares of Series D Convertible Preferred Stock issued and outstanding, respectively.
Approximate Number of Equity Security Holders As of March 28, 2024, there were approximately 3,070 holders of record of our common stock, and the last reported sale price of our common stock on the Nasdaq Capital Market on March 28, 2024 was $4.34 per share.
As of December 31, 2024, and December 31, 2023, respectively, there were zero and zero shares of Series F Convertible Preferred Stock issued and outstanding. 23 Approximate Number of Equity Security Holders As of March 27, 2025, there were approximately 243 holders of record of our common stock, and the last reported sale price of our common stock on the Nasdaq Capital Market on March 27, 2025 was $6.05 per share.
Pursuant to one agreement (the “Series E Purchase Agreement”), the Company issued an aggregate of 2,125 shares of Series E Convertible Preferred Stock and the Company received proceeds of $2,125,000. The Series E Preferred Stock was sold at $1,000 a share. The Series E Purchase Agreement contains customary representations, warranties, agreements, and indemnification rights and obligations of the parties.
Pursuant to the Purchase Agreement, the Purchaser purchased 300 shares of the newly authorized Series D Convertible Preferred Stock, and the Company received proceeds of $300,000. The Purchase Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties.
As of December 31, 2023 and December 31, 2022, respectively, there were 11,500 and 0 shares of Series E Convertible Preferred Stock issued and outstanding. Series F Convertible Preferred Stock On August 1, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an existing, accredited investor in the Company (the “Purchaser”).
As of December 31, 2024, and December 31, 2023, respectively, there were 13,500 and 11,500 shares of Series E Convertible Preferred Stock issued and outstanding. In connection with such Purchase Agreements, the Company also entered into Registration Rights Agreements with the Purchasers.
The Purchase Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties. On October 29, 2022, the Company sold to an existing investor in the Company 300 shares of Series D Preferred Stock at a price of $1,000 a share, resulting in gross proceeds of $300,000 to the Company.
The Purchase Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties. On October 29, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a certain existing investor in the Company (the “Purchaser”).
All of the shares of Series F Preferred Stock thereupon were cancelled. As of December 31, 2023 and December 31, 2022, respectively, there were 0 and 0 shares of Series F Convertible Preferred Stock issued and outstanding.
All of the shares of Series F Preferred Stock thereupon were cancelled with zero shares now outstanding.
The conversion price of the Series E Preferred Stock currently is $3.00 per share (subject to adjustment). The Purchasers under the November Purchase Agreement also were the holders of the Company's Series F Preferred Stock issued on August 2, 2023.
This provision was not triggered as of June 30, 2024. The Purchasers under the November Purchase Agreement also were the holders of the Company’s Series F Convertible Preferred Stock issued on August 1, 2023.
Pursuant to one agreement (the “Series D Purchase Agreement”), the Company issued an aggregate of 500 shares of Series D Convertible Preferred Stock and the Company received proceeds of $500,000.
Pursuant to the Purchase Agreements, the 2024 Purchasers purchased an aggregate of 2,125 shares of Series E Convertible Preferred Stock, at a price in each case of $1,000 per share, and the Company received proceeds of $2,125,002.
The Series E Preferred Stock was sold at $1,000 a share. The November Purchase Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties.
The Registration Rights Agreements contain customary representations, warranties, agreements and indemnification rights and obligations of the parties.
Removed
On March 28, 2024, the Company entered into one additional agreement with an accredited investor and issued an additional 120 shares of Series D Convertible Preferred and received proceeds of $120,000. The Series D Preferred Stock was sold at $1,000 a share. The Series D Purchase Agreement contains customary representations, warranties, agreements, and indemnification rights and obligations of the parties.
Added
Pursuant to the Purchase Agreements, the 2024 Purchasers purchased an aggregate of 870 shares of Series D Preferred Stock, at a price of $1,000 per share, and the Company received proceeds of $870,000. In April, May, July and October of 2024, 870 outstanding shares of Series D Convertible Preferred Stock were converted into 290,002 shares of common stock.
Removed
The terms of the Series E Preferred Stock were previously disclosed in the Company's Current Report on Form 8-K filed with the SEC on March 28, 2023 and the Certificate of Designation of Preferences, Rights and Limitations of the Series E Preferred Stock was filed as an exhibit to the Form 8-K.
Added
The Registration Rights Agreements contain provisions for liquidated damages equal to 1% multiplied by the aggregate subscription amount paid, paid each month, in the event certain deadlines are missed. 21 Series E Convertible Preferred Stock The Company’s Board of Directors had designated 30,000 shares as the Series E Convertible Preferred Stock (the “Series E Convertible Preferred Stock”).
Added
On March 22, 2024 and March 28, 2024, the Company entered into Securities Purchase Agreements (the “Purchase Agreements”) with certain existing and other accredited investors (the “2024 Purchasers”).
