DUOT Duos Technologies Group Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________________ to ________________ 

 

Commission file number 000-55497

 

Duos Technologies Group, Inc.

(Exact name of registrant as specified in its charter)

 

Florida	65-0493217
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

 

7660 Centurion Parkway, Suite 100, Jacksonville, Florida 32256

(Address of principal executive offices)

 

(904) 296-2807

(Registrant’s telephone number, including area code)

 

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

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001		DUOT		The Nasdaq Capital Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐

  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒   No ☐

  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

  

As of August 9, 2024, the registrant has one class of common equity, and the number of shares outstanding of such common equity is 7,689,969.

 

 

 

 

 

 

TABLE OF CONTENTS

 

	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40

 

SIGNATURES

41

 

i

 

 

 

PART I FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

		June 30,				December 31,
		2024				2023
			(Unaudited)
ASSETS
CURRENT ASSETS:
Cash		$	506,114			$	2,441,842
Accounts receivable, net			128,795				1,462,463
Contract assets			1,139,395				641,947
Inventory			1,060,373				1,526,165
Prepaid expenses and other current assets			436,066				184,478
Note receivable, net			157,500				—
Total Current Assets			3,428,243				6,256,895
Property and equipment, net			1,736,407				726,507
Operating lease right of use asset			4,204,593				4,373,155
Security deposit			500,000				550,000
OTHER ASSETS:
Note receivable, net			—				153,750
Intangible asset, net			10,688,359				—
Patents and trademarks, net			128,371				129,140
Software development costs, net			524,225				652,838
Total Other Assets			11,340,955				935,728
TOTAL ASSETS		$	21,210,198			$	12,842,285
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable		$	849,497			$	595,634
Notes payable - financing agreements			241,452				41,976
Accrued expenses			252,024				164,113
Operating lease obligations-current portion			788,801				779,087
Contract liabilities, current			3,676,567				1,666,243
Total Current Liabilities			5,808,341				3,247,053
Contract liabilities, less current portion			8,495,876				—
Operating lease obligations, less current portion			4,052,527				4,228,718
Total Liabilities			18,356,744				7,475,771
Commitments and Contingencies (Note 5)			—				—
STOCKHOLDERS' EQUITY:
Preferred stock: $0.001 par value, 10,000,000 authorized, 9,441,000 shares available to be designated
Series A redeemable convertible preferred stock, $10 stated value per share, 500,000 shares designated; 0 and 0 issued and outstanding at June 30, 2024 and December 31, 2023, respectively, convertible into common stock at $6.30 per share			—				—
Series B convertible preferred stock, $1,000 stated value per share, 15,000 shares designated; 0 and 0 issued and outstanding at June 30, 2024 and December 31, 2023, respectively, convertible into common stock at $7 per share			—				—
Series C convertible preferred stock, $1,000 stated value per share, 5,000 shares designated; 0 and 0 issued and outstanding at June 30, 2024 and December 31, 2023, respectively, convertible into common stock at $5.50 per share			—				—
Series D convertible preferred stock, $1,000 stated value per share,   4,000 shares designated; 1,519 and 1,299 issued  and outstanding at June 30, 2024 and December 31, 2023, respectively,  convertible into common stock at $3 per share			1				1
Series E convertible preferred stock, $1,000 stated value per share, 30,000 shares designated; 13,625 and 11,500 issued  and outstanding at June 30, 2024 and December 31, 2023, respectively,  convertible into common stock at $3 per share			14				12
Series F convertible preferred stock, $1,000 stated value per share, 5,000 shares designated; 0 and 0 issued and outstanding at June 30, 2024 and December 31, 2023, respectively, convertible into common stock at $6.20 per share			—				—
Common stock: $0.001 par value; 500,000,000 shares authorized, 7,623,598 and 7,306,663 shares issued, 7,622,274 and 7,305,339 shares outstanding at June 30, 2024 and December 31, 2023, respectively			7,623				7,306
Additional paid-in-capital			72,563,300				69,120,199
Accumulated deficit			(69,560,032	)			(63,603,552	)
Sub-total			3,010,906				5,523,966
Less:  Treasury stock (1,324 shares of common stock at June 30, 2024 and December 31, 2023)			(157,452	)			(157,452	)
Total Stockholders' Equity			2,853,454				5,366,514
Total Liabilities and Stockholders' Equity		$	21,210,198			$	12,842,285

 

 

 See accompanying condensed notes to the unaudited consolidated financial statements.

  

 

 

 

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the Three Months Ended				For the Three Months Ended				For the Six Months Ended				For the Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2024				2023				2024				2023
REVENUES:
Technology systems		$	264,999			$	870,494			$	534,854			$	2,698,258
Services and consulting			1,245,497				899,565				2,046,322				1,716,089
Total Revenues			1,510,496				1,770,059				2,581,176				4,414,347
COST OF REVENUES:
Technology systems			780,912				1,072,106				1,364,349				2,839,315
Services and consulting			944,148				456,616				1,336,759				796,523
Total Cost of Revenues			1,725,060				1,528,722				2,701,108				3,635,838
GROSS MARGIN			(214,564	)			241,337				(119,932	)			778,509
OPERATING EXPENSES:
Sales and marketing			712,456				301,077				1,265,942				608,654
Research and development			390,000				537,801				772,142				942,686
General and administration			1,899,396				2,550,709				3,819,446				4,522,217
Total Operating Expenses			3,001,852				3,389,587				5,857,530				6,073,557
LOSS FROM OPERATIONS			(3,216,416	)			(3,148,250	)			(5,977,462	)			(5,295,048	)
OTHER INCOME (EXPENSES):
Interest expense			(1,150	)			(3,230	)			(1,595	)			(4,410	)
Other income, net			13,395				162,080				22,577				166,375
Total Other Income (Expenses)			12,245				158,850				20,982				161,965
NET LOSS		$	(3,204,171	)		$	(2,989,400	)		$	(5,956,480	)		$	(5,133,083	)
Basic and Diluted Net Loss Per Share		$	(0.43	)		$	(0.42	)		$	(0.81	)		$	(0.72	)
Weighted Average Shares-Basic and Diluted			7,450,676				7,169,340				7,378,813				7,163,142

 

 

See accompanying condensed notes to the unaudited consolidated financial statements.

 

 

 

  

  

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Three and Six Months Ended June 30, 2024 and 2023

(Unaudited)

 

		Preferred Stock B								Preferred Stock C								Preferred Stock D								Preferred Stock E								Common Stock								Additional				Accumulated
		# of Shares				Amount				# of Shares				Amount				# of Shares				Amount				# of Shares				Amount				# of Shares				Amount				Paid-in-Capital				Deficit				Treasury Stock				Total
Balance December 31, 2022			—			$	—				—			$	—				1,299			$	1				—			$	—				7,156,876			$	7,156			$	56,562,600			$	(52,361,834	)		$	(157,452	)		$	4,050,471
Series E preferred stock issued			—				—				—				—				—				—				4,000				4				—				—				3,999,996				—				—				4,000,000
Stock options compensation			—				—				—				—				—				—				—				—				—				—				75,128				—				—				75,128
Stock issuance cost			—				—				—				—				—				—				—				—				—				—				(299,145	)			—				—				(299,145	)
Stock issued for services			—				—				—				—				—				—				—				—				12,463				12				32,488				—				—				32,500
Net loss for the three months ended March 31, 2023			—				—				—				—				—				—				—				—				—				—				—				(2,143,683	)			—				(2,143,683	)
Balance March 31, 2023			—			$	—				—			$	—				1,299			$	1				4,000			$	4				7,169,339			$	7,168			$	60,371,067			$	(54,505,517	)		$	(157,452	)		$	5,715,271
Stock options compensation			—				—				—			$	—				—			$	—				—			$	—				—			$	—			$	161,399			$	—			$	—			$	161,399
Stock issuance cost			—				—				—				—				—				—				—				—				—				—				281,500				—				—				281,500
Stock issued for services			—				—				—				—				—				—				—				—				5,645				6				32,494				—				—				32,500
Stock issued under the Employee Stock Purchase Plan for cash and compensation			—				—				—				—				—				—				—				—				65,561				66				183,199				—				—				183,265
Net loss for the three months ended June 30, 2023			—				—				—				—				—				—				—				—				—				—				—				(2,989,400	)			—				(2,989,400	)
Balance June 30, 2023			—			$	—				—			$	—				1,299			$	1				4,000			$	4				7,240,545			$	7,240			$	61,029,659			$	(57,494,917	)		$	(157,452	)		$	3,384,535
Balance December 31, 2023			—			$	—				—			$	—				1,299			$	1				11,500			$	12				7,306,663			$	7,306			$	69,120,199			$	(63,603,552	)		$	(157,452	)		$	5,366,514
Series D preferred stock issued			—				—				—				—				620				1				—				—				—				—				619,999				—				—				620,000
Series E preferred stock issued			—				—				—				—				—				—				2,125				2				—				—				2,125,000				—				—				2,125,002
Stock options compensation			—				—				—				—				—				—				—				—				—				—				141,204				—				—				141,204
Stock issuance cost			—				—				—				—				—				—				—				—				—				—				(36,188	)			—				—				(36,188	)
Stock issued for services			—				—				—				—				—				—				—				—				8,655				9				37,491				—				—				37,500
Stock Compensation under ESPP			—				—				—				—				—				—				—				—				—				—				18,116				—				—				18,116
Net loss for the three months ended March 31, 2024			—				—				—				—				—				—				—				—				—				—				—				(2,752,309	)			—				(2,752,309	)
Balance March 31, 2024			—			$	—				—			$	—				1,919			$	2				13,625			$	14				7,315,318			$	7,315			$	72,025,821			$	(66,355,861	)		$	(157,452	)		$	5,519,839
Series D preferred stock issued			—			$	—				—			$	—				250			$	—				—			$	—				—			$	—			$	250,000			$	—			$	—			$	250,000
Stock issued for services			—				—				—				—				—				—				—				—				15,041				15				42,485				—				—				42,500
Stock issued under the Employee Stock Purchase Plan for cash and compensation			—				—				—				—				—				—				—				—				38,041				38				109,780				—				—				109,818
Series D preferred stock converted to common stock			—				—				—				—				(650	)			(1	)			—				—				216,668			$	217			$	(216	)			—				—				—
Common stock issued for cash			—				—				—				—				—				—				—				—				38,530			$	38			$	115,525				—				—				115,563
Stock issuance cost			—				—				—				—				—				—				—				—				—				—				(40,000	)			—				—				(40,000	)
Stock options compensation			—				—				—				—				—				—				—				—				—				—				59,905				—				—				59,905
Net loss for the three months ended June 30, 2024			—				—				—				—				—				—				—				—				—				—				—				(3,204,171	)			—				(3,204,171	)
Balance June 30, 2024			—			$	—				—			$	—				1,519			$	1				13,625			$	14				7,623,598			$	7,623			$	72,563,300			$	(69,560,032	)		$	(157,452	)		$	2,853,454

 

 

 

See accompanying condensed notes to the unaudited consolidated financial statements.

 

 

 

 

 

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

 

		For the Six Months Ended
		June 30,
		2024				2023
Cash from operating activities:
Net loss		$	(5,956,480	)		$	(5,133,083	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			781,835				230,592
Stock based compensation			241,694				302,743
Stock issued for services			80,000				65,000
Amortization of operating lease right of use asset			168,562				155,338
Changes in assets and liabilities:
Accounts receivable			1,333,668				3,131,392
Note receivable			(3,750	)			(150,625	)
Contract assets			(497,448	)			(581,069	)
Inventory			165,792				(116,393	)
Security deposit			50,000				50,000
Prepaid expenses and other current assets			175,073				403,225
Accounts payable			253,863				(1,530,361	)
Accrued expenses			87,912				(150,914	)
Operating lease obligation			(166,477	)			(80,559	)
Contract liabilities			(655,228	)			1,481,643
Net cash used in operating activities			(3,940,984	)			(1,923,071	)
Cash flows from investing activities:
Purchase of patents/trademarks			(4,765	)			(28,720	)
Purchase of software development			—				(360,437	)
Purchase of fixed assets			(884,520	)			(159,203	)
Net cash used in investing activities			(889,285	)			(548,360	)
Cash flows from financing activities:
Repayments on financing agreements			(227,184	)			(273,965	)
Repayment of finance lease			—				(22,851	)
Proceeds from common stock issued			115,563				—
Stock issuance costs			(76,188	)			(17,645	)
Proceeds from shares issued under Employee Stock Purchase Plan			87,348				117,048
Proceeds from preferred stock issued			2,995,002				4,000,000
Net cash provided by financing activities			2,894,541				3,802,587
Net increase (decrease) in cash			(1,935,728	)			1,331,156
Cash, beginning of period			2,441,842				1,121,092
Cash, end of period		$	506,114			$	2,452,248
Supplemental Disclosure of Cash Flow Information:
Interest paid		$	1,596			$	4,410
Taxes paid		$	5,055			$	—
Supplemental Non-Cash Investing and Financing Activities:
Notes issued for financing of insurance premiums		$	426,661			$	458,452
Transfer of inventory to fixed assets		$	300,000			$	—
Intangible asset acquired with contract liability		$	11,161,428			$	—

 

 

 See accompanying condensed notes to the unaudited consolidated financial statements.

 

 

 

 

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Operations

 

Duos Technologies Group, Inc. (the “Company”), through its operating subsidiaries, Duos Technologies, Inc. (“Duos”) and Duos Edge AI, Inc. (“Edge”) (collectively the “Company”), is a company that specializes in machine vision and artificial intelligence to analyze fast moving objects such as trains, trucks, automobiles, and aircraft. This technology can help improve safety, maintenance, and operating metrics.

 

The Company is the inventor of the Railcar Inspection Portal (RIP) and is currently the rail industry leader for machine vision/camera wayside detection systems that include the use of Artificial Intelligence at speeds up to 125 mph. The RIP inspects a train at full speed from the top, sides, and bottom looking at FRA/AAR mandated safety inspection points. The system also detects illegal riders, which can assist law enforcement agencies. Each rail car is scanned with machine vision cameras and other sensors from the top, sides, and bottom, where images are produced within seconds of the railcar passing. These images can then be used by the customer to help prevent derailments, improve maintenance operations, and assist with security. The Company self-performs all aspects of hardware, software, Information Technology (“IT”), and Artificial Intelligence development and engineering. The Company maintains significant intellectual property and continues to be awarded additional patents for both the technology and methodologies used. The Company also has a proprietary portfolio of approximately 53 Artificial Intelligence “Use Cases” that automatically flag defects. The Company has deployed this system with several Class 1 railroads and one major passenger carrier and anticipates an increased demand in the future from railcar operators, owners, shippers, transit railroads as well as law enforcement agencies.

 

During the three months ended June 30, 2024, the Company initiated a study to determine how to expand its market reach into non-rail markets. Using the information technology (IT) investments already made into the RIP in conjunction with the recently awarded patents for both methodology and artificial intelligence, the Company has determined that its use of Edge Data Centers for the processing of large volumes of image data has broad applicability to enabling local, high-speed processing in similar environments as being undertaken at the 13 current RIPs, that is, in rural and underserved areas. Accordingly, the Company has recently announced that effective early in the third quarter, it will be expanding into the market for the provision of bespoke Edge Data Centers (EDCs) for certain markets including remote education and healthcare facilities as well as other applications where high-speed, local processing is required.

 

The Company has also developed the Automated Logistics Information System (“ALIS”) which automates gatehouse operations where trucks enter and exit large logistics and intermodal facilities. This solution also incorporates sensors and data points as necessary for each operation and directly interconnects with backend logistics databases and processes to streamline and significantly improve operations and security and, importantly, dramatically improve throughput on each lane on which the technology is deployed. The Company is not currently actively pursuing further customers for ALIS but will continue to analyze the potential market and, depending on market demand, may deploy an upgraded Truck Inspection Portal (TIP) which uses the same technology and lessons learned from the ALIS and RIP systems at some point in the future.

 

The Company’s strategy for the rail industry is to expand beyond our existing customer base in the Class 1 and major passenger transit market and we expect to add additional users in the short line, industrial and regional transit markets in North America. In addition, we plan to expand our subscription offering to car owners and shippers and expand operations to meet the demand from international customers. The Company is prepared to respond and scale, if necessary, to react to increased demand for potential regulations that may be imposed around wayside detection technology. In the future the Company may put more emphasis on the trucking and intermodal sector with an updated Truck Inspection Portal solution. The Company continues to focus on operational and technical excellence, customer satisfaction, and maintaining a highly skilled and performance-based work force. The Company is also further investigating market opportunities for subsets of its technology including deployment and management of Edge Data Centers, a fundamental component of the distributed, rapid response data analysis used in the RIP.

 

 

5

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (all of which are of a normal recurring nature) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other future period. These unaudited consolidated financial statements and the unaudited condensed notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2024.

 

Principles of Consolidation

 

The unaudited consolidated financial statements include Duos Technologies Group, Inc. and its wholly owned subsidiaries, Duos Technologies, Inc. and Duos Edge AI, Inc. All inter-company transactions and balances are eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. The most significant estimates in the accompanying unaudited consolidated financial statements include the initial valuation of a non-monetary transaction with a customer, valuation of intangible assets for impairment analysis, allowance on accounts receivable and notes receivable, valuation of common stock warrants received in exchange for an asset sale, valuation of deferred tax assets, and valuation of other long-lived assets, estimates of net contract revenues and the total estimated costs to determine progress towards contract completion, valuation of inventory, estimates of the valuation of right of use assets and corresponding lease liabilities, valuation of warrants issued with debt and valuation of stock-based awards. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

  

Concentrations

 

Cash Concentrations

 

Cash is maintained at financial institutions and at times, balances may exceed federally insured limits. We have not experienced any losses related to these balances. As of June 30, 2024, the balance in one financial institution exceeded federally insured limits by approximately $163,603. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s consolidated financial condition, results of operation and cash flows.

 

Significant Customers and Concentration of Credit Risk

 

The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:

 

For the six months ended June 30, 2024, three customers accounted for 43%, 25% and 18% of revenues. For the six months ended June 30, 2023, two customers accounted for 61%, and 25% of revenues. In all cases, there are no minimum contract values stated. Each contract covers an agreement to deliver a Railcar Inspection Portal or services 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 may be paid annually in advance with revenues recorded ratably over the contract period.

  

 

6

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

At June 30, 2024, two customers accounted for 53%, and 38% of accounts receivable. At December 31, 2023, two customers accounted for 83%, and 11% of accounts receivable. Much of the credit risk is mitigated since all the customers listed here are Class 1 railroads with a history of timely payments to us.

  

 

Geographic Concentration

 

For the six months ended June 30, 2024, approximately 65% of revenue was generated from three customers outside of the United States. For the six months ended June 30, 2023, approximately 31% of revenue was generated from three customers outside of the United States.

 

Significant Vendors and Concentration of Credit Risk

 

In some instances, the Company relies on a limited pool of vendors for key components related to the manufacturing of its subsystems. These vendors are primarily focused on camera, server, and lighting technologies integral to the Company’s solution. Where possible, the Company seeks multiple vendors for key components to mitigate vendor concentration risk.

 

Fair Value of Financial Instruments and Fair Value Measurements

 

The Company follows Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that requires the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements.

 

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

 

These inputs are prioritized below: 

 

Level 1:	Observable inputs such as quoted market prices in active markets for identical assets or liabilities.
Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3:	Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions that the market participants would use in the valuation of the asset or liability based on the best available information.

 

The Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

The estimated fair value of certain financial instruments, including accounts receivable, prepaid expenses, accounts payable, accrued expenses and notes payable are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

 

Accounts Receivable

  

On January 1, 2023, the Company adopted ASC 326, “Financial Instruments - Credit Losses”. In accordance with ASC 326, an allowance is maintained for estimated forward-looking losses resulting from the possible inability of customers to make the required payments (current expected losses). The amount of the allowance is determined principally on the basis of past collection experience and known financial factors regarding specific customers.

