Duos Technologies (DUOT) - 2024 Q4 - Annual Report

Financial Performance - For the year ended December 31, 2024, total revenues decreased by 3% to $7,280,885 compared to$7,471,198 in 2023, primarily due to deployment delays of high-speed Railcar Inspection Portals [184]. - Technology systems revenue fell by 38% to $2,252,357, while services and consulting revenue increased by 31$5,028,528, driven by new AI and subscription customers [185]. - The cost of revenues increased by 11% to $6,811,670, with technology systems costs decreasing by 35$2,818,078, while services and consulting costs surged by 121% to $3,993,592 [189]. - The net loss for 2024 was$10,764,457, a slight improvement from the net loss of $11,241,718 in 2023 [184]. - Revenues for the year ended December 31, 2024, were$7,280,885, a decrease of 3% compared to $7,471,198 in 2023 [193]. - Gross margin decreased to approximately 6$11,452,741, driven by a 43% increase in sales and marketing expenses and a 16% decline in research and development costs [194]. - The net loss for the year ended December 31, 2024, was $10,764,457, a reduction from the net loss of$11,241,718 in 2023 [198]. Cash Flow and Financing - Cash used in operating activities decreased to $3,488,687 in 2024 from$8,746,564 in 2023, reflecting improved cash flow management [200]. - The company had a cash balance of $6,266,296 and accounts receivable of$403,441 as of December 31, 2024 [199]. - Net cash provided by financing activities was $9,154,439 in 2024, primarily from the issuance of Series D and E Convertible Preferred Stock [202]. - The company anticipates continued positive cash flow from its Asset Management Agreement (AMA) with New APR Energy, which is expected to support operations [210]. - The company raised gross proceeds of approximately$3,544,689 through its At-The-Market (ATM) offering program in 2024 [208]. - The working capital deficit as of December 31, 2024, was $8,002,361, with an accumulated deficit of$74,368,009 [207]. Contracts and Agreements - The company secured a long-term agreement with a major Class 1 railroad, enabling new subscription-based services for over 3,000 railcar owners and lessors, expected to generate significant new revenue streams [178]. - Duos Energy Corporation, a new subsidiary, aims to meet the growing demand for power generation, with a two-year agreement valued at approximately $42 million [182]. - The company plans to shift to a modular and subscription-based approach for its Railcar Inspection Portal, enhancing recurring revenue streams through "RIP-as-a-Service" [182]. - The company anticipates revenue growth from new maintenance contracts and subscription offerings starting in 2025, targeting a broader market including Class 1 railroads and railcar owners [186]. - The Company will begin recognizing revenue from the AMA agreement starting January 2025 [216]. Assets and Investments - The Company recorded an initial carrying value of$7.2 million for common units received from Sawgrass Parent, representing non-cash consideration for future services under the Asset Management Agreement (AMA) [219]. - The Company recognized an intangible asset valued at $11,161,428 related to a 5-year customer contract for maintenance services, with immediate amortization of$199,008 for pre-contract costs [221][223]. - No impairment losses were recognized for the equity method investment during the year ended December 31, 2024, and there is no indication of impairment as of the same date [220][226]. - The Company will recognize deferred revenue of $11,161,428 over the 5-year term of the customer contract, with a portion recognized immediately for completed pilot program services [223]. - The Company assesses its equity method investment for impairment whenever events indicate that the carrying amount may not be recoverable [220]. Stock-Based Compensation - The Company accounts for stock-based compensation based on estimated fair values, with a graded vesting feature for employees and directors [227]. - The fair value of stock options is estimated using the Black-Scholes option-pricing formula, influenced by stock price and various subjective variables [228]. - The Company holds a 5% interest in Sawgrass Parent, which is deemed a Variable Interest Entity (VIE), but does not consolidate it as it lacks control over significant economic activities [218]. Revenue Sources - The Company generates revenue from four sources, including Technology Systems, AI Technologies, Technical Support, and Consulting Services [216].