Added
Those purchase agreements had similar price protections as the November Purchase Agreement but extended the price protection date to December 31, 2024, for all Series E holders.
Added
On September 19, 2024, the conversion rate was lowered to $2.61 from $3.00 per share based on the warrant’s induced exercise price of $2.61 per share. 22 In October of 2024, 125 outstanding shares of Series E Convertible Preferred Stock were converted into 47,892 shares of common stock.
Added
Pursuant to the Registration Rights Agreements, the Company filed with the SEC registration statements covering the resale by the Purchasers of the shares of common stock into which the shares of Series E Convertible Preferred Stock are convertible. The Registration Rights Agreements contain customary representations, warranties, agreements and indemnification rights and obligations of the parties.
Added
The Registration Rights Agreements contain provisions for liquidated damages equal to 1% multiplied by the aggregate subscription amount paid, paid each month, in the event certain deadlines are missed. Series F Convertible Preferred Stock On August 2, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with existing, accredited investors in the Company (the “Purchasers”).
Added
The purchasers of the Series F Preferred Stock elected that their ownership limitation would be 19.99%.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

46 edited+64 added−30 removed27 unchanged
Biggest changeThe decline in costs generally follows the same trend as project revenues year-over-year as a result of an overall timing difference of major project work related to the substantial completion of two freight Railcar Inspection Portals and subsequent progression of procurement and manufacturing for the transit-focused RIPs compared to the equivalent period in 2023 where the Company continued to progress into the advanced stages of procurement and manufacturing of the transit-focused RIPs, which it anticipates completing during 2024.
Biggest changeCost of revenues on technology systems decreased during the period compared to the equivalent period in 2023 in-line with the decline in project revenues. The decline in costs generally follows the same year-over-year trend as project revenues due to timing differences in major project work. This is primarily related to the procurement and manufacturing of transit-focused RIPs.
Consulting Services Stock Based Compensation The Company accounts for employee and non-employee stock-based compensation in accordance with ASC 718-10, “ Share-Based Payment ,” which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including stock options, restricted stock units, and employee stock purchases based on estimated fair values.
Stock Based Compensation The Company accounts for employee and non-employee stock-based compensation in accordance with ASC 718-10, “ Share-Based Payment ,” which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including stock options, restricted stock units, and employee stock purchases based on estimated fair values.
The Company estimates volatility based upon the historical stock price of the Company and estimates the expected term for stock options using the simplified method for employees and directors and the contractual term for non-employees. The risk-free rate is determined based upon the prevailing rate of United States Treasury securities with similar maturities. 26 Item 7A.
The Company estimates volatility based upon the historical stock price of the Company and estimates the expected term for stock options using the simplified method for employees and directors and the contractual term for non-employees. The risk-free rate is determined based upon the prevailing rate of United States Treasury securities with similar maturities. 33 Item 7A.
The recognition of the revenue and subsequent profit from these projects, as well as underlying services and maintenance revenues from existing and recently completed projects, coupled with the previously mentioned fixed departmental costs resulted in a gross margin of approximately 18%.
The recognition of the revenue and subsequent profit from these projects, as well as underlying services and maintenance revenues from existing and recently completed projects, coupled with the previously mentioned fixed departmental costs resulted in a gross margin of approximately 6%.
Our current capital and access to further capital and revenues are sufficient to fund such expansion we are now less dependent on timely payments by our customers for projects and work in process, however we expect such timely payments to continue.
Our current capital and access to further capital and revenues are sufficient to fund such expansion and we are now less dependent on timely payments by our customers for projects and work in process. However we anticipate such timely payments to continue.
Ultimately the continuation of the Company as a going concern is dependent upon the ability of the Company to continue executing the plan described above which was put in place in late 2022 and will continue in 2024 and beyond.
Ultimately the continuation of the Company as a going concern is dependent upon the ability of the Company to continue executing the plan described above which was put in place in late 2024 and will continue in 2025 and beyond.
These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 25 Critical Accounting Estimates Revenue Recognition The Company recognizes revenue over time using a cost-based input methodology in which significant judgment is required to estimate costs to complete projects.
These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 31 Critical Accounting Estimates Revenue Recognition For technology systems, the Company recognizes revenue over time using a cost-based input methodology in which significant judgment is required to estimate costs to complete projects.
Management believes that, at this time, the conditions in our market space with ongoing contract delays and the additional time needed to execute on new contracts previously reported have put a strain on our cash reserves.
Management believes that, at this time, the conditions in our traditional market space with ongoing contract delays and the additional time needed to execute on new contracts previously reported could put a strain on our cash reserves.