 

 

7

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

Accounts receivable are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers net of estimated credit loss allowances for uncollectible accounts. In determining the collections on the account, historical trends are evaluated, and specific customer issues are reviewed to arrive at appropriate allowances. The Company reviews its accounts to estimate losses resulting from the inability of its customers to make the required payments. Any required allowance is based on specific analysis of past due accounts and also considers historical trends of write-offs. Past due status is based on how recently payments have been received from customers.

 

Inventory

 

Inventory consists primarily of spare parts and consumables and long-lead time components to be used in the production of our technology systems or in connection with maintenance agreements with customers. Any inventory deemed to be obsolete is written off. Inventory is stated at the lower of cost or net realizable value. Inventory cost is primarily determined using the weighted average cost method.

 

Intangible Asset

 

In May 2024, the Company recognized an intangible asset which represents digital image data rights received under a license agreement as non-monetary consideration under a five-year customer contract. The intangible asset will be amortized over the five-year contractual term.

 

Long-lived assets

 

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company estimates the future undiscounted net cash flows of the related asset or asset group over the remaining life of the asset in measuring whether the long-lived asset should be written down to fair value. Measurement of the amount of impairment would be based on generally accepted valuation methodologies, as deemed appropriate. If the carrying amount is greater than the undiscounted cash flows, the carrying amount of the asset is reduced to the asset’s fair value. An impairment loss is recognized immediately as an operating expense in the consolidated statements of operations. Reversal of previously recorded impairment losses are prohibited.

 

 

 

Software Development Costs

 

Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs. The technological feasibility of a software product is established when the Company has completed all planning, designing, coding, and testing activities that are necessary to establish that the product meets its design specifications, including functionality, features, and technical performance requirements. Software development costs incurred after establishing technological feasibility for software sold as a perpetual license, as defined within ASC 985-20 (Software – Costs of Software to be Sold, Leased, or Marketed), are capitalized and amortized on a product-by-product basis when the product is available for general release to customers. Software development costs are evaluated for impairment annually by comparing the net realizable value to the unamortized capitalized costs and writing these costs down to net realizable value.

 

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 stock-based compensation carries a graded vesting feature subject to the condition of time of employment service with awarded stock-based compensation tranches vesting evenly upon the anniversary date of the award.

 

The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. In accordance with ASC 718-10-35-8, the Company elected to recognize the fair value of the stock award using the graded vesting method as time of employment service is the criteria for vesting. The Company’s determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding a number of highly subjective variables.

 

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. 

 

Revenue Recognition

 

The Company follows Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), that affects the timing of when certain types of revenues will be recognized. The basic principles in ASC 606 include the following: a contract with a customer creates distinct contract assets and performance obligations, satisfaction of a performance obligation creates revenue, and a performance obligation is satisfied upon transfer of control to a good or service to a customer.

 

Revenue is recognized by evaluating our revenue contracts with customers based on the five-step model under ASC 606:

 

1.

Identify the contract with the customer;

 

2.

Identify the performance obligations in the contract;

 

3.

Determine the transaction price;

 

 

8

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

4.

Allocate the transaction price to separate performance obligations; and

 

5.

Recognize revenue when (or as) each performance obligation is satisfied.

 

The Company generates revenue from four sources:

 

(1) Technology Systems

 

(2) AI Technologies

 

(3) Technical Support

 

(4) Consulting Services

 

Technology Systems

 

For revenues related to 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. These estimated costs are then used to determine the progress towards contract completion and the corresponding amount of revenue to recognize.

 

Accordingly, the Company now bases its revenue recognition on ASC 606-10-25-27, where control of a good or service transfers over time if the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date including a profit margin or reasonable return on capital. Control is deemed to pass to the customer instantaneously as the goods are manufactured and revenue is recognized accordingly.

 

In addition, the Company has adopted ASC 606-10-55-21 such that if the cost incurred is not proportionate to the progress in satisfying the performance obligation, we adjust the input method to recognize revenue only to the extent of the cost incurred. Therefore, the Company will recognize revenue at an equal amount to the cost of the goods to satisfy the performance obligation. To accurately reflect revenue recognition based on the input method, the Company has adopted the implementation guidance as set out in ASC-606-10-55-187 through 192.

 

Under this method, contract revenues are recognized over the performance period of the contract in direct proportion to the costs incurred. Costs include direct material, direct labor, subcontract labor and other allocable indirect costs. All un-allocable indirect costs and corporate general and administrative costs are also charged to the periods as incurred. Any recognized revenues that have not been billed to a customer are recorded as an asset in “contract assets”. Any billings of customers more than recognized revenues are recorded as a liability in “contract liabilities”. However, in the event a loss on a contract is foreseen, the Company will recognize the loss when such loss is determined to be both probable and reasonably estimable.

 

 

9

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

 

AI Technologies

 

The Company has revenue from applications that incorporate artificial intelligence (AI) in the form of predetermined algorithms which provide important operating information to the users of our systems. The revenue generated from these applications of AI consists of a fixed fee related to the design, development, testing and incorporation of new algorithms into the system, which is recognized as revenue at a point in time upon acceptance, as well as an annual application maintenance fee, which is recognized as revenue ratably over the contracted maintenance term.

 

Technical Support

 

Technical support services are provided on both an as-needed and extended-term basis and may include providing both parts and labor. Maintenance and technical support provided outside of a maintenance contract are on an “as-requested” basis, and revenue is recognized over time as the services are provided. Revenue for maintenance and technical support provided on an extended-term basis is recognized over time ratably over the term of the contract.

 

Consulting Services

 

The Company’s consulting services business generates revenues under contracts with customers from three sources: (1) Professional Services (consulting and auditing); (2) Customer service training and (3) Maintenance/support.

 

(1) Revenues for professional services, which are of short-term duration, are recognized when services are completed;

 

(2) Training sales are one-time upfront short-term training sessions and are recognized after the service has been performed; and

 

(3) Maintenance/support is an optional product sold to our software license customers under one-year or longer contracts. Accordingly, maintenance payments received upfront are deferred and recognized over the contract term.

 

Multiple Performance Obligations and Allocation of Transaction Price

 

Arrangements with customers may involve multiple performance obligations including project revenue and maintenance services in our Technology Systems business. Maintenance will occur after the project is completed and may be provided on an extended-term basis or on an as-needed basis. In our consulting services business, multiple performance obligations may include any of the above four sources. Training and maintenance on software products may occur after the software product sale while other services may occur before or after the software product sale and may not relate to the software product. Revenue recognition for a multiple performance obligations arrangement is as follows:

 

Each performance obligation is accounted for separately when each has value to the customer on a standalone basis and there is Company specific objective evidence of the selling price of each deliverable. For revenue arrangements with multiple deliverables, the Company allocates the total customer arrangement to the separate units of accounting based on their relative selling prices as determined by the price of the items when sold separately. Once the selling price is allocated, the revenue for each performance obligation is recognized using the applicable criteria under GAAP as discussed above for performance obligations sold in single performance obligation arrangements. A delivered item or items that do not qualify as a separate unit of accounting within the arrangement are combined with the other applicable undelivered items within the arrangement. The allocation of arrangement consideration and the recognition of revenue is then determined for those combined deliverables as a single unit of accounting. The Company sells its various services and software and hardware products at established prices on a standalone basis which provides Company specific objective evidence of selling price for purposes of performance obligations relative selling price allocation. The Company only sells maintenance services or spare parts based on its established rates after it has completed a system integration project for a customer. The customer is not required to purchase maintenance services. All elements in multiple performance obligations arrangements with Company customers qualify as separate units of account for revenue recognition purposes.

 

 

10

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

Leases

 

The Company follows ASC 842 “Leases”. This guidance requires lessees to recognize right-of-use (“ROU”) assets and lease liabilities for most operating leases. In addition, this guidance requires that lessors separate lease and non-lease components in a contract in accordance with the revenue guidance in ASC 606.

 

The Company made an accounting policy election to not recognize short-term leases with terms of twelve months or less on the balance sheet and instead recognize the lease payments as an expense when incurred. The Company has also elected to account for real estate leases that contain both lease and non-lease components as a single lease component.

 

At the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset.

 

Operating ROU assets represent the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the lease commencement date to determine the present value of future payments. The lease term includes all periods covered by renewal and termination options where the Company is reasonably certain to exercise the renewal options or not to exercise the termination options. Operating lease expense is recognized on a straight-line basis over the lease term and is included in general and administration expenses in the consolidated statements of operations.

 

Earnings (Loss) Per Share

 

Basic earnings per share (EPS) are computed by dividing the net loss applicable to common stock by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss applicable to common stock by the weighted average number of common shares outstanding for the period and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise or conversion of stock options, stock warrants, convertible debt instruments, convertible preferred stock or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.  

 

At June 30, 2024, there were (i) an aggregate of 44,644 outstanding warrants to purchase shares of common stock, (ii) employee stock options to purchase an aggregate of 1,340,903 shares of common stock, (iii) 506,333 common shares issuable upon conversion of Series D Convertible Preferred Stock, and (iv) subject to receipt of shareholder approval, 4,541,667 common shares issuable upon conversion of Series E Convertible Preferred Stock, all of which were excluded from the computation of diluted net earnings per share because their inclusion would have been anti-dilutive.

At June 30, 2023, there were (i) an aggregate of 80,091 outstanding warrants to purchase shares of common stock, (ii) employee stock options to purchase an aggregate of 1,217,775 shares of common stock, (iii) 433,000 common shares issuable upon conversion of Series D Convertible Preferred Stock and (iv) 1,333,334 common shares issuable upon conversion of Series E Convertible Preferred Stock, all of which were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive.

 

11

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

Recent Accounting Pronouncements

 

From time to time, the FASB or other standards setting bodies will issue new accounting pronouncements. Updates to the FASB ASC are communicated through issuance of an Accounting Standards Update (“ASU”).

 

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker. ASU 2023-07 is effective for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025. ASU 2023-07 must be applied retrospectively to all prior periods presented in the financial statements. The Company has evaluated the disclosure impact of ASU 2023-07; and determined the standard will not have an impact on the Company’s consolidated financial statements.

 

In December 2023, the FASB issued ASU No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Further, ASU 2023-09 requires companies to disclose additional information about income taxes paid. ASU 2023-09 is effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is evaluating the disclosure impact of ASU 2023-09; however, the standard will not have an impact on the Company’s consolidated financial statements.

 

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

 

NOTE 2 – 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. 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.

 

As reflected in the accompanying consolidated financial statements, the Company had a net loss of $5,956,480 for the six months ended June 30, 2024. During the same period, cash used in operating activities was $3,940,984. The working capital deficit and accumulated deficit as of June 30, 2024, were $2,380,098 and $69,560,032, respectively. 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 underwritten offerings and private placements which were completed during 2022, 2023, and now the first and second quarters of 2024 as well.

 

 

12

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

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, in the first and second quarters of 2024, the Company raised gross proceeds of $2,995,000 from the issuance of a combination of Series D and E Preferred Stock (See Note 6). 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 entered into an ATM Sales Agreement (the “Sales Agreement”) with Ascendiant Capital Markets, LLC (the “Sales Agent” or “ACM”) relating to the sale of our common stock, par value $0.001 per share, pursuant to the prospectus dated May 17, 2024. In accordance with the terms of the Sales Agreement, we may offer and sell shares of our common stock bearing an aggregate offering price of up to $7,500,000 from time to time through or to ACM, acting as an agent or principal. On July 22, 2024, the Company, through its wholly owned subsidiary Duos Edge AI, Inc., entered into secured promissory notes totaling $2.2 million in funding with two institutional investors. These notes mature on December 31, 2025, and bear an interest rate of 10% per annum, with all principal and accrued interest due at maturity. The proceeds are designated exclusively for the equipment and services required for the installation of the Company's previously announced edge data centers. In the long run, the continuation of the Company as a going concern is dependent upon the ability of the Company to continue executing its business plan, generate enough revenue, and attain consistently profitable operations. Although the lingering effects of the global pandemic related to the coronavirus (Covid-19) previously affected our operations, particularly in our supply chain, we now believe that the supply chain lags have largely been abated.

 

In the long run, the continuation of the Company as a going concern is dependent upon the ability of the Company to continue executing its business plan and growing the Company sufficiently to generate enough revenue to attain consistently profitable operations. The Company cannot currently quantify the uncertainty related to previous supply chain delays or the persistence of inflation and their effects on our customers in the coming quarters. We have analyzed our cash flow under “stress test” conditions and have determined that we have sufficient liquid assets on hand, forthcoming with ongoing business or available via the capital markets to maintain operations for at least twelve months from the date of this report.

 

In addition, management has been taking and continues to take actions including, but not limited to, elimination of certain costs that do not contribute to short term revenue, and re-aligning both management and staffing with a focus on improving certain skill sets necessary to build growth and profitability and focusing product strategy on opportunities that are likely to bear results in the relatively short term. The Company believes that, as described above, it will have sufficient sources of working capital to meet its obligations over the following twelve months. In the last twelve months the Company has experienced relatively steady contracted backlog as well as seen positive signs from new commercial engagements that indicate improvements in future commercial opportunities for both one-time capital and recurring services revenues.

 

Management believes that, at this time, the conditions in our market space with ongoing contract delays, the consequent need to procure certain materials in advance of a binding contract and the additional time needed to execute on new contracts previously reported have put a strain on our cash reserves. However, proactive management of our existing contracts, recent stock offerings and private placements as well as the availability to raise capital via the Sales Agreement indicate there is no substantial doubt that the Company can continue as a going concern for a period of twelve months from the issuance date of this report. We continue executing the plan to grow our business and achieve profitability. The Company may selectively look at opportunities for fund raising in the future. Management has extensively evaluated our requirements for the next twelve months and has determined that the Company currently has sufficient cash and access to capital to operate for at least that period.

 

While no assurance can be provided, management believes that these actions provide the opportunity for the Company to continue as a going concern and to grow its business and achieve profitability with access to additional capital funding. 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, continued in 2023, and will continue in 2024 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.

 

 

13

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

 

NOTE 3 – INTANGIBLE ASSET

 

In May 2024, the Company recorded an intangible asset with a fair value of $11,161,428. This asset represents non-monetary consideration received under a 5-year customer contract, in which the Company will provide maintenance services to the customer. The intangible asset represents Digital Image data rights in the form of a license agreement received by the Company from the customer.

The fair value of the asset was determined on the contract inception date based on the standalone selling price of the service and goods to be provided to the customer under the 5-year contract since the Company could not reasonably estimate the fair value of the data rights received. The non-monetary transaction was accounted for in accordance with Accounting Standards Codification (ASC) 606-10-32-21 through ASC 606-10-32-24.

On the contract inception date, the Company also recorded an immediate amortization of the intangible asset of $199,008 related to the pre-contract costs incurred relating to a pilot program for this contract and recorded deferred revenue of $11,161,428 as contract liabilities with a current and non-current component, and then immediately recognized $199,008 of this deferred revenue relating to the completed pilot program. The remaining deferred revenue will be recognized over the 5-year term.

In accordance with ASC 350-30-35-1, the amortization for the intangible asset is based on its useful life and the useful life of an intangible asset is the period over which it is expected to contribute directly or indirectly to the future cash flows of that entity. Accordingly, amortization of the intangible asset is recognized over the life of the contract of five years.

In accordance with ASC 350-30-35-14, an intangible asset that is subject to amortization shall be reviewed for impairment if the carrying amount of the asset is not recoverable and exceeds its fair value. There is no indication of impairment at June 30, 2024.

Intangible asset at June 30, 2024 and December 31, 2023 consists of:

Schedule of intangible asset
		June 30,				December 31,
		2024				2023
Intangible Asset, gross		$	11,161,428			$	—
Accumulated Amortization			(473,069	)			—
Intangible Asset, net		$	10,688,359			$	—

Amortization of the intangible asset during the six months ended June 30, 2024 and June 30 2023, was $473,069 and zero 0 respectively.

The future amortization of the intangible asset is as follows:

Schedule of future amortization of intangible assets
Calendar Year				Amount
	2024			$	1,096,241
	2025				2,192,484
	2026				2,192,484
	2027				2,192,484
	2028				2,192,484
	2029				822,182
	Total Intangible Asset Amortization			$	10,688,359

 

NOTE 4 – DEBT

 

Notes Payable - Financing Agreements

  

The Company’s notes payable relating to financing agreements classified as current liabilities consist of the following as of June 30, 2024 and December 31, 2023:

Schedule of notes payable related to financing agreements
		June 30, 2024								December 31, 2023
Notes Payable		Principal				Interest				Principal				Interest
Third Party - Insurance Note 1		$	124,311				8.25	%		$	39,968				8.00	%
Third Party - Insurance Note 2			16,316				—				2,008				—
Third Party - Insurance Note 3			100,825				—				—				—
Total		$	241,452				—			$	41,976				—

  

The Company entered into an agreement on April 15, 2023 with its insurance provider by issuing a note payable (Insurance Note 1) for the purchase of an insurance policy in the amount of $142,734, secured by that policy with an annual interest rate of 8.00% and payable in 11 monthly installments of principal and interest totaling $13,501. The Company renewed its agreement on April 15, 2024 with its insurance provider by issuing a note payable (Insurance Note 1) for the purchase of an insurance policy in the amount of $154,338, secured by that policy with an annual interest rate of 8.25% and payable in 10 monthly installments of principal and interest totaling $16,023. At June 30, 2024 and December 31, 2023, the balance of Insurance Note 1 was $124,311 and $39,968, respectively.

 

The Company renewed it’s agreement on February 3, 2023 with its insurance provider by issuing a note payable (Insurance Note 2) for the purchase of an insurance policy in the amount of $24,140, and payable in 12 monthly installments of $2,012. The Company renewed it’s agreement on February 3, 2024 with its insurance provider by issuing a note payable (Insurance Note 2) for the purchase of an insurance policy in the amount of $24,480, and payable in 12 monthly installments of $2,040. At June 30, 2024 and December 31, 2023, the balance of Insurance Note 2 was $16,316 and $2,008, respectively.

 

The Company entered into an agreement on February 3, 2024 with its insurance provider by issuing a note payable (Insurance Note 3) for the purchase of an insurance policy in the amount of $245,798 with a down payment paid in the amount of $84,473 in the first quarter of 2024 and ten monthly installments of $20,166. At June 30, 2024 and December 31, 2023, the balance of Insurance Note 3 was $100,825 and $0, respectively.

 

 

14

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

NOTE 5 – COMMITMENTS AND CONTINGENCIES

 

Operating Lease Obligations

 

On July 26, 2021, the Company entered a new operating lease agreement for office and warehouse combination space of 40,000 square feet, with the lease commencing on November 1, 2021 and ending April 30, 2032. This new space combines the Company’s two separate work locations into one facility, which allows for greater collaboration and also accommodates a larger anticipated workforce and manufacturing facility. On November 24, 2021, the lease was amended to commence on December 1, 2021 and end on May 31, 2032. The Company recognized a ROU asset and operating lease liability in the amount of $4,980,104   at lease commencement. Rent for the first eleven months of the term was calculated based on 30,000 rentable square feet. The rent is subject to an annual escalation of 2.5%, beginning November 1, 2023. The Company made a security deposit payment in the amount of $600,000 on July 26, 2021. Per the contract, in the 18th month and every 12th month thereafter, the security deposit was reduced by $50,000. The right of use asset balance at June 30, 2024, net of accumulated amortization, was $4,204,593.

 

As of June 30, 2024, the office and warehouse lease is the Company’s only lease with a term greater than twelve months. The office and warehouse lease has a remaining term of approximately 7.9 years and includes an option to extend for two renewal terms of five years each. The renewal options are not reasonably certain to be exercised, and therefore, they are not included when determining the lease term used to establish the right-of use asset and lease liability. The Company also has several short-term leases, primarily related to equipment. The Company made an accounting policy election to not recognize short-term leases with terms of twelve months or less on the consolidated balance sheet and instead recognize the lease payments in expense as incurred. The Company has also elected to account for real estate leases that contain both lease and non-lease components (such as common area maintenance) as a single lease component.

 

The following table shows supplemental information related to leases:

Schedule of supplemental information related to leases
		Six Months Ended June 30,
		2024				2023
Lease cost:
Operating lease cost		$	390,819			$	390,819
Short-term lease cost		$	10,916			$	46,717
Other information:
Operating cash outflow used for operating leases		$	388,734			$	316,040
Weighted average discount rate			9.0	%			9.0	%
Weighted average remaining lease term			8.0 years				9.0 years

  

 

15

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

 

As of June 30, 2024, future minimum lease payments due under our operating leases are as follows:

Schedule of future minimum lease payments due under the operating lease
		Amount
Calendar year:
2024		$	390,353
2025			798,556
2026			818,518
2027			838,984
2028			859,856
Thereafter			3,183,571
Total undiscounted future minimum lease payments			6,889,838
Less: Impact of discounting			(2,048,510	)
Total present value of operating lease obligations			4,841,328
Current portion, operating lease obligation			(788,801	)
Operating lease obligations, less current portion		$	4,052,527

  

NOTE 6 – STOCKHOLDERS’ EQUITY 

 

Series B Convertible Preferred Stock

 

The following summary of certain terms and provisions of our Series B Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) is subject to, and qualified in its entirety by reference to, the terms and provisions set forth in our certificate of designation of preferences, rights and limitations of Series B Convertible Preferred Stock (the “Series B Convertible Preferred Certificate of Designation”) as previously filed. Subject to the limitations prescribed by our articles of incorporation, our board of directors is authorized to establish the number of shares constituting each series of preferred stock and to fix the designations, powers, preferences, and rights of the shares of each of those series and the qualifications, limitations and restrictions of each of those series, all without any further vote or action by our stockholders. Our board of directors designated 15,000 of the 10,000,000 authorized shares of preferred stock as Series B Convertible Preferred Stock with a stated value of $1,000 per share. The shares of Series B Convertible Preferred Stock were validly issued, fully paid and non-assessable.

 

Each share of Series B Convertible Preferred Stock was convertible at any time at the holder’s option into a number of shares of common stock equal to $1,000 divided by the conversion price of $7.00 per share. Notwithstanding the foregoing, we could not effect any conversion of Series B Convertible Preferred Stock, with certain exceptions, to the extent that, after giving effect to an attempted conversion, the holder of shares of Series B Convertible Preferred Stock (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number of shares of our common stock in excess of 4.99% (or, at the election of the purchaser, 9.99%) of the shares of our common stock then outstanding after giving effect to such conversion. The Series B Convertible Preferred Certificate of Designation does not prohibit the Company from waiving this limitation. Upon any liquidation, dissolution or winding-up of Company, whether voluntary or involuntary, the holders shall be entitled to participate on an as-converted-to-common stock basis (without giving effect to the Beneficial Ownership Limitation) with holders of the common stock in any distribution of assets of the Company to the holders of the common stock. As of June 30, 2024 and December 31, 2023, respectively, there are zero 0 and zero 0 shares of Series B Convertible Preferred Stock issued and outstanding. 

 

Series C Convertible Preferred Stock

 

The Company’s Board of Directors designated 5,000 shares as the Series C Convertible Preferred Stock (the “Series C Convertible Preferred Stock”). Each share of the Series C Convertible Preferred Stock had a stated value of $1,000. The holders of the Series C Convertible 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. Each share of Series C Convertible Preferred Stock has 172 votes (subject to adjustment); provided that in no event may a holder of Series C Convertible Preferred Stock be entitled to vote a number of shares in excess of such holder’s Beneficial Ownership Limitation (as defined in the Certificate of Designation and as described below). Each share of Series C Convertible 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) determined by dividing the stated value of such share ($1,000) by the conversion price, which is $5.50 (subject to adjustment). The Company shall not effect any conversion of the Series C Convertible Preferred Stock, and a holder shall not have the right to convert any portion of the Series C Convertible Preferred Stock, to the extent that after giving effect to the conversion sought by the holder such holder (together with such holder’s Attribution Parties (as defined in the Certificate of Designation)) would beneficially own more than 4.99% (or upon election by a holder, 19.99%) of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon such conversion (the “Beneficial Ownership Limitation”). All holders of the Series C Preferred Stock elected the 19.99% Beneficial Ownership Limitation.

 

 

16

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

On February 26, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain existing investors in the Company (the “Purchasers”). Pursuant to the Purchase Agreement, the Purchasers purchased 4,500 shares of a newly authorized Series C Convertible Preferred Stock, and the Company received proceeds of $4,500,000. The Purchase Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties. In January 2022, the 2,500 outstanding shares of Series C Convertible Preferred Stock were converted into 454,546 shares of common stock. As of June 30, 2024 and December 31, 2023, respectively, there were zero 0 and zero 0 shares of Series C Convertible Preferred Stock issued and outstanding.

 

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 C Convertible Preferred Stock were convertible. The Registration Rights Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties.

 

Series D Convertible Preferred Stock 

 

On September 28, 2022, the Company amended its articles of incorporation to designate 4,000 shares as the Series D Convertible Preferred Stock (the “Series D Convertible Preferred Stock”). Each share of the Series D Convertible Preferred Stock has a stated value of $1,000. The holders of the Series D Convertible 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. Each share of Series D Convertible Preferred Stock has 333 votes (subject to standard anti-dilution adjustment); provided that in no event may a holder of Series D Convertible Preferred Stock be entitled to vote a number of shares in excess of such holder’s Beneficial Ownership Limitation (as defined in the Certificate of Designation and as described below). Each share of Series D 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 is $3.00 (subject to adjustment). The Company shall not effect any conversion of the Series D Convertible Preferred Stock, and a holder shall not have the right to convert any portion of the Series D Convertible Preferred Stock, to the extent that after giving effect to the conversion sought by the holder such holder (together with such holder’s Attribution Parties (as defined in the Certificate of Designation)) would beneficially own more than 4.99% (or upon election by a holder, 19.99%) of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon such conversion (the “Beneficial Ownership Limitation”). All but one of the holders of the Series D Preferred Stock elected the 19.99% Beneficial Ownership Limitation. 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. 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.

 

On September 30, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain existing investors in the Company (the “Purchasers”). Pursuant to the Purchase Agreement, the Purchasers purchased 999 shares of the newly authorized Series D Convertible Preferred Stock, and the Company received proceeds of $999,000. 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”). 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.

 

On May 16, 2023, the Series D Convertible Preferred Stock was approved for conversion to common shares during the Company’s annual shareholder meeting. 

 

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 Purchaser”). Pursuant to the Purchase Agreements, the 2024 Purchasers purchased an aggregate of 620 shares of Series D Preferred Stock, at a price of $1,000 per share, and the Company received proceeds of $620,000.

 

On April 3, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “2024 Purchaser”). Pursuant to the Purchase Agreement, the 2024 Purchasers purchased an aggregate of 250 shares of Series D Preferred Stock, at a price of $1,000 per share, and the Company received proceeds of $250,000.

 

In April and May of 2024, 650 outstanding shares of Series D Convertible Preferred Stock were converted into 216,668 shares of common stock. As of June 30, 2024 and December 31, 2023, respectively, there were 1,519 and 1,299 shares of Series D Convertible Preferred Stock issued and outstanding.

 

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. The Registration Rights Agreements contain customary representations, warranties, agreements and indemnification rights and obligations of the parties.

 

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.

 

 

17

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

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”). Each share of the Series E Convertible Preferred Stock has a stated value of $1,000. The holders of the Series E Convertible 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 as one class on all matters submitted to a vote of shareholders of the Company. 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. 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). The Company shall not effect any conversion of the Series E Convertible Preferred Stock, and the holder shall not have the right to convert any portion of the Series E Convertible Preferred Stock, to the extent that after giving effect to the conversion sought by the holder such holder (together with such holder’s Attribution Parties (as defined in the Certificate of Designation)) would beneficially own more than 4.99% (or upon election by a holder, 19.99%) of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon such conversion (the “Beneficial Ownership Limitation”). 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”). 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.

 

The existing investor’s 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 Purchase Agreement) on or prior to December 31, 2023 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 Convertible Preferred Stock without the consent of the Purchaser.

 

On November 9, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an existing investor in the Company (the “Purchaser”). Pursuant to the Purchase Agreement, the Purchaser purchased 2,500 shares of authorized Series E Convertible Preferred Stock, at a price of $1,000 per share, and the Company received proceeds of $2,500,000.  

 

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 Convertible Preferred Stock without the consent of the Purchasers. The conversion price of the Series E Convertible Preferred Stock currently is $3.00 per share (subject to adjustment). If the company sells shares less than the then conversion price, then the series E conversion price will be amended to that lower share price. As of June 30, 2024 there were no share sales at less than the $3.00 conversion price and this anti-dilution provision expired.

 

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. 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 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. 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.

  

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”). 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.

 

As of June 30, 2024 and December 31, 2023, respectively, there were 13,625 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. 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.

 

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.

 

 

18

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

Series F Convertible Preferred Stock

 

On August 2, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an existing, accredited investor in the Company (the “Purchaser”). Pursuant to the Purchase Agreement, 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.

 

The Company's Board of Directors designated 5,000 shares as the Series F Preferred Stock. Each share of Series F 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 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, however, shall not effect any conversion of the Series F Preferred Stock, and the holder shall not have the right to convert any portion of the Series F Preferred Stock, to the extent that after giving effect to the conversion sought by the holder such holder (together with such holder’s Attribution Parties (as defined in the Certificate of Designation)) would beneficially own more than 4.99% (or upon election by a holder, 19.99%) of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon such conversion. The purchasers of the Series F Preferred Stock elected that their ownership limitation would be 19.99%.

 

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. 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.

 

The Company also agreed that it would not, with certain exceptions, sell or issue common stock or Common Stock Equivalents (as defined in the Purchase Agreement relating to the Series F Preferred Stock) 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 F Preferred Stock without the consent of the holders. 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. All of the shares of Series F Preferred Stock thereupon were cancelled with 0 shares now outstanding.

 

As of June 30, 2024 and December 31, 2023, respectively, there were zero 0 and zero 0 shares of Series F Convertible Preferred Stock issued and outstanding. 

 

Common stock issued

 

Six Months Ended June 30, 2024

 

During the three months ended March 31, 2024, the Company issued 8,655 shares of common stock for payment of board fees to four directors in the amount of $37,500 for services to the board which was expensed during the three months ended March 31, 2024. The volume-weighted average price (VWAP) per share is $4.33. 

 

On April 23, 2024, two shareholders converted 147 and 78 for a total of 225 shares of Series D Convertible Preferred Stock collectively with a stated value of $225,000 with a conversion price of $3.00 per common share resulting in the issuance of 49,000 and 26,000 shares of the Company’s common stock.

 

On April 30, 2024, two shareholders converted 100 and 250 for a total of 350 shares of Series D Convertible Preferred Stock collectively with a stated value of $350,000 entities with a conversion price of $3.00 per common share resulting in the issuance of 33,334 and 83,334 shares of the Company’s common stock.

 

On May 7, 2024, a shareholder converted 75 shares of Series D Convertible Preferred Stock with a stated value of $75,000 with a conversion price of $3.00 per common share resulting in the issuance of 25,000 shares of the Company’s common stock.

 

On May 17, 2024, the Company entered into an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with Ascendiant Capital Markets, LLC, as sales agent (the “Agent”) providing for the sale by the Company of shares of our common stock, par value $0.001 per share, having an aggregate offering price of up to $7,500,000 from time to time through the Agent in connection with an “at-the-market” equity offering program (the “ATM Offering”) as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). On May 17, 2024, the Company filed a prospectus supplement with the Securities and Exchange Commission (“SEC”) relating to the offer and sale of up to $7,500,000 of common stock in the ATM Offering.

 

On June 12, 2024, the Company issued 11,239 shares of common stock at a price of $3.05 per share through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $33,261.

 

 

19

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

On June 13, 2024, the Company issued 9,747 shares of common stock at a price of $3.15 per share through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $29,626.

 

On June 17, 2024, the Company issued 400 shares of common stock at a price of $3.02 per share through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $1,165.

 

On June 18, 2024, the Company issued 1,534 shares of common stock at a price of $3.03 per share through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $4,507.

 

On June 25, 2024, the Company issued 15,610 shares of common stock at a price of $3.15 per share through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $47,004.

 

In summary during the three months ended June 30, 2024, the Company issued an aggregate of 38,530 shares of common stock through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $115,563.

 

During the three months ended June 30, 2024, the Company issued 15,041 shares of common stock for payment of board fees to four directors in the amount of $42,500 for services to the board which was expensed during the three months ended June 30, 2024. The volume-weighted average price (VWAP) per share used to value the services is $2.83. 

 

On June 30, 2024, the Company issued 38,041 shares of common stock to employees participating in the Company’s Employee Stock Purchase Plan at the end of a six-month offering period. The employee contributions totaled $87,348 for the six months ended June 30, 2024 which represented a purchase price of approximately $2.30 per share. The purchase price for one share of Common Stock under the ESPP is equal to 85% of the fair market value of one share of Common Stock on the first trading day of the offering period or the purchase date, whichever is lower (see below).

 

The Company also recognized compensation expense of $40,589 for the six months ended June 30, 2024.

 

Six Months Ended June 30, 2023

 

During the three months ended March 31, 2023, the Company issued 12,463 shares of common stock for payment of board fees to three directors in the amount of $32,500 for services to the board which was expensed during the three months ended March 31, 2023. The volume-weighted average price (VWAP) per share is $2.61. 

 

During the three months ended June 30, 2023, the Company issued 5,645 shares of common stock for payment of board fees to three directors in the amount of $32,500 for services to the board which was expensed during the three months ended June 30, 2023. The volume-weighted average price (VWAP) per share is $5.76.

 

On June 30, 2023, the Company issued 65,561 shares of common stock to employees participating in the Company’s Employee Stock Purchase Plan at the end of a six-month offering period. The employee contributions totaled $117,048 for the six months ended June 30, 2023 and represented a purchase price of $1.79 per share. The purchase price for one share of Common Stock under the ESPP is equal to 85% of the fair market value of one share of Common Stock on the first trading day of the offering period or the purchase date, whichever is lower (see below).

 

Employee Stock Purchase Plan

 

In the fourth quarter of 2022, the board of directors adopted an Employee Stock Purchase Plan (“ESPP”) which was effective as of January 1, 2023 with a term of 10 years. The ESPP allows eligible employees to purchase shares of the Company's common stock at a discounted price, through payroll deductions from a minimum of 1% and up to 25% of their eligible compensation up to a maximum of $25,000 or the IRS allowable limit per calendar year. The Company’s Chief Financial Officer administers the ESPP in conjunction with approvals from the Company’s Compensation Committee, including with respect to the frequency and duration of offering periods, the maximum number of shares that an eligible employee may purchase during an offering period, and, subject to certain limitations set forth in the ESPP, the per-share purchase price. Currently, the maximum number of shares that can be purchased by an eligible employee under the ESPP is 10,000 shares per offering period and there are two six-month offering periods that begin in the first and third quarters of each fiscal year. The purchase price for one share of Common Stock under the ESPP is currently equal to 85% of the fair market value of one share of Common Stock on the first trading day of the offering period or the purchase date, whichever is lower (look-back feature). Although not required by the ESPP, all payroll deductions received or held by the Company under the ESPP are segregated until the completion of the offering period and redemption of the applicable shares and those withheld amounts are recorded as liabilities. The maximum aggregate number of shares of the Common Stock that may be issued under the ESPP is 1,000,000 shares.

 

Under ASC 718-50 “Employee Share Purchase Plans” the plan is considered a compensatory plan and the compensation for each six-month offering period is computed based upon the grant date (that is the first date of each offering period) fair value of the estimated shares to be purchased based on the estimated payroll deduction withholdings. Each grant date fair value is computed as the sum of (a) 15% purchase discount off of the grant date quoted trading price of the Company’s common stock and (b) the fair value of the look-back feature of the Company’s common stock on the grant date which consists of a call option on 85% of a share of common stock and a put option on 15% of a share of common stock.

 

 

20

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

The Company computed the fair value of the look-back feature call and put options for January 1, 2024 to June 30, 2024 using a Black Scholes option pricing model using the following assumptions:

Schedule of black scholes option pricing model using assumptions
		At June 30, 2024
Grant date share price at January 1, 2024		$	2.70
Grant date exercise price		$	2.30
Expected term			0.5 years
Expected volatility			67.3	%
Risk-free rate			5.26	%
Expected dividend rate			0	%

  

During the offer period, the Company records stock-based compensation pro rata as an expense and a credit to additional paid-in capital. The Company issued 38,041 and 65,561 common shares on the option exercise date of June 30, 2024 and June 30, 2023 as follows: 

Schedule of stock-based compensation
		At June 30, 2024
Cash from employee withholdings used to purchase ESPP shares		$	87,348
Stock based compensation expense			40,589
Total charges related to the Employee Stock Purchase Plan		$	127,937

   

		At June 30, 2023
Cash from employee withholdings used to purchase ESPP shares		$	117,048
Stock based compensation expense			66,217
Total charges related to the Employee Stock Purchase Plan		$	183,265

 

Stock-Based Compensation

 

Stock-based compensation expense recognized under ASC 718-10 for the six months ended June 30, 2024 and 2023, was $201,109 and $236,527, respectively, for stock options granted to employees. This expense is included in general and administrative expenses in the unaudited consolidated statements of operations. Stock-based compensation expense recognized during the periods is based on the grant-date fair value of the portion of share-based payment awards that are ultimately expected to vest during the period. At June 30, 2024, the total compensation cost for stock options not yet recognized was $315,069. This cost will be recognized over the remaining vesting term of the options ranging from six months to two and one-half years.

  

 

21

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

On May 12, 2021, the Board adopted, with shareholder approval, the 2021 Equity Incentive Plan (the “2021 Plan”) providing for the issuance of up to 1,000,000 shares of our common stock. The purpose of the 2021 Plan is to assist the Company in attracting and retaining key employees, directors and consultants and to provide incentives to such individuals to align their interests with those of our shareholders. During the third quarter of 2021, the shareholders approved the issuance of up to one million shares or share equivalents pursuant to the 2021 Plan. The Company filed an S-8 registration statement in concert with the 2021 Plan which was deemed effective on August 5, 2021. The plan covers a period of ten years.

 

As of June 30, 2024, and December 31, 2023, options to purchase a total of 1,340,903 (net of forfeitures) shares of common stock and 1,387,775 shares of common stock were outstanding, respectively. At June 30, 2024, 850,629 options were exercisable. Of the total options issued, 269,658 and 269,658 options were outstanding under the 2016 Equity Incentive Plan, 741,245 and 788,117 were outstanding under the 2021 Plan and a further 330,000 and 330,000 non-plan options to purchase common stock were outstanding as of June 30, 2024 and December 31, 2023, respectively. The non-plan options were granted to four executives as hiring incentives, including the Company’s CEO in the fourth quarter of 2020.