Plan of Operation The Company’s growth strategy includes expansion of its technology base through organic development efforts, strategic partnerships, and strategic acquisitions where appropriate. The Company provides its broad range of technology solutions with an emphasis on the Vision Technology market sector and, more specifically, the Machine Vision subsector.
Plan of Operation The Company’s growth strategy includes expansion of its technology base through organic development efforts, strategic partnerships, and targeted acquisitions where appropriate. The Company provides a broad range of technology solutions with a primary emphasis on the Vision Technology market sector, specifically within the Machine Vision subsector.
The Company believes that, with the combination of commercial sales success, Series E Preferred Stock offering coupled with an S-3 shelf registration availability starting in the second quarter of 2024, it will have sufficient working capital to meet its obligations over the following twelve months.
The Company believes that, with the combination of commercial sales success, coupled with an S-3 shelf registration availability starting in the second quarter of 2025, it will have sufficient working capital to meet its obligations over the following twelve months.
As previously noted, the Company was successful during 2023 in raising gross proceeds of over $11,500,000 from the sale of Series E and F Preferred Stock. Additionally, late in the first quarter of 2024, the Company raised gross proceeds of $2,745,000 from the issuance of a combination of Series D and E Preferred Stock (See Note 17).
As previously noted, the Company was successful during 2023 in raising gross proceeds of over $11,500,000 from the sale of Series E and F Preferred Stock. Additionally, late in the first and second quarters of 2024, the Company raised gross proceeds of $2,995,002 from the issuance of a combination of Series D and E Preferred Stock (See Note 14).
However, the bulk of these deferred revenues are expected to be reported in 2024. While customer-driven delays in the installation of our high-speed transit-focused Railcar Inspection Portals have impacted revenue growth timing year-over-year, the Company's capital structure remains resilient, allowing us to pursue large projects despite unexpected delays.
While customer-driven delays in the installation of our high-speed transit-focused Railcar Inspection Portals have impacted revenue growth timing year-over-year, the Company's capital structure remains resilient, allowing us to pursue large projects despite unexpected delays.
The Company may selectively look at opportunities for fund raising in the future. Management has extensively evaluated our requirements for the next 12 months and has determined that the Company currently has sufficient cash and access to capital to operate for at least that period.
The Company may selectively look at opportunities for fundraising in the future including potential debt offerings to support asset acquisition. Management has extensively evaluated our requirements for the next 12 months and has determined that the Company currently has sufficient cash and access to capital to operate for at least that period.
It should be noted that the Company recently increased its working capital to account for an increase in pre-contract procurement activities to avoid a slowdown in revenues caused by delays in receiving certain components as had been the case in previous years.
It should be noted that the Company recently increased its working capital to account for an increase in pre-contract procurement activities to avoid a slowdown in revenues caused by delays in receiving certain components as had been the case in previous years. 27 Overall, in 2024, the Company made significant strides in advancing the procurement and manufacturing of its transit-focused RIPs.
However, recent private placements as well as the availability to raise capital via its shelf registration indicate there is no substantial doubt for the Company to continue as a going concern for a period of twelve months. We continue executing the plan to grow our business and achieve profitability.
However, the anticipated steady cashflow from the AMA and the ability to raise capital via its shelf registration indicate there is no substantial doubt for the Company to continue as a going concern for a period of twelve months. We expect to continue executing the plan to grow our business and achieve profitability as previously discussed.
As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued.
As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. Management has assessed the Company’s ability to continue as a going concern in accordance with the requirement of ASC 205-40.
The increase in net cash used in operations for the year ended December 31, 2023 was the result of expenditures related to current projects as previously discussed as well as expenditures related to projects which the Company anticipates will be completed in 2024.
The decrease in net cash used in operations for the year ended December 31, 2024 was the result of a decrease in expenditures related to current projects as previously discussed.
This was principally due to a lack of working capital prior to an underwritten offerings and private placements which were completed during the first, third and fourth quarters of 2022, the first, third and fourth quarters of 2023, as well as the first quarter of 2024.
In previous financial reports, the Company had raised substantial doubt about continuing as a going concern. This was principally due to a lack of working capital prior to an underwritten offerings and private placements which were completed during the first, third and fourth quarters of 2022, the first, third and fourth quarters of 2023, as well as 2024 and 2025.
There are many risks that affect our business and results of operations, some of which are beyond our control and unexpected macro events can have a severe impact on the business. Please see the risk factors identified in “Item 1A – Risk Factors” elsewhere in this Annual Report.
There are many risks that affect our business and results of operations, some of which are beyond our control and unexpected macro events can have a severe impact on the business.