Schedule of non-plan options
						Weighted				Average
						Average				Remaining				Aggregate
		Number of				Exercise				Contractual				Intrinsic
		Options				Price				Term (Years)				Value
Outstanding at December 31, 2022			926,266			$	5.74				3.3			$	—
Granted			463,117			$	4.22				4.35			$	—
Forfeited			(1,608	)		$	14.00				—			$	—
Outstanding at December 31, 2023			1,387,775			$	5.23				3.0			$	—
Exercisable at December 31, 2023			581,324			$	5.38				1.8			$	—
Outstanding at December 31, 2023			1,387,775			$	5.23				3.0			$	—
Granted			—			$	—				—			$	—
Exercised/Forfeited/Expired			(46,872	)		$	5.47				—			$	—
Outstanding at June 30, 2024			1,340,903			$	5.22				2.5			$	—
Exercisable at June 30, 2024			850,629			$	5.43				1.8			$	—

 

Warrants

Schedule of warrants
										Weighted
						Weighted				Average
						Average				Remaining				Aggregate
		Number of				Exercise				Contractual				Intrinsic
		Warrants				Price				Term (Years)				Value
Outstanding at December 31, 2022			147,591			$	8.63				0.8			$	—
Warrants expired, forfeited, cancelled or exercised			(102,947	)		$	—				—			$	—
Warrants issued			—			$	—				—			$	—
Outstanding at December 31, 2023			44,644			$	7.70				0.7			$	—
Exercisable at December 31, 2023			44,644			$	7.70				0.7			$	—
Outstanding at December 31, 2023			44,644			$	7.70				0.7			$	—
Warrants expired, forfeited, cancelled or exercised			—			$	—				—			$	—
Warrants issued			—			$	—				—			$	—
Outstanding at June 30, 2024			44,644			$	7.70				0.2			$	—
Exercisable at June 30, 2024			44,644			$	7.70				0.2			$	—

 

 

 

22

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

NOTE 7 - REVENUE AND CONTRACT ACCOUNTING

 

Revenue Recognition and Contract Accounting

 

The Company generates revenue from four sources: (1) Technology Systems; (2) AI Technology which is included in the consolidated statements of operations line-item Technology Systems; (3) Technical Support; and (4) Consulting Services which is included in the consolidated statements of operations line-item Services and Consulting.

 

Contract assets and contract liabilities on uncompleted contracts for revenues recognized over time are as follows:

 

Contract Assets

 

Contract assets on uncompleted contracts represent cumulative revenues recognized in excess of billings and/or cash received on uncompleted contracts accounted for under the cost-to-cost input method, which recognizes revenue based on the ratio of cost incurred to total estimated costs.

 

At June 30, 2024 and December 31, 2023, contract assets on uncompleted contracts consisted of the following:

Schedule of contracts assets on uncompleted contracts
		June 30, 2024				December 31, 2023
Cumulative revenues recognized		$	9,317,704			$	8,820,256
Less: Billings or cash received			(8,178,309	)			(8,178,309	)
Contract assets		$	1,139,395			$	641,947

 

Contract Liabilities

 

Contract liabilities on uncompleted contracts represent billings and/or cash received that exceed cumulative revenues recognized on uncompleted contracts accounted for under the cost-to-cost input method, which recognizes revenues based on the ratio of the cost incurred to total estimated costs.

 

Contract liabilities on services and consulting revenues represent billings and/or cash received in excess of revenue recognized on service agreements that are not accounted for under the cost-to-cost input method.

 

At June 30, 2024 and December 31, 2023, contract liabilities on uncompleted contracts and contract liabilities on services and consulting consisted of the following:

Schedule of contract liabilities on uncompleted contracts
		June 30, 2024				December 31, 2023
Billings and/or cash receipts on uncompleted contracts		$	1,264,658			$	1,264,658
Less: Cumulative revenues recognized			(237,382	)			(199,976	)
Contract liabilities, technology systems			1,027,276				1,064,682
Contract liabilities, services and consulting			2,649,291				601,561
Total contract liabilities, current		$	3,676,567			$	1,666,243
Total contract liabilities, services and consulting, non-current		$	8,495,876			$	—

   

Contract liabilities at December 31, 2023 were $1,666,243; of which $37,407 for technology systems and $442,610 in services and consulting have been recognized as of June 30, 2024.

 

The Company expects to recognize all current contract liabilities within 12 months from the respective consolidated balance sheet date.

 

In May 2024, the Company recorded an initial deferred revenue as a contract liability in the amount of $11,161,428 of which $199,008 related to a pilot program was immediately recognized as revenue (See Note 3). This contract liability resulted from a five-year contract with a customer where the Company received non-monetary consideration recorded as intangible assets (See Note 3). This transaction was accounted for under ASC 606-10-32-21 through ASC-606-10-32-24, Non-Cash Consideration. The performance obligations, which include various support and maintenance services will be recognized as revenue pro-rata over time during the five-year contract term. The current contract liabilities of $2,192,483 as of June 30, 2024 relate to the portion of the contract value the Company expects to recognize pro-rata within the next twelve months. The non-current contract liabilities of $8,495,876 as of June 30, 2024 represent the portion of the contract value that is expected to be recognized pro-rata beyond the next twelve months. If the Digital Image License Agreement is terminated prior to the completion of the five-year term, then the customer will pay for the maintenance and support services annually in cash.

As of June 30, 2024 the balance in contract liabilities pertaining to the agreement is as follows:

Schedule of balance in contract liabilities
Calendar Year				Amount
	2024			$	1,096,241
	2025				2,192,484
	2026				2,192,484
	2027				2,192,484
	2028				2,192,484
	2029				822,182
	Total CN agreement Contract Liabilities			$	10,688,359

 

 

 

23

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

Disaggregation of Revenue

 

The Company is following the guidance of ASC 606-10-55-296 and 297 for disaggregation of revenue. Accordingly, revenue has been disaggregated according to the nature, amount, timing and uncertainty of revenue and cash flows. We are providing qualitative and quantitative disclosures.

 

Qualitative:

 

1.

We have four distinct revenue sources:

 

a.

Technology Systems (Turnkey, engineered projects);

 

b.

AI Technology (Associated maintenance and support services);

 

c.

Technical Support (Licensing and professional services related to auditing of data center assets); and

 

d.

Consulting Services (Predetermined algorithms to provide important operating information to the users of our systems).

 

2.

We currently operate in North America including the USA, Mexico and Canada.

 

3.

Our customers include rail transportation, commercial, government, banking and IT suppliers.

 

4.

Our services & maintenance contracts are fixed price and fall into two duration types:

 

a.

Turnkey engineered projects and professional service contracts that are less than one year in duration and are typically one to two quarters in length; and

 

b.

Maintenance and support contracts ranging from one to five years in length.

 

 

24

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

 

Quantitative:

 

For the Three Months Ended June 30, 2024

Schedule of disaggregation of revenue
Segments		Rail				Commercial				Government				Artificial Intelligence				Total
Primary Geographical Markets
North America		$	1,510,496			$	—			$	—			$	—			$	1,510,496
Major Goods and Service Lines
Turnkey Projects		$	264,999			$	—			$	—			$	—			$	264,999
Maintenance and Support			1,041,661				—				—				—				1,041,661
Algorithms			203,836				—				—				—				203,836
		$	1,510,496			$	—			$	—			$	—			$	1,510,496
Timing of Revenue Recognition
Goods transferred over time		$	264,999			$	—			$	—			$	—			$	264,999
Services transferred over time			1,245,497				—				—				—				1,245,497
		$	1,510,496			$	—			$	—			$	—			$	1,510,496

 

 

 

25

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

For the Three Months Ended June 30, 2023

Segments		Rail				Commercial				Government				Artificial Intelligence				Total
Primary Geographical Markets
North America		$	1,537,286			$	42,381			$	—			$	190,392			$	1,770,059
Major Goods and Service Lines
Turnkey Projects		$	856,942			$	13,552			$	—			$	—			$	870,494
Maintenance and Support			680,344				28,829				—				—				709,173
Algorithms			—				—				—				190,392				190,392
		$	1,537,286			$	42,381			$	—			$	190,392			$	1,770,059
Timing of Revenue Recognition
Goods transferred over time		$	856,942			$	13,552			$	—			$	—			$	870,494
Services transferred over time			680,344				28,829				—				190,392				899,565
		$	1,537,286			$	42,381			$	—			$	190,392			$	1,770,059

 

 

 For the Six Months Ended June 30, 2024

Segments		Rail				Commercial				Government				Artificial Intelligence				Total
Primary Geographical Markets
North America		$	2,581,176			$	—			$	—			$	—			$	2,581,176
Major Goods and Service Lines
Turnkey Projects		$	534,854			$	—			$	—			$	—			$	534,854
Maintenance and Support			1,643,283				—				—				—				1,643,283
Algorithms			403,039				—				—				—				403,039
		$	2,581,176			$	—			$	—			$	—			$	2,581,176
Timing of Revenue Recognition
Goods transferred over time		$	534,854			$	—			$	—			$	—			$	534,854
Services transferred over time			2,049,322				—				—				—				2,046,322
		$	2,581,176			$	—			$	—			$	—			$	2,581,176

 

 

For the Six Months Ended June 30, 2023

Segments		Rail				Commercial				Government				Artificial Intelligence				Total
Primary Geographical Markets
North America		$	3,913,735			$	71,212			$	11,353			$	418,047			$	4,414,347
Major Goods and Service Lines
Turnkey Projects		$	2,684,706			$	13,552			$	—			$	—			$	2,698,258
Maintenance and Support			1,229,029				57,660				11,353				—				1,298,042
Algorithms			—				—				—				418,047				418,047
		$	3,913,735			$	71,212			$	11,353			$	418,047			$	4,414,347
Timing of Revenue Recognition
Goods transferred over time		$	2,684,706			$	13,552			$	—			$	—			$	2,698,258
Services transferred over time			1,229,029				57,660				11,353				418,047				1,716,089
		$	3,913,735			$	71,212			$	11,353			$	418,047			$	4,414,347

  

 

26

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

NOTE 8 – DEFINED CONTRIBUTION PLAN

 

The Company has a 401(k)-retirement savings plan (the “401(k) Plan”) covering all eligible employees. The 401(k) Plan allows employees to defer a portion of their annual compensation, and the Company may match a portion of the employees’ contributions generally after the first six months of service. During the three months ended June 30, 2024, the Company matched 100% of the first 4% of eligible employee compensation that was contributed to the 401(k) Plan. For the three and six months ended June 30, 2024, the Company recognized expense for matching cash contributions to the 401(k) Plan totaling $56,340 and $111,438, respectively.

  

NOTE 9 – RELATED PARTY TRANSACTIONS

 

Frank Lonegro serves on the Board of Directors and is a member of the Audit Committee. Mr. Lonegro is the Chief Executive Officer of Landstar System, Inc. (“Landstar”), based in Jacksonville, Florida. The Company has previously utilized Landstar for shipping services including transporting large items. Most recently, Landstar was the designated vendor involved in shipping an Edge Data Center to an Amtrak site in Secaucus New Jersey. Mr. Lonegro was not involved in the selection of his company by Duos, with whom there was an existing relationship pre-dating Mr. Lonegro’s appointment to the Board of Duos. Mr. Lonegro did not participate in any Board discussions or votes relating to the selection of Landstar nor approval of the transactions with Landstar. The terms of these transactions were reviewed and approved by the management team, which concluded that they are fair and reasonable to the Company and on terms no less favorable than could have been obtained from an unaffiliated party. For the six months ended June 30, 2024 and June 30, 2023 the Company expensed $43,137 and $11,397, respectively. As of June 30, 2024 and December 31, 2023 the amounts owed were $43,137 and $33,812, respectively, and are included in accounts payable in the accompanying balance sheets.

 

NOTE 10 – SALE OF ASSETS

 

On June 29, 2023, the Company completed a transaction whereby it sold assets related to its Integrated Correctional Automation System (iCAS) business with a single customer. In the fourth quarter of 2022, the Company elected to not renew a support contract due to the limited nature of the business. The transaction was completed with a third-party buyer of which the Company’s former and now current Chief Financial Officer is a director. Said officer did not participate in the transaction on behalf of the Company.

 

The assets of the iCAS business were sold for a convertible promissory note with a principal amount of $165,000 with a 10% original issue discount as well as common stock purchase warrants. The note matures in 2 years from the date of sale and is convertible immediately through the later of the maturity date or payment by the borrower of the default amount, as defined in the note, into shares of the buyer’s common stock at a conversion price of $0.003 or 55,000,000 shares. The conversion of the note carries restrictions which include limiting conversion to the extent it would exceed 4.99% of the common stock outstanding of the buyer. The convertible promissory note is subject to standard anti-dilution provisions.

 

The common stock purchase warrants are for a total of 55,000,000 common shares of the buyer at an exercise price of $0.01 per share. The warrants are subject to standard anti-dilution provisions. The warrants are not exercisable until on or after six months from the issuance date and no later than on or before the third anniversary of the issuance date. The Company may exercise the warrants at any time after the six-month anniversary of the issuance date on a cashless basis if there is no effective registration statement covering the resale of the Warrant Shares at prevailing market prices by the holder. The exercise of these warrants is subject to beneficial ownership limits of 4.99% which may be increased by the holder up to 9.99% as defined in the warrant. Given that the shares carried no intrinsic value at the time of the transaction and that the overall fair value is de minimis, the Company has not recorded the warrants associated with the transaction.

 

The Company recognized a gain on sale of assets of $150,000, which is included in other income in the second quarter of 2023.

 

The original issue discount is being accrued into interest income over the term of the note.

 

The note receivable was recorded as follows on June 30, 2024:

Schedule of note receivable
		June 30, 2024
Convertible note receivable		$	165,000
Unamortized discount			(7,500	)
Convertible note receivable, net		$	157,500

 

 

27

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited)

 

 

NOTE 11 – SUBSEQUENT EVENTS

 

On July 5, 2024, a holder of our Series D Preferred Stock converted 120 shares of Series D Preferred Stock into 40,000 shares of Common Stock.

 

On July 22, 2024, the Company and Duos Edge AI, Inc. (“Edge”), a wholly owned subsidiary of the Company, entered into secured promissory notes (the “Notes”) with two institutional investors in the Company. Under the Notes, Edge received an aggregate of $2.2 million. The Notes mature on December 31, 2025, and bear interest at the rate of 10% per annum. All principal and accrued interest under the Notes is due and payable on the maturity date. Edge will use the proceeds under the Notes solely to pay for the equipment and any services necessary to complete the installation of its previously announced edge data centers. As security for the Notes, Edge and the Company entered into a Security Agreement (the “Security Agreement”), pursuant to which Edge granted a first priority security interest in the equipment installed at the edge data centers, as well as all revenues from such equipment, and the Company pledged all proceeds from its previously announced “at-the-market” offering of its common stock pursuant to the prospectus dated May 17, 2024. All of the pledged revenues from the equipment and the at-the-market offering will be deposited in a blocked account and used solely to repay the Notes. In connection with the Notes, the Company issued warrants (the “Warrants”) to purchase an aggregate of 300,000 shares of common stock. The Warrants are exercisable at $3.00 per share (subject to adjustment) and expire in five 5 years. In the event the Notes are not paid by the maturity date, the interest rate on the Notes will increase to 18% per annum and the Company will issue additional warrants (with the same terms as the Warrants) to purchase an aggregate of 75,000 shares of common stock for each 30 days that the Notes are not paid after maturity. The Company has guaranteed all of Edge’s obligations under the Notes pursuant to the terms of a Guaranty (the “Guaranty”). The Notes, Security Agreement and Guaranty contain customary representations, warranties, agreements, and indemnification rights and obligations of the parties.

 

Subsequent to the balance sheet date, in July 2024 the Company issued 27,695 shares of common stock at a weighted average price of $3.04 per share through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $81,495.

 

 

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

 

This quarterly report on Form 10-Q and other reports filed by Duos Technologies Group, Inc., and its operating subsidiaries, Duos Technologies, Inc. (“Duos”) and Duos Edge AI, Inc. (“Edge”) (Duos Technologies Group, Inc., Duos and Edge, collectively the “Company” “we”, “our”, and “us”) from time to time with the Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” “aim,” “project,” “target,” “will,” “may,” “should,” “forecast” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements typically address the Company’s expected future business and financial performance and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ materially from those anticipated, believed, estimated, expected, intended, or planned.

 

These factors include, but are not limited to, risks related to the Company’s ability to continue as a going concern, the Company’s ability to generate sufficient cash to continue and expand operations, the competitive environment generally and in the Company’s specific market areas, changes in technology, the availability of and the terms of financing, changes in costs and availability of goods and services, economic conditions in general and in the Company’s specific market areas, changes in federal, state and/or local government laws and regulations potentially affecting the use of the Company’s technology, changes in operating strategy or development plans and the ability to attract and retain qualified personnel. The Company cautions that the foregoing list of risks, uncertainties and factors is not exclusive. Additional information concerning these and other risk factors is contained in the Company’s most recently filed Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other filings filed by the Company with the SEC, which are available at the SEC’s website, http://www.sec.gov. The Company believes its plans, intentions and expectations reflected in or suggested by these forward-looking statements are based on reasonable assumptions. No assurance, however, can be given that the Company will achieve or realize these plans, intentions or expectations. Indeed, it is likely that some of the Company’s assumptions may prove to be incorrect. The Company’s actual results and financial position may vary from those projected or implied in the forward-looking statements and the variances may be material. Each forward-looking statement speaks only as of the date of the particular statement. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any forward-looking statement is based, except as required by law. All subsequent written and oral forward-looking statements concerning the Company or other matters attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

 

Overview

 

The Company, operating under its brand name duostech, 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. Machine Vision companies provide imaging-based automatic inspection and analysis for process control for industry with potential expansion into other markets. Duos has developed key technologies over the past several years in software, industry specific hardware and artificial intelligence and has demonstrated industrial strength usability of its systems supporting rail, logistics and intermodal businesses that streamline operations, improve safety and reduce costs. Our team includes engineering subject matter expertise in hardware, software, and information technology as well as industry specific applications of artificial intelligence also referred to as Expert Artificial Intelligence. We also have specific industry experts in the rail industry on staff and as consultants. 

 

 

 

 

Duos is currently developing industry solutions for its target markets which will address rail, trucking, aviation and other vehicle-based processes. In addition, the Company has begun to evaluate using its patented technology and considerable experience in deploying information technology (IT) investments for the provision of Edge Data Centers, enabling local, high-speed processing in rural and underserved areas. The Company has recently announced that effective early in the third quarter, it will be expanding into the market for the provision of bespoke Edge Data Centers (EDCs) for remote education and healthcare facilities as well as other applications where high-speed, local processing is required. In order to facilitate this, the Company formed a new subsidiary, Duos Edge AI to pursue this market and has invested approximately $1,200,000 in acquiring assets to begin marketing the solution to defined markets starting in the third quarter.

 

Duos’ legacy offering, the Railcar Inspection Portal (RIP), will continue to be the main revenue driver for the consolidated business. 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. The RIP utilizes a variety of sophisticated optical, laser and speed sensors to scan each passing railcar to create a high-resolution image-set of the top, sides and undercarriage. These images are then processed with our edge data center using artificial intelligence (AI) algorithms to identify safety and security defects on each railcar. The algorithms are developed in conjunction with industrial application experts, in this case resident Railcar Mechanical Engineers, to provide specific guidance in the analysis (“human in the loop”). Within seconds of the railcar passing through the RIP, a detailed report is sent to the customer where they are able to take action on identified issues. This solution has the potential to transform the railroad industry immediately, increasing safety, improving efficiency and reducing costs. The Company has already deployed this system with several Class 1 railroads and anticipates an increased demand from transit and other railroad customers along with selected government agencies that operate and/or manage rail traffic. 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 recently secured two strategic patents for the overall concept and applied technology for rail car scanning and the Company is expecting further patent awards in the coming months for other related technologies.

 

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. 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 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. The Company is not currently actively pursing further customers for ALIS but will continue to analyze the potential market and expects to deploy an upgraded Truck Inspector Portal (TIP) which uses the same technology and lessons learned from ALIS and RIP systems at some point in the future.

 

We have developed two proprietary solutions that operate our software and artificial intelligence. centraco® is an Enterprise Information Management Software platform that consolidates data and events from multiple sources into a unified and distributive user interface. Customized to the end user’s Concept of Operations (CONOPS), it provides improved situational awareness and data visualization for operational objectives compared to traditional manual inspections. truevue360™ is our fully integrated platform that we utilize to develop and deploy Artificial Intelligence (AI) algorithms, including Machine Learning, Computer Vision, Object Detection and Deep Neural Network-based processing for real-time applications.

 

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 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 2022 ushered in a new phase in the Company’s development. Although we continue to see an extension of challenges faced in past years, we also see positive changes and opportunities for our business that will be discussed in greater detail herein. 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.

·

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, the Company is developing a plan to market the EDC product to non-rail markets and expects to announce this in Q3.