For the year ended December 31, 2023 compared to December 31, 2022 The following table sets forth a summary of our Consolidated Statements of Operations that is used in the following discussions of our results of operations: For the Years Ended December 31, 2023 2022 Revenues $ 7,471,198 $ 15,012,366 Cost of revenues 6,162,317 10,264,263 Gross margin 1,308,881 4,748,103 Operating expenses 12,755,447 11,613,252 Loss from operations (11,446,566 ) (6,865,149 ) Other income 204,848 366 Net loss $ (11,241,718 ) $ (6,864,783 ) 20 Revenues For the Years Ended December 31, 2023 2022 % Change Revenues: Technology systems $ 3,618,022 $ 11,190,292 -68 % Services and consulting 3,853,176 3,822,074 1 % Total revenues $ 7,471,198 $ 15,012,366 -50 % For the full year 2023, there was a 50% decrease in overall revenues compared to 2022.
For the year ended December 31, 2024 compared to December 31, 2023 The following table sets forth a summary of our Consolidated Statements of Operations that is used in the following discussions of our results of operations: For the Years Ended December 31, 2024 2023 Revenues $ 7,280,885 $ 7,471,198 Cost of revenues 6,811,670 6,162,317 Gross margin 469,215 1,308,881 Operating expenses 11,452,741 12,755,447 Loss from operations (10,983,526 ) (11,446,566 ) Other income 219,069 204,848 Net loss $ (10,764,457 ) $ (11,241,718 ) Revenues For the Years Ended December 31, 2024 2023 % Change Revenues: Technology systems $ 2,252,357 $ 3,618,022 -38 % Services and consulting 5,028,528 3,853,176 31 % Total revenues $ 7,280,885 $ 7,471,198 -3 % For the full year 2024, there was a 3% decrease in overall revenues compared to 2023.
Results of Operations The following discussion should be read in conjunction with the consolidated financial statements included in this report.
Please see the risk factors identified in “Item 1A – Risk Factors” elsewhere in this Annual Report. 26 Results of Operations The following discussion should be read in conjunction with the consolidated financial statements included in this report.
As such, in 2023, this fixed component contributed to a negative margin on the Technology systems revenues. In concert with this, there is a continued focus on construction costs and savings through efficiency, but the Company has elected to retain its key employees in anticipation of expected sales growth in technology systems and services in 2024 and beyond.
In concert with this, there is a continued focus on construction costs and savings through efficiency, and there were some targeted staff reductions during 2024. However, the Company has elected to retain its key employees in anticipation of expected sales growth in technology systems and services in 2025 and beyond. The cost of revenues increased on services and consulting year-over-year.
Machine Vision companies provide imaging-based automatic inspection and analysis for process control for industry with potential expansion into other markets. Duos is currently developing industry solutions for its target markets which will address rail, trucking, aviation and other vehicle-based processes.
Machine Vision companies provide imaging-based automatic inspection and analysis for process control, with the potential for expansion into additional industries. Duos is currently developing industry solutions targeting rail, trucking, aviation, and other vehicle-based processes while also expanding into the fast-growing Edge Data Center and power generation markets.
Liquidity Under Accounting Codification ASC 205, Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued.
In as much as a major portion of our activities is the receipt of revenues from the sales of our products and services, our business operations could be adversely affected by our competitors as well as prolonged recession periods although these are not considered to be a factor at present. 30 Liquidity Under Accounting Codification ASC 205, Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued.
Demand for the products and services will be dependent on, among other things, market acceptance of our products and services, the technology market in general, and general economic conditions, which are cyclical in nature.
The maximum amount of material cash requirements not currently supported by up-front customer deposits is expected to be less than $1 million. Demand for the products and services will be dependent on, among other things, market acceptance of our products and services, the technology market in general, and general economic conditions, which are cyclical in nature.
The Company anticipates that it will install a two-RIP solution for the carrier in 2024, with a long-term services agreement commencing upon delivery of the system. Although the Company’s prospects for future revenue growth are anticipated to be favorable, investing in our securities involves risk and careful consideration should be made before deciding to purchase our securities.
Although the Company’s prospects for future revenue growth are anticipated to be favorable, investing in our securities involves risk and careful consideration should be made before deciding to purchase our securities.
There was a 12% increase in sales and marketing related to increased investment into the capability of the commercial team, including the addition of professionals with extensive experience and leadership in the rail industry. Research and development costs saw a 10% uptick during the year, driven by the increased personnel costs related to the departments allocated to R&D.
There was a 43% increase in sales and marketing related to increased investment into the capability of the commercial team, including the addition of professionals with extensive experience and leadership in the rail, Edge data center and power industries.
During 2023, we funded our operations through the sale of our equity (or equity linked) securities, and through revenues generated and cash received from ongoing project execution, services and associated maintenance revenues. As of March 27, 2024, we have cash on hand of approximately $3,329,753 after an equity capital raise in March 2024 which provided net proceeds of $2,745,000.
During 2024, we funded our operations through the sale of our equity (or equity linked) securities, and through revenues generated and cash received from ongoing project execution, services and associated maintenance revenues.
Liquidity and Capital Resources As of December 31, 2023, the Company has a cash balance of $2,441,842 and an Accounts Receivable balance of $1,462,463. 23 Cash Flows The following table sets forth the major components of our statements of cash flows data for the periods presented: For the Years Ended December 31, 2023 2022 Net cash used in operating activities $ (8,746,564 ) $ (7,873,307 ) Net cash used in investing activities (1,093,909 ) (644,888 ) Net cash provided in financing activities 11,161,223 8,745,567 Net increase (decrease) in cash $ 1,320,750 $ 227,372 Net cash used in operating activities for the years ended December 31, 2023 and 2022 was $8,746,564 and $7,873,307, respectively.
Cash Flows The following table sets forth the major components of our statements of cash flows data for the periods presented: For the Years Ended December 31, 2024 2023 Net cash used in operating activities $ (3,488,687 ) $ (8,746,564 ) Net cash used in investing activities (1,841,298 ) (1,093,909 ) Net cash provided by financing activities 9,154,439 11,161,223 Net increase in cash $ 3,824,454 $ 1,320,750 Net cash used in operating activities for the years ended December 31, 2024 and 2023 was $3,488,687 and $8,746,564, respectively.
Additionally, a 10% increase in general and administration costs was influenced by several factors, including non-cash amortization charges associated with roughly 400,000 share options that were issued during 2023 as well as an increase in incentive programs tied to certain 2022 performance targets.
Additionally, an 18% decrease in general and administration costs was influenced by several factors, including a reduction in personnel and personnel related expenses as well as a decrease in non-cash amortization charges year over year associated with roughly 781,323 share options that were forfeited during 2024.
At the time of this document, the Company estimates that it has available capacity on its shelf registration which it can utilize to bolster working capital and growth of the business in the event it did not have an uptake in the preferred classes of shares previously noted.
At the time of this document, the Company estimates that it has available capacity on its shelf registration which it can utilize to bolster working capital and growth of the business in the event that revenues from its recently executed Asset Management Agreement (“AMA”) with New APR Energy does not provide sufficient cash flow to support operations.
Cost of Revenues For the Years Ended December 31, 2023 2022 % Change Cost of revenues: Technology systems $ 4,352,247 $ 8,376,649 -48 % Services and consulting 1,810,070 1,887,614 -4 % Total cost of revenues $ 6,162,317 $ 10,264,263 -40 % 21 Cost of revenues largely comprises equipment, certain fixed labor and overhead necessary to support the implementation of new systems and support and maintenance of existing systems.
Cost of Revenues For the Years Ended December 31, 2024 2023 % Change Cost of revenues: Technology systems $ 2,818,078 $ 4,352,247 -35 % Services and consulting 3,993,592 1,810,070 121 % Total cost of revenues $ 6,811,670 $ 6,162,317 11 % Cost of revenues primarily includes inventory, shipping, certain fixed labor and overhead and allocated depreciation and amortization as applicable necessary to support the implementation of new systems and support and maintenance of existing systems.
The increase in net loss is primarily attributable to the decrease in project activity in 2023 compared to 2022, offset slightly with an increase in the Company’s recurring services and consulting. Net loss per common share was $1.56 and $1.11 for the years ended December 31, 2023 and 2022, respectively.
Net Loss The net loss for the years ended December 31, 2024 and 2023 was $10,764,457 and $11,241,718, respectively. The decrease in net loss is primarily attributable to the decrease in operating costs as described above. Net loss per common share was $1.39 and $1.56 for the years ended December 31, 2024 and 2023, respectively.
These internal costs are being recognized against project and support revenues with a similar reduction in costs previously recognized for research and development, engineering and internal support. The project costs reflect subsequent allocations of fixed costs related to the staff and departmental costs associated with procurement, manufacturing and installation of RIP installations.
The project costs reflect subsequent allocations of fixed costs related to the staff and departmental costs associated with procurement, manufacturing and installation of RIP installations. As such, in 2024, this fixed component contributed to a negative margin on the technology systems revenues.
The recognition of the revenue and subsequent profit from these major projects, as well as underlying services and maintenance revenues from existing projects, resulted in a 32% gross margin in 2022. 22 Operating Expenses For the Years Ended December 31, 2023 2022 % Change Operating expenses: Sales and marketing $ 1,493,309 $ 1,337,186 12 % Research and development 1,812,951 1,651,064 10 % General and Administration 9,449,187 8,625,002 10 % Total operating expense $ 12,755,447 $ 11,613,252 10 % Overall operating expenses were higher by 10% in 2023 as compared to the full-year 2022.