 

 

 

 

Prospects and Outlook

 

The Company’s focus for the last several years was to improve operational and technical execution which will continue into the foreseeable future. This we expect will enable the commercial side of the business to expand delivery of the Company’s products and services into existing customers and to expand and diversify our current customer base as well as enter new markets. 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 for current and planned offerings and its expansion of its artificial intelligence offering, this will also open up additional commercial avenues to the Company. Historically, the Company has been focused on large, one-time sales with the subscription opportunities representing an expanded addressable market with an increasing emphasis on recurring revenues.

 

The Company expanded its focus in the rail industry to encompass passenger transportation and was awarded a large, multi-year contract with a national rail carrier in the second half of 2022. The Company has been developing and constructing the enhanced systems for this contract and anticipates that it will install a high performance, two-RIP solution for the carrier in 2024, with a long-term services agreement commencing upon delivery of the system.

 

The Company expanded its focus in the rail industry to encompass passenger transportation and was awarded a large, multi-year contract with a national rail carrier in 2022. The Company has been developing and constructing the enhanced systems for this contract and anticipates that it will install a high performance, 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. 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” of our Annual Report on Form 10-K filed with the SEC on April 1, 2024.

 

Results of Operations

 

The following discussion should be read in conjunction with the unaudited financial statements included in this report.

 

Comparison for the Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

 

The following table sets forth a summary of our unaudited Consolidated Statements of Operations and is used in the following discussions of our results of operations:

 

		For the Three Months Ended
		June 30,
		2024				2023
Revenues		$	1,510,496			$	1,770,059
Cost of revenues			1,725,060				1,528,722
Gross margin			(214,564	)			241,337
Operating expenses			3,001,852				3,389,587
Loss from operations			(3,216,416	)			(3,148,250	)
Other income (expense)			12,245				158,850
Net loss		$	(3,204,171	)		$	(2,989,400	)

 

   

 

 

 

 

Revenues

 

		For the Three Months Ended
		June 30,
		2024				2023				% Change
Revenues:
Technology systems		$	264,999			$	870,494				-70	%
Services and consulting			1,245,497				899,565				38	%
Total revenues		$	1,510,496			$	1,770,059				-15	%

    

The decrease in overall revenues for the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023, is primarily attributed to delays outside of the Company’s control with deployment of our two high-speed Railcar Inspection Portals, which are recorded in the technology systems portion of our business. Although these systems were largely ready for deployment in 2023, customer delays at the deployment site prevented installation even though these two high-speed Railcar Inspection Portals were deep into their production and manufacturing phases, which did not allow us to record the next phase of recognition. We believe that the customer is approaching the completion of the local site preparation and is preparing for field installation later this year. Additionally, the Company continues to see opportunities for expansion of its programs with existing customers. In spite of the timing delays that continue to impact the quarterly results, management remains confident in the long-term potential of the RIP product.

 

The increase in the services portion of our revenues stems from the addition of new AI and subscription customers that were not present in the same quarter last year as well as increases in service contract revenue due to higher service contract prices. The Company expects growth with new revenue from existing customers, including services revenue as the result of new maintenance contracts being established on installations coming on-line during 2024. The Company anticipates revenue growth from new and existing customers related to the subscription offering starting in the second half of 2024. The Company also anticipates renewals of existing and backlog contracts and a shift to the next generation of technology systems which are currently being manufactured and expect to be completed during early 2025.

  

Cost of Revenues

 

		For the Three Months Ended
		June 30,
		2024				2023				% Change
Cost of revenues:
Technology systems		$	780,912			$	1,072,106				-27	%
Services and consulting			944,148				456,616				107	%
Total cost of revenues		$	1,725,060			$	1,528,722				13	%

   

Cost of revenues largely comprises equipment and labor necessary to support the implementation of new systems and support and maintenance of existing systems and software projects.

 

During the three months ended June 30, 2024, the cost of revenues on technology systems decreased compared to the equivalent period in 2023. This reduction is primarily due to the Company continuing the production and manufacturing phase of our two high-speed Railcar Inspection Portals during the second quarter of 2023. By the second quarter of 2024, we are approaching the end of the manufacturing cycle and beginning preparations for field installation later in the year, and thereby contributing to the decrease in cost of revenues year-over-year. Additionally, the Company records certain fixed, operating and servicing costs for both technology systems and services and consulting. These fixed costs, in part, contribute to the cost of revenues declining at a slower rate than that of revenue. While we expect that macro-economic factors will continue to drive prices, the Company continues to manage its costs and, where possible, pass through increased costs to customers in the form of higher prices, although this is not assured.

 

The cost of revenues for services and consulting increased in the three months ended June 30, 2024, compared to the same period last year. This increase is primarily due to $473,069 in amortization expense of the intangible asset related to a nonmonetary transaction, which was not present in the corresponding period of 2023. Excluding this, the cost of revenues for services and consulting remained relatively flat quarter over quarter.

 

Gross Margin

 

		For the Three Months Ended
		June 30,
		2024				2023				% Change
Revenues		$	1,510,496			$	1,770,059				-15	%
Cost of revenues			1,725,060				1,528,722				13	%
Gross margin		$	(214,564)			$	241,337				-189	%

 

Gross margin decreased for the second quarter of 2024 as compared to the same period in 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. Those same project revenues and subsequent margin contributions were not present during the second quarter of 2024. It should be noted that when comparing the results between two periods, the stage of completion for manufacturing and installation can factor into those comparisons and should be taken into account when analyzing those periods.  

 

 

 

  

Operating Expenses

 

		For the Three Months Ended
		June 30,
		2024				2023				% Change
Operating expenses:
Sales and marketing		$	712,456			$	301,077				137	%
Research and development			390,000				537,801				-27	%
General and administration			1,899,396				2,550,709				-26	%
Total operating expenses		$	3,001,852			$	3,389,587				-11	%

  

During the three months ended June 30, 2024, the Company experienced a decrease in overall operating expenses compared to the same period in 2023. There was a significant uptick in sales and marketing costs, primarily due to an expansion in staff after strengthening our commercial team in the latter half of 2023 in preparation for entering new markets. Conversely, research and development expenses fell by 27% owing to reduced personnel and scaled-back testing of prospective technologies. Moreover, general and administrative expenses decreased by 26% due to a reduction in personnel and a smaller bonus pool payout compared to the same period in 2023. Overall, the Company continues to focus on stabilizing operating expenses while meeting the increased needs of our customers. It should be noted that when comparing the results between two periods, the stage of completion for manufacturing and installation can factor into those comparisons and should be taken into account when analyzing those periods.

 

Loss from Operations

 

The loss from operations for the three months ended June 30, 2024 and 2023 was $3,216,416 and $3,148,250, respectively. The increase in loss from operations was primarily the result of lower revenues recorded in the quarter as a consequence of delays in going to field for the two high-speed RIPs for a passenger transit client offset by a planned reduction in expenses which resulted in a lower percentage increase in operating loss compared to a larger percentage decrease in revenue recorded during the quarter.

 

Other Income/Expense

 

Other income for the three months ended June 30, 2024 was $13,395 and $162,080 for the comparative period in 2023. The decrease in other income is attributed to the sale of assets related to the Integrated Correctional Automation System (iCAS) in June of 2023, there was no such transaction in 2024. Interest expense for the three months ended June 30, 2024 was $1,150 and $3,230 for the comparative period in 2023.

 

Net Loss

 

The net loss for the three months ended June 30, 2024 and 2023 was $3,204,171 and $2,989,400, respectively. The 7% increase in net loss was mostly attributed to the decrease in revenues as described above from timing delays. Net loss per common share was $0.43 and $0.42 for the three months ended June 30, 2024 and 2023, respectively.

 

Comparison for the Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

 

The following table sets forth a summary of our unaudited Consolidated Statements of Operations and is used in the following discussions of our results of operations:

 

		For the Six Months Ended
		June 30,
		2024				2023
Revenues		$	2,581,176			$	4,414,347
Cost of revenues			2,701,108				3,635,838
Gross margin			(119,932	)			778,509
Operating expenses			5,857,530				6,073,557
Loss from operations			(5,977,462	)			(5,295,048	)
Other income (expense)			20,982				161,965
Net loss		$	(5,956,480	)		$	(5,133,083	)

 

 

 

 

 

Revenues

 

		For the Six Months Ended
		June 30,
		2024				2023				% Change
Revenues:
Technology systems		$	534,854			$	2,698,258				-80	%
Services and consulting			2,046,322				1,716,089				19	%
Total revenues		$	2,581,176			$	4,414,347				-42	%

    

The decrease in overall revenues for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, is primarily attributed to delays outside of the Company’s control with deployment of our two high-speed Railcar Inspection Portals, which are recorded in the technology systems portion of our business. Although these systems were largely ready for deployment in 2023, customer delays at the deployment site prevented installation even though these two high-speed Railcar Inspection Portals were deep into their production and manufacturing phases, which did not allow us to record the next phase of recognition. We believe that the customer is approaching the completion of the local site preparation and is preparing for field installation later this year. Additionally, the Company continues to see opportunities for expansion of its programs with existing customers. In spite of the timing delays that continue to impact results, management remains confident in the long-term potential of the RIP product.

 

The increase in the services portion of our revenues stems from the addition of new AI and subscription customers that were not present in the same period last year as well as increases in service contract revenue due to higher service contract prices. The Company expects growth with new revenue from existing customers, including services revenue as the result of new maintenance contracts being established on installations coming on-line during 2024. The Company anticipates revenue growth from new and existing customers related to the subscription offering starting in the second half of 2024. The Company also anticipates renewals of existing and backlog contracts and a shift to the next generation of technology systems which are currently being manufactured and expect to be completed during early 2025.

  

Cost of Revenues

 

		For the Six Months Ended
		June 30,
		2024				2023				% Change
Cost of revenues:
Technology systems		$	1,364,349			$	2,839,315				-52	%
Services and consulting			1,336,759				796,523				68	%
Total cost of revenues		$	2,701,108			$	3,635,838				-26	%

   

Cost of revenues largely comprises equipment and labor necessary to support the implementation of new systems and support and maintenance of existing systems and software projects.

 

During the six months ended June 30, 2024, the cost of revenues on technology systems decreased compared to the equivalent period in 2023. This reduction is primarily due to the Company continuing the production and manufacturing phase of our two high-speed Railcar Inspection Portals during the same period of 2023. By the second quarter of 2024, we are approaching the end of the manufacturing cycle and beginning preparations for field installation later in the year, and thereby contributing to the decrease in cost of revenues year-over-year. Additionally, the Company records certain fixed, operating and servicing costs for both technology systems and services and consulting. These fixed costs, in part, contribute to the cost of revenues declining at a slower rate than that of revenue. While we expect that macro-economic factors will continue to drive prices, the Company continues to manage its costs and, where possible, pass through increased costs to customers in the form of higher prices, although this is not assured.

 

The cost of revenues for services and consulting increased in the six months ended June 30, 2024, compared to the same period last year. This increase is primarily due to $473,069 in amortization expense of the intangible asset related to a nonmonetary transaction, which was not present in the corresponding period of 2023.

 

Gross Margin

 

		For the Six Months Ended
		June 30,
		2024				2023				% Change
Revenues		$	2,581,176			$	4,414,347				-42	%
Cost of revenues			2,701,108				3,635,838				-26	%
Gross margin		$	(119,932	)		$	778,509				-115	%

 

Gross margin decreased during the six months ended June 30, 2024, as compared to the same period in 2023 largely in line with the decline in revenue. 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. Those same project revenues and subsequent margin contributions were not present during the first and second quarters of 2024. It should be noted that when comparing the results between two periods, the stage of completion for manufacturing and installation can factor into those comparisons and should be taken into account when analyzing those periods. 

 

 

 

  

Operating Expenses

 

		For the Six Months Ended
		June 30,
		2024				2023				% Change
Operating expenses:
Sales and marketing		$	1,265,942			$	608,654				108	%
Research and development			772,142				942,686				-18	%
General and administration			3,819,446				4,522,217				-16	%
Total operating expenses		$	5,857,530			$	6,073,557				-4	%

 

During the six months ended June 30, 2024, the Company experienced a modest decrease in overall operating expenses compared to the same period in 2023. There was a significant uptick in sales and marketing costs, primarily due to an expansion in staff after strengthening our commercial team in the latter half of 2023 in preparation for entering new markets. Conversely, research and development expenses fell by 18% owing to reduced personnel and scaled-back testing of prospective technologies. Moreover, general and administrative expenses decreased by 16% due to a reduction in personnel and personnel related expenses as well as a decrease in consulting expenses compared to the same period in 2023. Overall, the Company continues to focus on stabilizing operating expenses while meeting the increased needs of our customers. It should be noted that when comparing the results between two periods, the stage of completion for manufacturing and installation can factor into those comparisons and should be taken into account when analyzing those periods.

 

Loss from Operations

 

The loss from operations for the six months ended June 30, 2024 and 2023 was $5,977,462 and $5,295,048, respectively. The increase in loss from operations was primarily the result of lower revenues recorded in the period as a consequence of delays in going to field for the two high-speed RIPs for a passenger transit client offset by a planned reduction in expenses which resulted in a lower percentage increase in operating loss compared to a larger percentage decrease in revenue recorded during the quarter.

 

Other Income/Expense

 

Other income for the six months ended June 30, 2024 was $22,577 and $166,375 for the comparative period in 2023. The decrease in other income is attributed to the sale of assets related to the Integrated Correctional Automation System (iCAS) in June of 2023, there was no such transaction in 2024. Interest expense for the six months ended June 30, 2024 was $1,595 and $4,410 for the comparative period in 2023.

 

Net Loss

 

The net loss for the six months ended June 30, 2024 and 2023 was $5,956,480 and $5,133,083, respectively. The 16% increase in net loss was mostly attributed to the decrease in revenues as described above from timing delays. Net loss per common share was $0.81 and $0.72 for the six months ended June 30, 2024 and 2023, respectively.

 

Liquidity and Capital Resources

 

As of June 30, 2024, the Company has a working capital deficit of $2,380,096 and the Company had a net loss of $5,956,480 for the six months ended June 30, 2024.

 

Cash Flows

 

The following table sets forth the major components of our statements of cash flows data for the periods presented:

 

		For the Six Months Ended June 30,
		2024				2023
Net cash used in operating activities		$	(3,940,984	)		$	(1,923,071	)
Net cash used in investing activities			(889,285	)			(548,360	)
Net cash provided by financing activities			2,894,541				3,802,587
Net (decrease) increase in cash		$	(1,935,728	)		$	1,331,156

  

Net cash used in operating activities for the six months ended June 30, 2024 and 2023 was $3,940,984 and $1,923,071, respectively. The increase in net cash used in operating activities for the six months ended June 30, 2024, was the result of cash outflows to procure necessary materials and overall sales and marketing, general and administration expenses offset by cash inflows from milestone payments related to current projects. In addition, there are two material changes in assets and liabilities that increased the use of cash in operating activities, notably the cash received for the reduction in accounts receivable and decreased contract assets related to lower overall project activities reported during the year.

  

 

 

 

 

 

Net cash used in investing activities for the six months ended June 30, 2024 and 2023 was $889,285 and $548,360, respectively, representing an increase in the purchase of various fixed assets including our three edge data centers that are currently being manufactured to be deployed in the later half of 2024; the remainder includes the purchase of computer equipment and product and software development and disbursements for patent costs.

  

Net cash provided by financing activities for the six months ended June 30, 2024 and 2023 was $2,894,541 and $3,802,587, respectively. Cash flows provided by financing activities during the first six months of 2024 were primarily attributable to gross proceeds of approximately $2,995,002 from issuances of Series D and Series E Convertible Preferred Stock. Cash flows from financing activities during the first six months of 2023 were primarily attributable to the issuance of Series E Convertible Preferred shares for $4,000,000 of gross proceeds offset by repayments of certain loans related to financing of insurance costs.

 

On a long-term basis, our liquidity is dependent on the continuation and expansion of operations and receipt of revenues. We believe our current capital and revenues are sufficient to fund such expansion and our operations over the next twelve months, although we are dependent on timely payments from our customers for projects and work in process. However, we expect such timely payments to continue. Material cash requirements for our rail inspection portal projects will be satisfied within the normal course of business including substantial upfront payments from our customers prior to starting projects However, for our edge data center business, upfront customer payments are not standard practice, and therefore, alternative funding arrangements may be necessary. The Company may elect to purchase materials and supplies in advance of contract award but where there is a high probability of that award.

 

Demand for our 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. Because a major portion of our activities is the receipt of revenues from the sales of our products and services, our business operations may continue to be challenged by our competitors and prolonged recession periods.

 

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. 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.

 

As reflected in the accompanying consolidated financial statements, the Company had a net loss of $5,956,480 for the six months ended June 30, 2024. During the same period, cash used in operating activities was $3,940,984. The working capital deficit and accumulated deficit as of June 30, 2024, were $2,380,098 and $69,560,032, respectively. 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 underwritten offerings and private placements which were completed during 2022, 2023, and now the first and second quarters of 2024 as well.

 

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, in the first and second quarters of 2024, the Company raised gross proceeds of $2,995,000 from the issuance of a combination of Series D and E Preferred Stock (See Note 6). 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 entered into an ATM Sales Agreement (the “Sales Agreement”) with Ascendiant Capital Markets, LLC (the “Sales Agent” or “ACM”) relating to the sale of our common stock, par value $0.001 per share, pursuant to the prospectus dated May 17, 2024. In accordance with the terms of the Sales Agreement, we may offer and sell shares of our common stock bearing an aggregate offering price of up to $7,500,000 from time to time through or to ACM, acting as an agent or principal.

ATM sales commenced in the second quarter, and the Company sold $115,563 in Common Stock during the month of June using the facility and we anticipate that approximate dollar amount raised in June will continue for each of the next twelve months.

 

On July 22, 2024, the Company, through its wholly owned subsidiary Duos Edge AI, Inc., entered into secured promissory notes totaling $2.2 million in funding with two institutional investors. These notes mature on December 31, 2025, and bear an interest rate of 10% per annum, with all principal and accrued interest due at maturity. The proceeds are designated exclusively for the equipment and services required for the installation of the Company's previously announced edge data centers.

 

In the long run, the continuation of the Company as a going concern is dependent upon the ability of the Company to continue executing its business plan, generate enough revenue, and attain consistently profitable operations. Although the lingering effects of the global pandemic related to the coronavirus (Covid-19) previously affected our operations, particularly in our supply chain, we now believe that the supply chain lags have largely been abated. We have analyzed our cash flow under “stress test” conditions and have determined that we have sufficient liquid assets on hand or available via the capital markets to maintain operations for at least twelve months from the issuance date of this report.  

 

In addition, management has been taking and continues to take actions including, but not limited to, elimination of certain costs that do not contribute to short term revenue, and re-aligning both management and staffing with a focus on improving certain skill sets necessary to build growth and profitability and focusing product strategy on opportunities that are likely to bear results in the relatively short term. The Company believes that, as described above, it will have sufficient sources of working capital to meet its obligations over the following twelve months. In the last twelve months the Company has experienced relatively steady contracted backlog as well as seen positive signs from new commercial engagements that indicate improvements in future commercial opportunities for both one-time capital and recurring services revenues.

 

 

 

 

 

 

Management believes that, at this time, the conditions in our market space with ongoing contract delays, the consequent need to procure certain materials in advance of a binding contract and the additional time needed to execute on new contracts previously reported have put a strain on our cash reserves. However, proactive management of our existing contracts, recent stock offerings and private placements as well as the availability to raise capital via our at-the-market offering indicate there is no substantial doubt that the Company can continue as a going concern for a period of twelve months from the issuance date of this report. We continue executing the plan to grow our business and achieve profitability. The Company may selectively look at opportunities for fund raising in the future. Management has extensively evaluated our requirements for the next twelve months and has determined that the Company currently has sufficient cash and access to capital to operate for at least that period.

 

While no assurance can be provided, management believes that these actions provide the opportunity for the Company to continue as a going concern and to grow its business and achieve profitability with access to additional capital funding. 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, continued in 2023, and will continue in 2024 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.

 

Critical Accounting Estimates

 

Intangible Assets

 

In May 2024, the Company recorded an intangible asset with a fair value of $11,161,428. This asset represents non-monetary consideration received under a 5-year customer contract, in which the Company will provide maintenance services to the customer. The intangible asset represents Digital Image data rights in the form of a license agreement received by the Company from the customer.

 

Significant estimates relating to this transaction are the initial valuation of this non-monetary transaction with the customer and the subsequent impairment analysis.

 

 

 

 

Revenue Recognition

 

The Company follows Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), that affects the timing of when certain types of revenues will be recognized. The basic principles in ASC 606 include the following: a contract with a customer creates distinct contract assets and performance obligations, satisfaction of a performance obligation creates revenue, and a performance obligation is satisfied upon transfer of control to a good or service to a customer.

 

Revenue is recognized by evaluating our revenue contracts with customers based on the five-step model under ASC 606:

 

	1.	Identify the contract with the customer;
	2.	Identify the performance obligations in the contract;
	3.	Determine the transaction price;
	4.	Allocate the transaction price to separate performance obligations; and
	5.	Recognize revenue when (or as) each performance obligation is satisfied.

 

The Company generates revenue from four sources:

 

1. Technology Systems

2. AI Technologies

3. Technical Support

4. 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. The stock-based compensation carries a graded vesting feature subject to the condition of time of employment service with awarded stock-based compensation tranches vesting evenly upon the anniversary date of the award.

 

The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. In accordance with ASC 718-10-35-8, the Company elected to recognize the fair value of the stock award using the graded vesting method as time of employment service is the criteria for vesting. The Company’s determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding a number of highly subjective variables.

  

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.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

 

 Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

With the participation of our Chief Executive Officer, Chief Financial Officer and Controller, we have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Report. Based upon such evaluation, our Chief Executive Officer, Chief Financial Officer and Controller have concluded that, as of the end of such period, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer, Chief Financial Officer and Controller, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended June 30, 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

 

  

PART II OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or any of our Company’s or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors.

 

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on April 1, 2024.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None

 

Item 3. Defaults Upon Senior Securities.

 

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

 

Item 4. Mine Safety Disclosures.

 

Not applicable

 

Item 5. Other Information.

 

Trading Plans

 

During the quarter ended June 30, 2024, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).

 

 

 

Item 6. Exhibits.

 

Exhibit No.		Description
31.1*		Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
31.2*		Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
32.1**		Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

 

* Filed

** Furnished herewith

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	DUOS TECHNOLOGIES GROUP, INC.
Date: August 13, 2024	By:	/s/ Charles P. Ferry
		Charles P. Ferry Chief Executive Officer
Date: August 13, 2024	By:	/s/ Adrian G. Goldfarb
		Adrian G. Goldfarb Chief Financial Officer

 

 

 

 

 

Exhibit 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, Charles P. Ferry, certify that:

 

1.    I have reviewed this quarterly report on Form 10-Q of Duos Technologies Group, Inc.;

 

2.    Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly for the period in which this quarterly report is being prepared;

 

b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

 

d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

 

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

 

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

  

Date: August 13, 2024	By:	/s/ Charles P. Ferry
		Charles P. Ferry Chief Executive Officer

 

 

Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, Adrian G. Goldfarb, certify that:

 

1.    I have reviewed this quarterly report on Form 10-Q of Duos Technologies Group, Inc.;

 

2.    Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly for the period in which this quarterly report is being prepared;

 

b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

 

d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

 

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

 

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

  

Date: August 13, 2024	By:	/s/ Adrian G. Goldfarb
		Adrian G. Goldfarb Chief Financial Officer

 

 

EXHIBIT 32.1

 

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

 

In connection with this Quarterly Report of Duos Technologies Group, Inc. (the “Company”), on Form 10-Q for the period ended June 30, 2024, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Charles P. Ferry, Chief Executive Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)

Such Quarterly Report on Form 10-Q for the period ended June 30, 2024, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in such Quarterly Report on Form 10-Q for the period ended June 30, 2024, fairly presents, in all material respects, the financial condition and results of operations of the Company.

  

 

Date: August 13, 2024	By:	/s/ Charles P. Ferry
		Charles P. Ferry
		Chief Executive Officer

 

 

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

 

In connection with this Quarterly Report of Duos Technologies Group, Inc. (the “Company”), on Form 10-Q for the period ended June 30, 2024, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Adrian G. Goldfarb, Chief Financial Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)

Such Quarterly Report on Form 10-Q for the period ended June 30, 2024, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in such Quarterly Report on Form 10-Q for the period ended June 30, 2024, fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date: August 13, 2024	By:	/s/ Adrian G. Goldfarb
		Adrian G. Goldfarb
		Chief Financial Officer

 

v3.24.2.u1

Cover - shares	6 Months Ended
	Jun. 30, 2024	Aug. 09, 2024
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2024
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2024
Current Fiscal Year End Date	--12-31
Entity File Number	000-55497
Entity Registrant Name	Duos Technologies Group, Inc.
Entity Central Index Key	0001396536
Entity Tax Identification Number	65-0493217
Entity Incorporation, State or Country Code	FL
Entity Address, Address Line One	7660 Centurion Parkway
Entity Address, Address Line Two	Suite 100
Entity Address, City or Town	Jacksonville
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	32256
City Area Code	904
Local Phone Number	296-2807
Title of 12(b) Security	Common Stock, par value $0.001
Trading Symbol	DUOT
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		7,689,969

v3.24.2.u1

CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2024	Dec. 31, 2023
CURRENT ASSETS:
Cash	$ 506,114	$ 2,441,842
Accounts receivable, net	128,795	1,462,463
Contract assets	1,139,395	641,947
Inventory	1,060,373	1,526,165
Prepaid expenses and other current assets	436,066	184,478
Note receivable, net	157,500	0
Total Current Assets	3,428,243	6,256,895
Property and equipment, net	1,736,407	726,507
Operating lease right of use asset	4,204,593	4,373,155
Security deposit	500,000	550,000
OTHER ASSETS:
Note receivable, net	0	153,750
Intangible asset, net	10,688,359	0
Patents and trademarks, net	128,371	129,140
Software development costs, net	524,225	652,838
Total Other Assets	11,340,955	935,728
TOTAL ASSETS	21,210,198	12,842,285
CURRENT LIABILITIES:
Accounts payable	849,497	595,634
Notes payable - financing agreements	241,452	41,976
Accrued expenses	252,024	164,113
Operating lease obligations-current portion	788,801	779,087
Contract liabilities, current	3,676,567	1,666,243
Total Current Liabilities	5,808,341	3,247,053
Contract liabilities, less current portion	8,495,876	0
Operating lease obligations, less current portion	4,052,527	4,228,718
Total Liabilities	18,356,744	7,475,771
Commitments and Contingencies (Note 5)
STOCKHOLDERS' EQUITY:
Common stock: $0.001 par value; 500,000,000 shares authorized, 7,623,598 and 7,306,663 shares issued, 7,622,274 and 7,305,339 shares outstanding at June 30, 2024 and December 31, 2023, respectively	7,623	7,306
Additional paid-in-capital	72,563,300	69,120,199
Accumulated deficit	(69,560,032)	(63,603,552)
Sub-total	3,010,906	5,523,966
Less:  Treasury stock (1,324 shares of common stock at June 30, 2024 and December 31, 2023)	(157,452)	(157,452)
Total Stockholders' Equity	2,853,454	5,366,514
Total Liabilities and Stockholders' Equity	21,210,198	12,842,285
Convertible Series A Preferred Stock [Member]
STOCKHOLDERS' EQUITY:
Preferred stock, value	0	0
Convertible Series B Preferred Stock [Member]
STOCKHOLDERS' EQUITY:
Preferred stock, value	0	0
Convertible Series C Preferred Stock [Member]
STOCKHOLDERS' EQUITY:
Preferred stock, value	0	0
Convertible Series D Preferred Stock [Member]
STOCKHOLDERS' EQUITY:
Preferred stock, value	1	1
Convertible Series E Preferred Stock [Member]
STOCKHOLDERS' EQUITY:
Preferred stock, value	14	12
Convertible Series F Preferred Stock [Member]
STOCKHOLDERS' EQUITY:
Preferred stock, value	$ 0	$ 0

v3.24.2.u1

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2024	Dec. 31, 2023
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares available to be designated	9,441,000	9,441,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	7,623,598	7,306,663
Common stock, shares outstanding	7,622,274	7,305,339
Treasury stock, common shares	1,324	1,324
Convertible Series A Preferred Stock [Member]
Preferred stock, par value	$ 10	$ 10
Preferred stock, shares available to be designated	500,000	500,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Preferred stock, conversion price per share	$ 6.30	$ 6.30
Convertible Series B Preferred Stock [Member]
Preferred stock, par value	$ 1,000	$ 1,000
Preferred stock, shares available to be designated	15,000	15,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Preferred stock, conversion price per share	$ 7	$ 7
Convertible Series C Preferred Stock [Member]
Preferred stock, par value	$ 1,000	$ 1,000
Preferred stock, shares available to be designated	5,000	5,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Preferred stock, conversion price per share	$ 5.50	$ 5.50
Convertible Series D Preferred Stock [Member]
Preferred stock, par value	$ 1,000	$ 1,000
Preferred stock, shares available to be designated	4,000	4,000
Preferred stock, shares issued	1,519	1,299
Preferred stock, shares outstanding	1,519	1,299
Preferred stock, conversion price per share	$ 3	$ 3
Convertible Series E Preferred Stock [Member]
Preferred stock, par value	$ 1,000	$ 1,000
Preferred stock, shares available to be designated	30,000	30,000
Preferred stock, shares issued	13,625	11,500
Preferred stock, shares outstanding	13,625	11,500
Preferred stock, conversion price per share	$ 3	$ 3
Convertible Series F Preferred Stock [Member]
Preferred stock, par value	$ 1,000	$ 1,000
Preferred stock, shares available to be designated	5,000	5,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Preferred stock, conversion price per share	$ 6.20	$ 6.20

v3.24.2.u1

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
REVENUES:
Total Revenues	$ 1,510,496	$ 1,770,059	$ 2,581,176	$ 4,414,347
COST OF REVENUES:
Total Cost of Revenues	1,725,060	1,528,722	2,701,108	3,635,838
GROSS MARGIN	(214,564)	241,337	(119,932)	778,509
OPERATING EXPENSES:
Sales and marketing	712,456	301,077	1,265,942	608,654
Research and development	390,000	537,801	772,142	942,686
General and administration	1,899,396	2,550,709	3,819,446	4,522,217
Total Operating Expenses	3,001,852	3,389,587	5,857,530	6,073,557
LOSS FROM OPERATIONS	(3,216,416)	(3,148,250)	(5,977,462)	(5,295,048)
OTHER INCOME (EXPENSES):
Interest expense	(1,150)	(3,230)	(1,595)	(4,410)
Other income, net	13,395	162,080	22,577	166,375
Total Other Income (Expenses)	12,245	158,850	20,982	161,965
NET LOSS	$ (3,204,171)	$ (2,989,400)	$ (5,956,480)	$ (5,133,083)
Basic Net Loss Per Share	$ (0.43)	$ (0.42)	$ (0.81)	$ (0.72)
Diluted Net Loss Per Share	$ (0.43)	$ (0.42)	$ (0.81)	$ (0.72)
Weighted Average Shares-Basic	7,450,676	7,169,340	7,378,813	7,163,142
Weighted Average Shares-Diluted	7,450,676	7,169,340	7,378,813	7,163,142
Technology Service [Member]
REVENUES:
Total Revenues	$ 264,999	$ 870,494	$ 534,854	$ 2,698,258
COST OF REVENUES:
Total Cost of Revenues	780,912	1,072,106	1,364,349	2,839,315
Service, Other [Member]
REVENUES:
Total Revenues	1,245,497	899,565	2,046,322	1,716,089
COST OF REVENUES:
Total Cost of Revenues	$ 944,148	$ 456,616	$ 1,336,759	$ 796,523

v3.24.2.u1

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($)	Preferred Stock B [Member]	Preferred Stock C [Member]	Preferred Stock D [Member]	Preferred Stock E [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Treasury Stock, Common [Member]	Total
Beginning balance, value at Dec. 31, 2022			$ 1		$ 7,156	$ 56,562,600	$ (52,361,834)	$ (157,452)	$ 4,050,471
Beginning balance, shares at Dec. 31, 2022			1,299		7,156,876
Series E preferred stock issued				$ 4		3,999,996			4,000,000
Series E preferred stock issued, shares				4,000
Stock options compensation						75,128			75,128
Stock issuance cost						(299,145)			(299,145)
Stock issued for services					$ 12	32,488			32,500
Stock issued for services, shares					12,463
Net loss							(2,143,683)		(2,143,683)
Ending balance, value at Mar. 31, 2023			$ 1	$ 4	$ 7,168	60,371,067	(54,505,517)	(157,452)	5,715,271
Ending balance, shares at Mar. 31, 2023			1,299	4,000	7,169,339
Beginning balance, value at Dec. 31, 2022			$ 1		$ 7,156	56,562,600	(52,361,834)	(157,452)	4,050,471
Beginning balance, shares at Dec. 31, 2022			1,299		7,156,876
Net loss									(5,133,083)
Ending balance, value at Jun. 30, 2023			$ 1	$ 4	$ 7,240	61,029,659	(57,494,917)	(157,452)	3,384,535
Ending balance, shares at Jun. 30, 2023			1,299	4,000	7,240,545
Beginning balance, value at Mar. 31, 2023			$ 1	$ 4	$ 7,168	60,371,067	(54,505,517)	(157,452)	5,715,271
Beginning balance, shares at Mar. 31, 2023			1,299	4,000	7,169,339
Stock options compensation						161,399			161,399
Stock issuance cost						281,500			281,500
Stock issued for services					$ 6	32,494			32,500
Stock issued for services, shares					5,645
Stock issued under the Employee Stock Purchase Plan for cash and compensation					$ 66	183,199			183,265
Stock issued under the Employee Stock Purchase Plan for cash and compensation, shares					65,561
Net loss							(2,989,400)		(2,989,400)
Ending balance, value at Jun. 30, 2023			$ 1	$ 4	$ 7,240	61,029,659	(57,494,917)	(157,452)	3,384,535
Ending balance, shares at Jun. 30, 2023			1,299	4,000	7,240,545
Beginning balance, value at Dec. 31, 2023			$ 1	$ 12	$ 7,306	69,120,199	(63,603,552)	(157,452)	5,366,514
Beginning balance, shares at Dec. 31, 2023			1,299	11,500	7,306,663
Series D preferred stock issued			$ 1			619,999			620,000
Series D preferred stock issued, shares			620
Series E preferred stock issued				$ 2		2,125,000			2,125,002
Series E preferred stock issued, shares				2,125
Stock options compensation						141,204			141,204
Stock issuance cost						(36,188)			(36,188)
Stock issued for services					$ 9	37,491			37,500
Stock issued for services, shares					8,655
Stock Compensation under ESPP						18,116			18,116
Net loss							(2,752,309)		(2,752,309)
Ending balance, value at Mar. 31, 2024			$ 2	$ 14	$ 7,315	72,025,821	(66,355,861)	(157,452)	5,519,839
Ending balance, shares at Mar. 31, 2024			1,919	13,625	7,315,318
Beginning balance, value at Dec. 31, 2023			$ 1	$ 12	$ 7,306	69,120,199	(63,603,552)	(157,452)	5,366,514
Beginning balance, shares at Dec. 31, 2023			1,299	11,500	7,306,663
Net loss									(5,956,480)
Ending balance, value at Jun. 30, 2024			$ 1	$ 14	$ 7,623	72,563,300	(69,560,032)	(157,452)	2,853,454
Ending balance, shares at Jun. 30, 2024			1,519	13,625	7,623,598
Beginning balance, value at Mar. 31, 2024			$ 2	$ 14	$ 7,315	72,025,821	(66,355,861)	(157,452)	5,519,839
Beginning balance, shares at Mar. 31, 2024			1,919	13,625	7,315,318
Series D preferred stock issued						250,000			250,000
Series D preferred stock issued, shares			250
Stock issuance cost						(40,000)			(40,000)
Stock issued for services					$ 15	42,485			42,500
Stock issued for services, shares					15,041
Stock issued under the Employee Stock Purchase Plan for cash and compensation					$ 38	109,780			109,818
Stock issued under the Employee Stock Purchase Plan for cash and compensation, shares					38,041
Series D preferred stock converted to common stock			$ (1)		$ 217	(216)
Series D preferred stock converted to common stock, shares			(650)		216,668
Common stock issued for cash					$ 38	115,525			115,563
Common stock issued for cash, shares					38,530
Stock options compensation						59,905			59,905
Net loss							(3,204,171)		(3,204,171)
Ending balance, value at Jun. 30, 2024			$ 1	$ 14	$ 7,623	$ 72,563,300	$ (69,560,032)	$ (157,452)	$ 2,853,454
Ending balance, shares at Jun. 30, 2024			1,519	13,625	7,623,598

v3.24.2.u1

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023
Cash from operating activities:
Net loss	$ (5,956,480)	$ (5,133,083)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	781,835	230,592
Stock based compensation	241,694	302,743
Stock issued for services	80,000	65,000
Amortization of operating lease right of use asset	168,562	155,338
Changes in assets and liabilities:
Accounts receivable	1,333,668	3,131,392
Note receivable	(3,750)	(150,625)
Contract assets	(497,448)	(581,069)
Inventory	165,792	(116,393)
Security deposit	50,000	50,000
Prepaid expenses and other current assets	175,073	403,225
Accounts payable	253,863	(1,530,361)
Accrued expenses	87,912	(150,914)
Operating lease obligation	(166,477)	(80,559)
Contract liabilities	(655,228)	1,481,643
Net cash used in operating activities	(3,940,984)	(1,923,071)
Cash flows from investing activities:
Purchase of patents/trademarks	(4,765)	(28,720)
Purchase of software development	0	(360,437)
Purchase of fixed assets	(884,520)	(159,203)
Net cash used in investing activities	(889,285)	(548,360)
Cash flows from financing activities:
Repayments on financing agreements	(227,184)	(273,965)
Repayment of finance lease	0	(22,851)
Proceeds from common stock issued	115,563	0
Stock issuance costs	(76,188)	(17,645)
Proceeds from shares issued under Employee Stock Purchase Plan	87,348	117,048
Proceeds from preferred stock issued	2,995,002	4,000,000
Net cash provided by financing activities	2,894,541	3,802,587
Net increase (decrease) in cash	(1,935,728)	1,331,156
Cash, beginning of period	2,441,842	1,121,092
Cash, end of period	506,114	2,452,248
Supplemental Disclosure of Cash Flow Information:
Interest paid	1,596	4,410
Taxes paid	5,055	0
Supplemental Non-Cash Investing and Financing Activities:
Notes issued for financing of insurance premiums	426,661	458,452
Transfer of inventory to fixed assets	300,000	0
Intangible asset acquired with contract liability	$ 11,161,428	$ 0

v3.24.2.u1

Pay vs Performance Disclosure - USD ($)	3 Months Ended				6 Months Ended
	Jun. 30, 2024	Mar. 31, 2024	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2024	Jun. 30, 2023
Pay vs Performance Disclosure [Table]
Net Income (Loss)	$ (3,204,171)	$ (2,752,309)	$ (2,989,400)	$ (2,143,683)	$ (5,956,480)	$ (5,133,083)

v3.24.2.u1

Insider Trading Arrangements	3 Months Ended
	Jun. 30, 2024
Insider Trading Arrangements [Line Items]
Rule 10b5-1 Arrangement Adopted [Flag]	false
Non-Rule 10b5-1 Arrangement Adopted [Flag]	false
Rule 10b5-1 Arrangement Terminated [Flag]	false
Non-Rule 10b5-1 Arrangement Terminated [Flag]	false