Operating Expenses For the Years Ended December 31, 2024 2023 % Change Operating expenses: Sales and marketing $ 2,138,431 $ 1,493,309 43 % Research and development 1,531,390 1,812,951 -16 % General and administration 7,782,920 9,449,187 -18 % Total operating expense $ 11,452,741 $ 12,755,447 -10 % Overall operating expenses decreased by 10% in 2024 as compared to the full year 2023.
Material cash requirements will be satisfied within the normal course of business including substantial upfront payments from our customers prior to starting projects. In some cases, the Company may elect to purchase materials and supplies in advance of contract award but where there is a high probability of that award.
In some cases, the Company may elect to purchase materials and supplies in advance of contract award but where there is a high probability of that award. Most, if not all, high value items that are pre-purchased, can be re-purposed if necessary.
As noted above, the decline in margin was a direct result of an increased level of business activity the Company recognized in 2022 related to the delivery of two freight portals and the progression of the transit-focused RIPs compared to the activity in 2023 as well as project delays that were experienced in the latter half of 2023.
As noted above, the decrease in margin was a direct result of the timing of business activity related to the manufacturing of two high-speed, transit-focused Railcar Inspection Portals compared to the activity in 2023. The business activity in 2024 consisted primarily of continued progression into the advanced stages of procurement and manufacturing for the transit-focused RIPs.
The Company continues to put into service additional artificial intelligence algorithms and maintenance and support services which are high margin and represent only marginal increases in the requisite costs to deliver these services.
The Company continues to put into service additional artificial intelligence algorithms and maintenance and support services which are high margin and represent only marginal increases in the requisite costs to deliver these services. 28 Gross Margin For the Years Ended December 31, 2024 2023 % Change Revenues $ 7,280,885 $ 7,471,198 -3 % Cost of revenues 6,811,670 6,162,317 11 % Gross margin $ 469,215 $ 1,308,881 -64 % Gross margin showed a decrease for the year ended December 31, 2024, as compared to the same period in 2023.
Cash flows provided by financing activities during 2023 were primarily attributable to gross proceeds from the issuance of preferred stock to shareholders in the amount of $11,500,000, offset by $25,797 in issuance costs. 2023 marked an increase from 2022 financing activities of $8,745,567.
The Company also obtained $2,200,000 in cash proceeds pursuant to notes executed in 2024 with a related parties. Cash flows from financing activities during 2023 were primarily attributable to the issuance of Series E and Series F Convertible Preferred Stock for $11,500,000 of gross proceeds offset by repayments of certain loans related to financing of insurance costs.
Management has assessed the Company’s ability to continue as a going concern in accordance with the requirement of ASC 205-40. 24 As reflected in the accompanying consolidated financial statements, the Company had a net loss of $11,241,718 for the year ended December 31, 2023. During the same period, cash used in operating activities was $8,746,564.
As reflected in the accompanying consolidated financial statements, the Company had a net loss of $10,764,457 for the year ended December 31, 2024. During the same period, cash used in operating activities was $3,488,687. The working capital deficit and accumulated deficit as of December 31, 2024, were $8,002,361 and $74,368,009, respectively.
By comparison for the full-year 2022, the Company had increased business activity from a handful of projects primarily related to the substantial completion of two freight RIPs along with significant progress made on the procurement and manufacturing of our two transit-focused RIPs.
By comparison for the full-year 2023, the Company had increased business activity from a procurement and manufacturing standpoint related to the transit-focused RIPs. The recognition of the revenue and subsequent profit from these major projects, as well as underlying services and maintenance revenues from existing projects, resulted in an 18% gross margin in 2023.
Duos’ initial offering, the Railcar Inspection Portal (RIP), provides both freight and transit railroad customers and select government agencies the ability to conduct fully automated railcar inspections of trains while they are moving at full speed. Specifically, based upon the current and anticipated business growth, the Company is investing in resources to focus on execution within its target markets.
The Company’s flagship product, the Railcar Inspection Portal (RIP), enables freight and transit railroad customers and select government agencies to conduct fully automated railcar inspections in real-time as trains move at full speed.
As part of its strategy, the Company will endeavor to utilize the Preferred Series E and the remainder of the Series D as additional funding mechanisms. Additionally, during the second quarter of 2024, the Company will again have access to its S-3 “shelf registration” statement allowing the Company to sell additional common shares.
The Company successfully raised approximately $3,544,689 in gross proceeds through its At-The-Market (ATM) offering program in 2024 and secured an additional $3,954,940 in gross proceeds during the first two months of 2025. Additionally, during the second quarter of 2025, the Company will again have access to its S-3 “shelf registration” statement allowing the Company to sell additional securities.
The Company continued to invest in computing, lab equipment, internal use software and artificial intelligence detections development as reflected in the year-over-year increase in 2023. Net cash provided in financing activities for the years ended December 31, 2023 and 2022 was $11,161,223 and $8,745,567, respectively.
Net cash provided by financing activities for the years ended December 31, 2024 and 2023 was $9,154,439 and $11,161,223, respectively.
We have approximately $165,500 in monthly lease and other mandatory payments, not including payroll and ordinary expenses which are due monthly. On a long-term basis, our liquidity is dependent on the continuation and expansion of operations and receipt of revenues.
As of March 28, 2025, we have cash on hand of approximately $4,060,300 after the completion of our At-The-Market (ATM) in January and February of 2025, which provided net proceeds of $3,836,032. On a long-term basis, our liquidity is dependent on the continuation and expansion of operations and receipt of revenues.
In addition, there are several changes in assets and liabilities that increased the use of cash in operations including decreases in accounts payable, accrued expenses and the operating lease obligation. Net cash used in investing activities for the years ended December 31, 2023 and 2022 was $1,093,909 and $644,888, respectively.
In addition, there are several changes in assets and liabilities that decreased the use of cash in operations including decreases in accounts receivable, increases in accounts payable and accrued expenses, and a rise in contract liabilities due to advance payments received from customers.
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We continue to evaluate key requirements within those markets, our go-to-market strategy and add development resources to allow us to compete for additional projects to drive additional revenue growth. 19 Prospects and Outlook The Company’s focus is to improve operational and technical execution which, we believe, will in turn enable the commercial side of the business to expand RIP and ALIS delivery into existing customers and to expand and diversify our current customer base.
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The RIP integrates sophisticated optical, laser, and speed sensors with edge computing and artificial intelligence (AI) algorithms to detect safety and security defects instantly, allowing operators to take immediate action. In 2024, the Company made a strategic decision to leverage its core expertise in high-speed data processing and AI-driven analysis to expand into additional markets.
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The Company’s primary customers have indicated readiness to order more equipment and services should the Company execute as expected on key deliverables. With the Company working toward a subscription platform approach and its expansion of its artificial intelligence offering, this will also open up additional commercial avenues to the Company.
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This resulted in the formation of two new subsidiaries: 1. Duos Edge AI (“Duos Edge”) – Specializing in high-speed data processing through Edge Data Centers, Duos Edge is focused on serving underserved Tier 3 and Tier 4 markets, providing critical infrastructure for education, healthcare, and enterprise computing needs.
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Historically, the Company has been focused on large, one-time sales with the subscription opportunities representing an expanded addressable market with emphasis on recurring revenues. Additionally, the Company is making engineering and software upgrades to the RIP to meet anticipated Federal Railroad Association (FRA) and Association of American Railroad (AAR) standards.
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The Edge Data Centers support applications requiring real-time response, reducing reliance on centralized cloud-based processing and improving efficiency. 2. Duos Energy Corporation (“Duos Energy”) – Established to meet the growing demand for power generation outside of traditional utility grids, Duos Energy provides consulting, asset management, and operational expertise for rapid deployment power generation.
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These upgrades will continue to be released throughout 2024 and are expected to drive revenue growth this year and beyond. The Company is expanding its focus in the rail industry to encompass passenger transportation and was awarded a large, multi-year contract with a national rail carrier.
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Duos Energy has engaged in agreements with Fortress Investment Group (“FIG”) to support power generation solutions, particularly for data centers and AI-driven applications, managing approximately 850 MW of generating capacity.
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This decrease was primarily driven by the substantial completion of two freight RIP projects, alongside ongoing procurement and manufacturing for our transit-focused RIPs in 2022.
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The strategic expansion into Edge Computing and power generation aligns with the Company's long-term vision to drive growth through diversified revenue streams while leveraging its existing technology infrastructure and domain expertise. 25 Prospects and Outlook The Company is focused on improving operational and technical execution, which, in turn, will enable commercial expansion and new technology offerings.
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However, in 2023, despite progress into the advanced stages of procurement and manufacturing for the transit-focused RIPs, customer-driven delays beyond the Company’s control arose during the ongoing production of the two high-speed transit-focused RIPs and thus resulted in timing delays of the overall project delivery timeline shifting anticipated revenues into 2024.
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The primary objectives for 2025 and beyond include: Expansion into power generation and energy solutions : The newly formed Duos Energy subsidiary is positioned to capitalize on the increasing demand for behind-the-meter (BTM) energy solutions.
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For the full year 2023, there was a small increase in services and consulting revenues as there were one-time services performed in 2022, related to major site maintenance and repairs for a single customer which did not occur in 2023. Underlying recurring revenues climbed by approximately 23% on a year-over-year basis.
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The Company’s AMA with New APR, valued at approximately $42 million over two years, along with its 5% non-voting equity interest in the ultimate parent of New APR, establishes a strong foundation for further market penetration in the fast power sector.