v3.24.2.u1

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	6 Months Ended
	Jun. 30, 2024
Accounting Policies [Abstract]
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Nature of Operations   Duos Technologies Group, Inc. (the “Company”), through its operating subsidiaries, Duos Technologies, Inc. (“Duos”) and Duos Edge AI, Inc. (“Edge”) (collectively the “Company”), is a company that specializes in machine vision and artificial intelligence to analyze fast moving objects such as trains, trucks, automobiles, and aircraft. This technology can help improve safety, maintenance, and operating metrics.   The Company is the inventor of the Railcar Inspection Portal (RIP) and is currently the rail industry leader for machine vision/camera wayside detection systems that include the use of Artificial Intelligence at speeds up to 125 mph. The RIP inspects a train at full speed from the top, sides, and bottom looking at FRA/AAR mandated safety inspection points. The system also detects illegal riders, which can assist law enforcement agencies. Each rail car is scanned with machine vision cameras and other sensors from the top, sides, and bottom, where images are produced within seconds of the railcar passing. These images can then be used by the customer to help prevent derailments, improve maintenance operations, and assist with security. The Company self-performs all aspects of hardware, software, Information Technology (“IT”), and Artificial Intelligence development and engineering. The Company maintains significant intellectual property and continues to be awarded additional patents for both the technology and methodologies used. The Company also has a proprietary portfolio of approximately 53 Artificial Intelligence “Use Cases” that automatically flag defects. The Company has deployed this system with several Class 1 railroads and one major passenger carrier and anticipates an increased demand in the future from railcar operators, owners, shippers, transit railroads as well as law enforcement agencies.   During the three months ended June 30, 2024, the Company initiated a study to determine how to expand its market reach into non-rail markets. Using the information technology (IT) investments already made into the RIP in conjunction with the recently awarded patents for both methodology and artificial intelligence, the Company has determined that its use of Edge Data Centers for the processing of large volumes of image data has broad applicability to enabling local, high-speed processing in similar environments as being undertaken at the 13 current RIPs, that is, in rural and underserved areas. Accordingly, the Company has recently announced that effective early in the third quarter, it will be expanding into the market for the provision of bespoke Edge Data Centers (EDCs) for certain markets including remote education and healthcare facilities as well as other applications where high-speed, local processing is required.   The Company has also developed the Automated Logistics Information System (“ALIS”) which automates gatehouse operations where trucks enter and exit large logistics and intermodal facilities. This solution also incorporates sensors and data points as necessary for each operation and directly interconnects with backend logistics databases and processes to streamline and significantly improve operations and security and, importantly, dramatically improve throughput on each lane on which the technology is deployed. The Company is not currently actively pursuing further customers for ALIS but will continue to analyze the potential market and, depending on market demand, may deploy an upgraded Truck Inspection Portal (TIP) which uses the same technology and lessons learned from the ALIS and RIP systems at some point in the future.   The Company’s strategy for the rail industry is to expand beyond our existing customer base in the Class 1 and major passenger transit market and we expect to add additional users in the short line, industrial and regional transit markets in North America. In addition, we plan to expand our subscription offering to car owners and shippers and expand operations to meet the demand from international customers. The Company is prepared to respond and scale, if necessary, to react to increased demand for potential regulations that may be imposed around wayside detection technology. In the future the Company may put more emphasis on the trucking and intermodal sector with an updated Truck Inspection Portal solution. The Company continues to focus on operational and technical excellence, customer satisfaction, and maintaining a highly skilled and performance-based work force. The Company is also further investigating market opportunities for subsets of its technology including deployment and management of Edge Data Centers, a fundamental component of the distributed, rapid response data analysis used in the RIP.   Basis of Presentation   The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (all of which are of a normal recurring nature) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other future period. These unaudited consolidated financial statements and the unaudited condensed notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2024.   Principles of Consolidation   The unaudited consolidated financial statements include Duos Technologies Group, Inc. and its wholly owned subsidiaries, Duos Technologies, Inc. and Duos Edge AI, Inc. All inter-company transactions and balances are eliminated in consolidation.   Use of Estimates   The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. The most significant estimates in the accompanying unaudited consolidated financial statements include the initial valuation of a non-monetary transaction with a customer, valuation of intangible assets for impairment analysis, allowance on accounts receivable and notes receivable, valuation of common stock warrants received in exchange for an asset sale, valuation of deferred tax assets, and valuation of other long-lived assets, estimates of net contract revenues and the total estimated costs to determine progress towards contract completion, valuation of inventory, estimates of the valuation of right of use assets and corresponding lease liabilities, valuation of warrants issued with debt and valuation of stock-based awards. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.    Concentrations   Cash Concentrations   Cash is maintained at financial institutions and at times, balances may exceed federally insured limits. We have not experienced any losses related to these balances. As of June 30, 2024, the balance in one financial institution exceeded federally insured limits by approximately $163,603. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s consolidated financial condition, results of operation and cash flows.   Significant Customers and Concentration of Credit Risk   The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:   For the six months ended June 30, 2024, three customers accounted for 43%, 25% and 18% of revenues. For the six months ended June 30, 2023, two customers accounted for 61%, and 25% of revenues. In all cases, there are no minimum contract values stated. Each contract covers an agreement to deliver a Railcar Inspection Portal or services 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 may be paid annually in advance with revenues recorded ratably over the contract period.    At June 30, 2024, two customers accounted for 53%, and 38% of accounts receivable. At December 31, 2023, two customers accounted for 83%, and 11% of accounts receivable. Much of the credit risk is mitigated since all the customers listed here are Class 1 railroads with a history of timely payments to us.      Geographic Concentration   For the six months ended June 30, 2024, approximately 65% of revenue was generated from three customers outside of the United States. For the six months ended June 30, 2023, approximately 31% of revenue was generated from three customers outside of the United States.   Significant Vendors and Concentration of Credit Risk   In some instances, the Company relies on a limited pool of vendors for key components related to the manufacturing of its subsystems. These vendors are primarily focused on camera, server, and lighting technologies integral to the Company’s solution. Where possible, the Company seeks multiple vendors for key components to mitigate vendor concentration risk.   Fair Value of Financial Instruments and Fair Value Measurements   The Company follows Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that requires the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements.   ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.   These inputs are prioritized below:    Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities.  Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.  Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions that the market participants would use in the valuation of the asset or liability based on the best available information.   The Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.   The estimated fair value of certain financial instruments, including accounts receivable, prepaid expenses, accounts payable, accrued expenses and notes payable are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.   Accounts Receivable    On January 1, 2023, the Company adopted ASC 326, “Financial Instruments - Credit Losses”. In accordance with ASC 326, an allowance is maintained for estimated forward-looking losses resulting from the possible inability of customers to make the required payments (current expected losses). The amount of the allowance is determined principally on the basis of past collection experience and known financial factors regarding specific customers.   Accounts receivable are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers net of estimated credit loss allowances for uncollectible accounts. In determining the collections on the account, historical trends are evaluated, and specific customer issues are reviewed to arrive at appropriate allowances. The Company reviews its accounts to estimate losses resulting from the inability of its customers to make the required payments. Any required allowance is based on specific analysis of past due accounts and also considers historical trends of write-offs. Past due status is based on how recently payments have been received from customers.   Inventory   Inventory consists primarily of spare parts and consumables and long-lead time components to be used in the production of our technology systems or in connection with maintenance agreements with customers. Any inventory deemed to be obsolete is written off. Inventory is stated at the lower of cost or net realizable value. Inventory cost is primarily determined using the weighted average cost method.   Intangible Asset   In May 2024, the Company recognized an intangible asset which represents digital image data rights received under a license agreement as non-monetary consideration under a five-year customer contract. The intangible asset will be amortized over the five-year contractual term.   Long-lived assets   Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company estimates the future undiscounted net cash flows of the related asset or asset group over the remaining life of the asset in measuring whether the long-lived asset should be written down to fair value. Measurement of the amount of impairment would be based on generally accepted valuation methodologies, as deemed appropriate. If the carrying amount is greater than the undiscounted cash flows, the carrying amount of the asset is reduced to the asset’s fair value. An impairment loss is recognized immediately as an operating expense in the consolidated statements of operations. Reversal of previously recorded impairment losses are prohibited.       Software Development Costs   Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs. The technological feasibility of a software product is established when the Company has completed all planning, designing, coding, and testing activities that are necessary to establish that the product meets its design specifications, including functionality, features, and technical performance requirements. Software development costs incurred after establishing technological feasibility for software sold as a perpetual license, as defined within ASC 985-20 (Software – Costs of Software to be Sold, Leased, or Marketed), are capitalized and amortized on a product-by-product basis when the product is available for general release to customers. Software development costs are evaluated for impairment annually by comparing the net realizable value to the unamortized capitalized costs and writing these costs down to net realizable value.   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 stock-based compensation carries a graded vesting feature subject to the condition of time of employment service with awarded stock-based compensation tranches vesting evenly upon the anniversary date of the award.   The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. In accordance with ASC 718-10-35-8, the Company elected to recognize the fair value of the stock award using the graded vesting method as time of employment service is the criteria for vesting. The Company’s determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding a number of highly subjective variables.   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.    Revenue Recognition   The Company follows Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), that affects the timing of when certain types of revenues will be recognized. The basic principles in ASC 606 include the following: a contract with a customer creates distinct contract assets and performance obligations, satisfaction of a performance obligation creates revenue, and a performance obligation is satisfied upon transfer of control to a good or service to a customer.   Revenue is recognized by evaluating our revenue contracts with customers based on the five-step model under ASC 606:     1. Identify the contract with the customer;     2. Identify the performance obligations in the contract;     3. Determine the transaction price;     4. Allocate the transaction price to separate performance obligations; and     5. Recognize revenue when (or as) each performance obligation is satisfied.   The Company generates revenue from four sources:   (1) Technology Systems   (2) AI Technologies   (3) Technical Support   (4) Consulting Services   Technology Systems   For revenues related to 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. These estimated costs are then used to determine the progress towards contract completion and the corresponding amount of revenue to recognize.   Accordingly, the Company now bases its revenue recognition on ASC 606-10-25-27, where control of a good or service transfers over time if the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date including a profit margin or reasonable return on capital. Control is deemed to pass to the customer instantaneously as the goods are manufactured and revenue is recognized accordingly.   In addition, the Company has adopted ASC 606-10-55-21 such that if the cost incurred is not proportionate to the progress in satisfying the performance obligation, we adjust the input method to recognize revenue only to the extent of the cost incurred. Therefore, the Company will recognize revenue at an equal amount to the cost of the goods to satisfy the performance obligation. To accurately reflect revenue recognition based on the input method, the Company has adopted the implementation guidance as set out in ASC-606-10-55-187 through 192.   Under this method, contract revenues are recognized over the performance period of the contract in direct proportion to the costs incurred. Costs include direct material, direct labor, subcontract labor and other allocable indirect costs. All un-allocable indirect costs and corporate general and administrative costs are also charged to the periods as incurred. Any recognized revenues that have not been billed to a customer are recorded as an asset in “contract assets”. Any billings of customers more than recognized revenues are recorded as a liability in “contract liabilities”. However, in the event a loss on a contract is foreseen, the Company will recognize the loss when such loss is determined to be both probable and reasonably estimable.   AI Technologies   The Company has revenue from applications that incorporate artificial intelligence (AI) in the form of predetermined algorithms which provide important operating information to the users of our systems. The revenue generated from these applications of AI consists of a fixed fee related to the design, development, testing and incorporation of new algorithms into the system, which is recognized as revenue at a point in time upon acceptance, as well as an annual application maintenance fee, which is recognized as revenue ratably over the contracted maintenance term.   Technical Support   Technical support services are provided on both an as-needed and extended-term basis and may include providing both parts and labor. Maintenance and technical support provided outside of a maintenance contract are on an “as-requested” basis, and revenue is recognized over time as the services are provided. Revenue for maintenance and technical support provided on an extended-term basis is recognized over time ratably over the term of the contract.   Consulting Services   The Company’s consulting services business generates revenues under contracts with customers from three sources: (1) Professional Services (consulting and auditing); (2) Customer service training and (3) Maintenance/support.   (1) Revenues for professional services, which are of short-term duration, are recognized when services are completed;   (2) Training sales are one-time upfront short-term training sessions and are recognized after the service has been performed; and   (3) Maintenance/support is an optional product sold to our software license customers under one-year or longer contracts. Accordingly, maintenance payments received upfront are deferred and recognized over the contract term.   Multiple Performance Obligations and Allocation of Transaction Price   Arrangements with customers may involve multiple performance obligations including project revenue and maintenance services in our Technology Systems business. Maintenance will occur after the project is completed and may be provided on an extended-term basis or on an as-needed basis. In our consulting services business, multiple performance obligations may include any of the above four sources. Training and maintenance on software products may occur after the software product sale while other services may occur before or after the software product sale and may not relate to the software product. Revenue recognition for a multiple performance obligations arrangement is as follows:   Each performance obligation is accounted for separately when each has value to the customer on a standalone basis and there is Company specific objective evidence of the selling price of each deliverable. For revenue arrangements with multiple deliverables, the Company allocates the total customer arrangement to the separate units of accounting based on their relative selling prices as determined by the price of the items when sold separately. Once the selling price is allocated, the revenue for each performance obligation is recognized using the applicable criteria under GAAP as discussed above for performance obligations sold in single performance obligation arrangements. A delivered item or items that do not qualify as a separate unit of accounting within the arrangement are combined with the other applicable undelivered items within the arrangement. The allocation of arrangement consideration and the recognition of revenue is then determined for those combined deliverables as a single unit of accounting. The Company sells its various services and software and hardware products at established prices on a standalone basis which provides Company specific objective evidence of selling price for purposes of performance obligations relative selling price allocation. The Company only sells maintenance services or spare parts based on its established rates after it has completed a system integration project for a customer. The customer is not required to purchase maintenance services. All elements in multiple performance obligations arrangements with Company customers qualify as separate units of account for revenue recognition purposes.   Leases   The Company follows ASC 842 “Leases”. This guidance requires lessees to recognize right-of-use (“ROU”) assets and lease liabilities for most operating leases. In addition, this guidance requires that lessors separate lease and non-lease components in a contract in accordance with the revenue guidance in ASC 606.   The Company made an accounting policy election to not recognize short-term leases with terms of twelve months or less on the balance sheet and instead recognize the lease payments as an expense when incurred. The Company has also elected to account for real estate leases that contain both lease and non-lease components as a single lease component.   At the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset.   Operating ROU assets represent the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the lease commencement date to determine the present value of future payments. The lease term includes all periods covered by renewal and termination options where the Company is reasonably certain to exercise the renewal options or not to exercise the termination options. Operating lease expense is recognized on a straight-line basis over the lease term and is included in general and administration expenses in the consolidated statements of operations.   Earnings (Loss) Per Share   Basic earnings per share (EPS) are computed by dividing the net loss applicable to common stock by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss applicable to common stock by the weighted average number of common shares outstanding for the period and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise or conversion of stock options, stock warrants, convertible debt instruments, convertible preferred stock or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.     At June 30, 2024, there were (i) an aggregate of 44,644 outstanding warrants to purchase shares of common stock, (ii) employee stock options to purchase an aggregate of 1,340,903 shares of common stock, (iii) 506,333 common shares issuable upon conversion of Series D Convertible Preferred Stock, and (iv) subject to receipt of shareholder approval, 4,541,667 common shares issuable upon conversion of Series E Convertible Preferred Stock, all of which were excluded from the computation of diluted net earnings per share because their inclusion would have been anti-dilutive. At June 30, 2023, there were (i) an aggregate of 80,091 outstanding warrants to purchase shares of common stock, (ii) employee stock options to purchase an aggregate of 1,217,775 shares of common stock, (iii) 433,000 common shares issuable upon conversion of Series D Convertible Preferred Stock and (iv) 1,333,334 common shares issuable upon conversion of Series E Convertible Preferred Stock, all of which were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive.   Recent Accounting Pronouncements   From time to time, the FASB or other standards setting bodies will issue new accounting pronouncements. Updates to the FASB ASC are communicated through issuance of an Accounting Standards Update (“ASU”).   In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker. ASU 2023-07 is effective for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025. ASU 2023-07 must be applied retrospectively to all prior periods presented in the financial statements. The Company has evaluated the disclosure impact of ASU 2023-07; and determined the standard will not have an impact on the Company’s consolidated financial statements.   In December 2023, the FASB issued ASU No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Further, ASU 2023-09 requires companies to disclose additional information about income taxes paid. ASU 2023-09 is effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is evaluating the disclosure impact of ASU 2023-09; however, the standard will not have an impact on the Company’s consolidated financial statements.   Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

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LIQUIDITY	6 Months Ended
	Jun. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
LIQUIDITY	NOTE 2 – 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. 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.   As reflected in the accompanying consolidated financial statements, the Company had a net loss of $5,956,480 for the six months ended June 30, 2024. During the same period, cash used in operating activities was $3,940,984. The working capital deficit and accumulated deficit as of June 30, 2024, were $2,380,098 and $69,560,032, respectively. 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 underwritten offerings and private placements which were completed during 2022, 2023, and now the first and second quarters of 2024 as well.   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, in the first and second quarters of 2024, the Company raised gross proceeds of $2,995,000 from the issuance of a combination of Series D and E Preferred Stock (See Note 6). 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 entered into an ATM Sales Agreement (the “Sales Agreement”) with Ascendiant Capital Markets, LLC (the “Sales Agent” or “ACM”) relating to the sale of our common stock, par value $0.001 per share, pursuant to the prospectus dated May 17, 2024. In accordance with the terms of the Sales Agreement, we may offer and sell shares of our common stock bearing an aggregate offering price of up to $7,500,000 from time to time through or to ACM, acting as an agent or principal. On July 22, 2024, the Company, through its wholly owned subsidiary Duos Edge AI, Inc., entered into secured promissory notes totaling $2.2 million in funding with two institutional investors. These notes mature on December 31, 2025, and bear an interest rate of 10% per annum, with all principal and accrued interest due at maturity. The proceeds are designated exclusively for the equipment and services required for the installation of the Company's previously announced edge data centers. In the long run, the continuation of the Company as a going concern is dependent upon the ability of the Company to continue executing its business plan, generate enough revenue, and attain consistently profitable operations. Although the lingering effects of the global pandemic related to the coronavirus (Covid-19) previously affected our operations, particularly in our supply chain, we now believe that the supply chain lags have largely been abated.   In the long run, the continuation of the Company as a going concern is dependent upon the ability of the Company to continue executing its business plan and growing the Company sufficiently to generate enough revenue to attain consistently profitable operations. The Company cannot currently quantify the uncertainty related to previous supply chain delays or the persistence of inflation and their effects on our customers in the coming quarters. We have analyzed our cash flow under “stress test” conditions and have determined that we have sufficient liquid assets on hand, forthcoming with ongoing business or available via the capital markets to maintain operations for at least twelve months from the date of this report.   In addition, management has been taking and continues to take actions including, but not limited to, elimination of certain costs that do not contribute to short term revenue, and re-aligning both management and staffing with a focus on improving certain skill sets necessary to build growth and profitability and focusing product strategy on opportunities that are likely to bear results in the relatively short term. The Company believes that, as described above, it will have sufficient sources of working capital to meet its obligations over the following twelve months. In the last twelve months the Company has experienced relatively steady contracted backlog as well as seen positive signs from new commercial engagements that indicate improvements in future commercial opportunities for both one-time capital and recurring services revenues.   Management believes that, at this time, the conditions in our market space with ongoing contract delays, the consequent need to procure certain materials in advance of a binding contract and the additional time needed to execute on new contracts previously reported have put a strain on our cash reserves. However, proactive management of our existing contracts, recent stock offerings and private placements as well as the availability to raise capital via the Sales Agreement indicate there is no substantial doubt that the Company can continue as a going concern for a period of twelve months from the issuance date of this report. We continue executing the plan to grow our business and achieve profitability. The Company may selectively look at opportunities for fund raising in the future. Management has extensively evaluated our requirements for the next twelve months and has determined that the Company currently has sufficient cash and access to capital to operate for at least that period.   While no assurance can be provided, management believes that these actions provide the opportunity for the Company to continue as a going concern and to grow its business and achieve profitability with access to additional capital funding. 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, continued in 2023, and will continue in 2024 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.