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This growth is fueled by the expansion of service contracts following the completion of new portals in early 2023, coupled with the deployment of AI services deployed with several customers.
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This business expansion in conjunction with the revenue generated under the AMA is expected to provide a significant portion of the Company’s revenues in 2025. Expansion of the RIP business model : The Company is shifting to a modular and subscription-based approach, allowing customers to select specific Acquisition Modules suited to their operational needs.
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The Company is focusing on increasing its business from services and the increase is the result of new contracts for existing and new systems which the Company anticipates will continue growing throughout 2024 and beyond.
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This transition provides flexible pricing structures, improves scalability, and enhances recurring revenue streams through “RIP-as-a-Service.” Deployment of AI-powered self-diagnostics : Enhancing RIP systems with AI-driven self-diagnostics enables real-time monitoring, improved system uptime, and predictive maintenance capabilities, reducing operational disruptions for customers.
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The Company continues to navigate delays outside of the Company's control related to the ongoing production and installation of our two high-speed transit-focused Railcar Inspection Portals. Management cautions that because of the delays in anticipated start dates, certain installations may produce revenues towards the end of 2024. These deferrals resulted in a slightly lower revenue growth performance than originally anticipated.
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Integration of Edge Data Centers : The Company is actively deploying Edge Data Centers to enable faster, localized data processing, particularly in rural and underserved markets. The first six sites are expected to become operational in the first half of 2025, with a further nine sites anticipated for the second half of 2025.
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The Company undertook a major review of operations during 2021 and made significant changes in staffing including additional engineering staff and revamping its software development and Artificial Intelligence staffing. These efforts have yielded benefits throughout 2022, 2023 and beyond.
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These initial Edge Data Centers are providing scalable solutions for enterprise and government clients. Enhancements in artificial intelligence and automation : The Company continues to refine its proprietary AI solutions, including computer vision, deep learning, and predictive analytics, to improve inspection accuracy and operational efficiency across all product offerings.
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Overall, in 2023, the Company achieved notable success in advancing procurement and manufacturing for its transit-focused RIPs, expanding service contracts, and securing new AI contracts and growing its AI portfolio, including the announcement of its inaugural subscription customer.
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Expansion into new vehicle inspection markets : While the Company remains committed to its core rail technology solutions, it continues to explore applications for scanning and inspecting other vehicle types, including trucks, buses, and aircraft. These markets offer potential growth opportunities through partnerships with logistics providers, government agencies, and commercial transport operators.
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Cost of revenues on technology systems decreased during the period compared to the equivalent period in 2022 in-line with the decline in project revenues.
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In 2024, Duos entered a long-term agreement with a major Class 1 railroad, securing data access from its RIPs and enabling new subscription-based services for over 3,000 railcar owners and lessors. This initiative is expected to open up significant new revenue streams while strengthening the Company's market leadership.
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Cost of revenues decreased on services and consulting year-over-year. The decrease in costs was a result of o ne-time services performed in 2022, related to major site maintenance and repairs for a single customer slightly offset by additional services costs related to the completion of two new freight portals in early 2023.
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The Company recognizes that technology adoption within the rail industry can be a gradual process, requiring substantial capital investment from customers. To accelerate adoption, Duos is focused on demonstrating clear ROI for its solutions, securing long-term service agreements, and pursuing partnerships that enhance its value proposition.
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Gross Margin For the Years Ended December 31, 2023 2022 % Change Revenues $ 7,471,198 $ 15,012,366 -50 % Cost of revenues 6,162,317 10,264,263 -40 % Gross margin $ 1,308,881 $ 4,748,103 -72 % Gross margin showed a decrease for the year ended December 31, 2023 as compared to the same period in 2022.
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Additionally, investments in engineering and software development will ensure compliance with evolving Federal Railroad Administration (FRA) and Association of American Railroad (AAR) standards, further positioning the Company for continued success in the rail sector.
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The business activity in 2023 consisted primarily of continued progression into the advanced stages of procurement and manufacturing for the transit-focused RIPs. The Company began to recognize revenue and profit on those activities in accordance with its revenue recognition policy.
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With the diversification into Edge Computing and power generation, coupled with continued growth in its core machine vision and AI-based inspection technologies, the Company is well-positioned to drive increased revenue, improve profitability, and generate long-term shareholder value.
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These efforts reflect a focus on employee retention and to drive higher performance and attract and retain better quality resources in a tight labor market. The Company still faces some pressure on existing staff compensation as a result of inflation in prior years but remains focused to manage and stabilize administrative costs without interruption to customer service.
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The decrease in overall revenues is primarily attributed to delays outside of the Company’s control with the deployment of our two high-speed Railcar Inspection Portals, which are recorded in the technology systems portion of our business.

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