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INTANGIBLE ASSET	6 Months Ended
	Jun. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]
INTANGIBLE ASSET	NOTE 3 – INTANGIBLE ASSET   In May 2024, the Company recorded an intangible asset with a fair value of $11,161,428. This asset represents non-monetary consideration received under a 5-year customer contract, in which the Company will provide maintenance services to the customer. The intangible asset represents Digital Image data rights in the form of a license agreement received by the Company from the customer. The fair value of the asset was determined on the contract inception date based on the standalone selling price of the service and goods to be provided to the customer under the 5-year contract since the Company could not reasonably estimate the fair value of the data rights received. The non-monetary transaction was accounted for in accordance with Accounting Standards Codification (ASC) 606-10-32-21 through ASC 606-10-32-24. On the contract inception date, the Company also recorded an immediate amortization of the intangible asset of $199,008 related to the pre-contract costs incurred relating to a pilot program for this contract and recorded deferred revenue of $11,161,428 as contract liabilities with a current and non-current component, and then immediately recognized $199,008 of this deferred revenue relating to the completed pilot program. The remaining deferred revenue will be recognized over the 5-year term. In accordance with ASC 350-30-35-1, the amortization for the intangible asset is based on its useful life and the useful life of an intangible asset is the period over which it is expected to contribute directly or indirectly to the future cash flows of that entity. Accordingly, amortization of the intangible asset is recognized over the life of the contract of five years. In accordance with ASC 350-30-35-14, an intangible asset that is subject to amortization shall be reviewed for impairment if the carrying amount of the asset is not recoverable and exceeds its fair value. There is no indication of impairment at June 30, 2024. Intangible asset at June 30, 2024 and December 31, 2023 consists of: Schedule of intangible asset                  June 30,     December 31,       2024     2023   Intangible Asset, gross   $ 11,161,428     $  —   Accumulated Amortization     (473,069 )     —   Intangible Asset, net   $ 10,688,359     $  —   Amortization of the intangible asset during the six months ended June 30, 2024 and June 30 2023, was $473,069 and zero 0 respectively. The future amortization of the intangible asset is as follows: Schedule of future amortization of intangible assets         Calendar Year      Amount     2024     $ 1,096,241     2025       2,192,484     2026       2,192,484     2027       2,192,484     2028       2,192,484     2029       822,182     Total Intangible Asset Amortization     $ 10,688,359

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DEBT	6 Months Ended
	Jun. 30, 2024
Debt Disclosure [Abstract]
DEBT	NOTE 4 – DEBT   Notes Payable - Financing Agreements    The Company’s notes payable relating to financing agreements classified as current liabilities consist of the following as of June 30, 2024 and December 31, 2023: Schedule of notes payable related to financing agreements                             June 30, 2024     December 31, 2023   Notes Payable   Principal     Interest     Principal     Interest                             Third Party - Insurance Note 1   $ 124,311       8.25 %   $ 39,968       8.00 % Third Party - Insurance Note 2     16,316       —       2,008       —   Third Party - Insurance Note 3     100,825       —       —       —   Total   $ 241,452       —     $ 41,976       —      The Company entered into an agreement on April 15, 2023 with its insurance provider by issuing a note payable (Insurance Note 1) for the purchase of an insurance policy in the amount of $142,734, secured by that policy with an annual interest rate of 8.00% and payable in 11 monthly installments of principal and interest totaling $13,501. The Company renewed its agreement on April 15, 2024 with its insurance provider by issuing a note payable (Insurance Note 1) for the purchase of an insurance policy in the amount of $154,338, secured by that policy with an annual interest rate of 8.25% and payable in 10 monthly installments of principal and interest totaling $16,023. At June 30, 2024 and December 31, 2023, the balance of Insurance Note 1 was $124,311 and $39,968, respectively.   The Company renewed it’s agreement on February 3, 2023 with its insurance provider by issuing a note payable (Insurance Note 2) for the purchase of an insurance policy in the amount of $24,140, and payable in 12 monthly installments of $2,012. The Company renewed it’s agreement on February 3, 2024 with its insurance provider by issuing a note payable (Insurance Note 2) for the purchase of an insurance policy in the amount of $24,480, and payable in 12 monthly installments of $2,040. At June 30, 2024 and December 31, 2023, the balance of Insurance Note 2 was $16,316 and $2,008, respectively.   The Company entered into an agreement on February 3, 2024 with its insurance provider by issuing a note payable (Insurance Note 3) for the purchase of an insurance policy in the amount of $245,798 with a down payment paid in the amount of $84,473 in the first quarter of 2024 and ten monthly installments of $20,166. At June 30, 2024 and December 31, 2023, the balance of Insurance Note 3 was $100,825 and $0, respectively.

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COMMITMENTS AND CONTINGENCIES	6 Months Ended
	Jun. 30, 2024
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	NOTE 5 – COMMITMENTS AND CONTINGENCIES   Operating Lease Obligations   On July 26, 2021, the Company entered a new operating lease agreement for office and warehouse combination space of 40,000 square feet, with the lease commencing on November 1, 2021 and ending April 30, 2032. This new space combines the Company’s two separate work locations into one facility, which allows for greater collaboration and also accommodates a larger anticipated workforce and manufacturing facility. On November 24, 2021, the lease was amended to commence on December 1, 2021 and end on May 31, 2032. The Company recognized a ROU asset and operating lease liability in the amount of $4,980,104   at lease commencement. Rent for the first eleven months of the term was calculated based on 30,000 rentable square feet. The rent is subject to an annual escalation of 2.5%, beginning November 1, 2023. The Company made a security deposit payment in the amount of $600,000 on July 26, 2021. Per the contract, in the 18th month and every 12th month thereafter, the security deposit was reduced by $50,000. The right of use asset balance at June 30, 2024, net of accumulated amortization, was $4,204,593.   As of June 30, 2024, the office and warehouse lease is the Company’s only lease with a term greater than twelve months. The office and warehouse lease has a remaining term of approximately 7.9 years and includes an option to extend for two renewal terms of five years each. The renewal options are not reasonably certain to be exercised, and therefore, they are not included when determining the lease term used to establish the right-of use asset and lease liability. The Company also has several short-term leases, primarily related to equipment. The Company made an accounting policy election to not recognize short-term leases with terms of twelve months or less on the consolidated balance sheet and instead recognize the lease payments in expense as incurred. The Company has also elected to account for real estate leases that contain both lease and non-lease components (such as common area maintenance) as a single lease component.   The following table shows supplemental information related to leases: Schedule of supplemental information related to leases                  Six Months Ended June 30,       2024     2023   Lease cost:                 Operating lease cost   $ 390,819     $ 390,819   Short-term lease cost   $ 10,916     $ 46,717                     Other information:                 Operating cash outflow used for operating leases   $ 388,734     $ 316,040   Weighted average discount rate     9.0 %     9.0 % Weighted average remaining lease term     8.0 years       9.0 years      As of June 30, 2024, future minimum lease payments due under our operating leases are as follows: Schedule of future minimum lease payments due under the operating lease           Amount   Calendar year:         2024   $ 390,353   2025     798,556   2026     818,518   2027     838,984   2028     859,856   Thereafter     3,183,571   Total undiscounted future minimum lease payments     6,889,838   Less: Impact of discounting     (2,048,510 ) Total present value of operating lease obligations     4,841,328   Current portion, operating lease obligation     (788,801 ) Operating lease obligations, less current portion   $ 4,052,527

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STOCKHOLDERS’ EQUITY	6 Months Ended
	Jun. 30, 2024
Equity [Abstract]
STOCKHOLDERS’ EQUITY	NOTE 6 – STOCKHOLDERS’ EQUITY    Series B Convertible Preferred Stock   The following summary of certain terms and provisions of our Series B Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) is subject to, and qualified in its entirety by reference to, the terms and provisions set forth in our certificate of designation of preferences, rights and limitations of Series B Convertible Preferred Stock (the “Series B Convertible Preferred Certificate of Designation”) as previously filed. Subject to the limitations prescribed by our articles of incorporation, our board of directors is authorized to establish the number of shares constituting each series of preferred stock and to fix the designations, powers, preferences, and rights of the shares of each of those series and the qualifications, limitations and restrictions of each of those series, all without any further vote or action by our stockholders. Our board of directors designated 15,000 of the 10,000,000 authorized shares of preferred stock as Series B Convertible Preferred Stock with a stated value of $1,000 per share. The shares of Series B Convertible Preferred Stock were validly issued, fully paid and non-assessable.   Each share of Series B Convertible Preferred Stock was convertible at any time at the holder’s option into a number of shares of common stock equal to $1,000 divided by the conversion price of $7.00 per share. Notwithstanding the foregoing, we could not effect any conversion of Series B Convertible Preferred Stock, with certain exceptions, to the extent that, after giving effect to an attempted conversion, the holder of shares of Series B Convertible Preferred Stock (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number of shares of our common stock in excess of 4.99% (or, at the election of the purchaser, 9.99%) of the shares of our common stock then outstanding after giving effect to such conversion. The Series B Convertible Preferred Certificate of Designation does not prohibit the Company from waiving this limitation. Upon any liquidation, dissolution or winding-up of Company, whether voluntary or involuntary, the holders shall be entitled to participate on an as-converted-to-common stock basis (without giving effect to the Beneficial Ownership Limitation) with holders of the common stock in any distribution of assets of the Company to the holders of the common stock. As of June 30, 2024 and December 31, 2023, respectively, there are zero 0 and zero 0 shares of Series B Convertible Preferred Stock issued and outstanding.    Series C Convertible Preferred Stock   The Company’s Board of Directors designated 5,000 shares as the Series C Convertible Preferred Stock (the “Series C Convertible Preferred Stock”). Each share of the Series C Convertible Preferred Stock had a stated value of $1,000. The holders of the Series C Convertible 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. Each share of Series C Convertible Preferred Stock has 172 votes (subject to adjustment); provided that in no event may a holder of Series C Convertible Preferred Stock be entitled to vote a number of shares in excess of such holder’s Beneficial Ownership Limitation (as defined in the Certificate of Designation and as described below). Each share of Series C Convertible 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) determined by dividing the stated value of such share ($1,000) by the conversion price, which is $5.50 (subject to adjustment). The Company shall not effect any conversion of the Series C Convertible Preferred Stock, and a holder shall not have the right to convert any portion of the Series C Convertible Preferred Stock, to the extent that after giving effect to the conversion sought by the holder such holder (together with such holder’s Attribution Parties (as defined in the Certificate of Designation)) would beneficially own more than 4.99% (or upon election by a holder, 19.99%) of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon such conversion (the “Beneficial Ownership Limitation”). All holders of the Series C Preferred Stock elected the 19.99% Beneficial Ownership Limitation.   On February 26, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain existing investors in the Company (the “Purchasers”). Pursuant to the Purchase Agreement, the Purchasers purchased 4,500 shares of a newly authorized Series C Convertible Preferred Stock, and the Company received proceeds of $4,500,000. The Purchase Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties. In January 2022, the 2,500 outstanding shares of Series C Convertible Preferred Stock were converted into 454,546 shares of common stock. As of June 30, 2024 and December 31, 2023, respectively, there were zero 0 and zero 0 shares of Series C Convertible Preferred Stock issued and outstanding.   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 C Convertible Preferred Stock were convertible. The Registration Rights Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties.   Series D Convertible Preferred Stock    On September 28, 2022, the Company amended its articles of incorporation to designate 4,000 shares as the Series D Convertible Preferred Stock (the “Series D Convertible Preferred Stock”). Each share of the Series D Convertible Preferred Stock has a stated value of $1,000. The holders of the Series D Convertible 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. Each share of Series D Convertible Preferred Stock has 333 votes (subject to standard anti-dilution adjustment); provided that in no event may a holder of Series D Convertible Preferred Stock be entitled to vote a number of shares in excess of such holder’s Beneficial Ownership Limitation (as defined in the Certificate of Designation and as described below). Each share of Series D 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 is $3.00 (subject to adjustment). The Company shall not effect any conversion of the Series D Convertible Preferred Stock, and a holder shall not have the right to convert any portion of the Series D Convertible Preferred Stock, to the extent that after giving effect to the conversion sought by the holder such holder (together with such holder’s Attribution Parties (as defined in the Certificate of Designation)) would beneficially own more than 4.99% (or upon election by a holder, 19.99%) of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon such conversion (the “Beneficial Ownership Limitation”). All but one of the holders of the Series D Preferred Stock elected the 19.99% Beneficial Ownership Limitation. 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. 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.   On September 30, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain existing investors in the Company (the “Purchasers”). Pursuant to the Purchase Agreement, the Purchasers purchased 999 shares of the newly authorized Series D Convertible Preferred Stock, and the Company received proceeds of $999,000. 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”). 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.   On May 16, 2023, the Series D Convertible Preferred Stock was approved for conversion to common shares during the Company’s annual shareholder meeting.    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 Purchaser”). Pursuant to the Purchase Agreements, the 2024 Purchasers purchased an aggregate of 620 shares of Series D Preferred Stock, at a price of $1,000 per share, and the Company received proceeds of $620,000.   On April 3, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “2024 Purchaser”). Pursuant to the Purchase Agreement, the 2024 Purchasers purchased an aggregate of 250 shares of Series D Preferred Stock, at a price of $1,000 per share, and the Company received proceeds of $250,000.   In April and May of 2024, 650 outstanding shares of Series D Convertible Preferred Stock were converted into 216,668 shares of common stock. As of June 30, 2024 and December 31, 2023, respectively, there were 1,519 and 1,299 shares of Series D Convertible Preferred Stock issued and outstanding.   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. The Registration Rights Agreements contain customary representations, warranties, agreements and indemnification rights and obligations of the parties.   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 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”). Each share of the Series E Convertible Preferred Stock has a stated value of $1,000. The holders of the Series E Convertible 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 as one class on all matters submitted to a vote of shareholders of the Company. 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. 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). The Company shall not effect any conversion of the Series E Convertible Preferred Stock, and the holder shall not have the right to convert any portion of the Series E Convertible Preferred Stock, to the extent that after giving effect to the conversion sought by the holder such holder (together with such holder’s Attribution Parties (as defined in the Certificate of Designation)) would beneficially own more than 4.99% (or upon election by a holder, 19.99%) of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon such conversion (the “Beneficial Ownership Limitation”). 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”). 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.   The existing investor’s 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 Purchase Agreement) on or prior to December 31, 2023 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 Convertible Preferred Stock without the consent of the Purchaser.   On November 9, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an existing investor in the Company (the “Purchaser”). Pursuant to the Purchase Agreement, the Purchaser purchased 2,500 shares of authorized Series E Convertible Preferred Stock, at a price of $1,000 per share, and the Company received proceeds of $2,500,000.     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 Convertible Preferred Stock without the consent of the Purchasers. The conversion price of the Series E Convertible Preferred Stock currently is $3.00 per share (subject to adjustment). If the company sells shares less than the then conversion price, then the series E conversion price will be amended to that lower share price. As of June 30, 2024 there were no share sales at less than the $3.00 conversion price and this anti-dilution provision expired.   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. 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 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. 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.    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”). 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.   As of June 30, 2024 and December 31, 2023, respectively, there were 13,625 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. 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.   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 an existing, accredited investor in the Company (the “Purchaser”). Pursuant to the Purchase Agreement, 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.   The Company's Board of Directors designated 5,000 shares as the Series F Preferred Stock. Each share of Series F 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 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, however, shall not effect any conversion of the Series F Preferred Stock, and the holder shall not have the right to convert any portion of the Series F Preferred Stock, to the extent that after giving effect to the conversion sought by the holder such holder (together with such holder’s Attribution Parties (as defined in the Certificate of Designation)) would beneficially own more than 4.99% (or upon election by a holder, 19.99%) of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon such conversion. The purchasers of the Series F Preferred Stock elected that their ownership limitation would be 19.99%.   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. 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.   The Company also agreed that it would not, with certain exceptions, sell or issue common stock or Common Stock Equivalents (as defined in the Purchase Agreement relating to the Series F Preferred Stock) 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 F Preferred Stock without the consent of the holders. 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. All of the shares of Series F Preferred Stock thereupon were cancelled with 0 shares now outstanding.   As of June 30, 2024 and December 31, 2023, respectively, there were zero 0 and zero 0 shares of Series F Convertible Preferred Stock issued and outstanding.    Common stock issued   Six Months Ended June 30, 2024   During the three months ended March 31, 2024, the Company issued 8,655 shares of common stock for payment of board fees to four directors in the amount of $37,500 for services to the board which was expensed during the three months ended March 31, 2024. The volume-weighted average price (VWAP) per share is $4.33.    On April 23, 2024, two shareholders converted 147 and 78 for a total of 225 shares of Series D Convertible Preferred Stock collectively with a stated value of $225,000 with a conversion price of $3.00 per common share resulting in the issuance of 49,000 and 26,000 shares of the Company’s common stock.   On April 30, 2024, two shareholders converted 100 and 250 for a total of 350 shares of Series D Convertible Preferred Stock collectively with a stated value of $350,000 entities with a conversion price of $3.00 per common share resulting in the issuance of 33,334 and 83,334 shares of the Company’s common stock.   On May 7, 2024, a shareholder converted 75 shares of Series D Convertible Preferred Stock with a stated value of $75,000 with a conversion price of $3.00 per common share resulting in the issuance of 25,000 shares of the Company’s common stock.   On May 17, 2024, the Company entered into an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with Ascendiant Capital Markets, LLC, as sales agent (the “Agent”) providing for the sale by the Company of shares of our common stock, par value $0.001 per share, having an aggregate offering price of up to $7,500,000 from time to time through the Agent in connection with an “at-the-market” equity offering program (the “ATM Offering”) as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). On May 17, 2024, the Company filed a prospectus supplement with the Securities and Exchange Commission (“SEC”) relating to the offer and sale of up to $7,500,000 of common stock in the ATM Offering.   On June 12, 2024, the Company issued 11,239 shares of common stock at a price of $3.05 per share through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $33,261.   On June 13, 2024, the Company issued 9,747 shares of common stock at a price of $3.15 per share through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $29,626.   On June 17, 2024, the Company issued 400 shares of common stock at a price of $3.02 per share through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $1,165.   On June 18, 2024, the Company issued 1,534 shares of common stock at a price of $3.03 per share through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $4,507.   On June 25, 2024, the Company issued 15,610 shares of common stock at a price of $3.15 per share through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $47,004.   In summary during the three months ended June 30, 2024, the Company issued an aggregate of 38,530 shares of common stock through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $115,563.   During the three months ended June 30, 2024, the Company issued 15,041 shares of common stock for payment of board fees to four directors in the amount of $42,500 for services to the board which was expensed during the three months ended June 30, 2024. The volume-weighted average price (VWAP) per share used to value the services is $2.83.    On June 30, 2024, the Company issued 38,041 shares of common stock to employees participating in the Company’s Employee Stock Purchase Plan at the end of a six-month offering period. The employee contributions totaled $87,348 for the six months ended June 30, 2024 which represented a purchase price of approximately $2.30 per share. The purchase price for one share of Common Stock under the ESPP is equal to 85% of the fair market value of one share of Common Stock on the first trading day of the offering period or the purchase date, whichever is lower (see below).   The Company also recognized compensation expense of $40,589 for the six months ended June 30, 2024.   Six Months Ended June 30, 2023   During the three months ended March 31, 2023, the Company issued 12,463 shares of common stock for payment of board fees to three directors in the amount of $32,500 for services to the board which was expensed during the three months ended March 31, 2023. The volume-weighted average price (VWAP) per share is $2.61.    During the three months ended June 30, 2023, the Company issued 5,645 shares of common stock for payment of board fees to three directors in the amount of $32,500 for services to the board which was expensed during the three months ended June 30, 2023. The volume-weighted average price (VWAP) per share is $5.76.   On June 30, 2023, the Company issued 65,561 shares of common stock to employees participating in the Company’s Employee Stock Purchase Plan at the end of a six-month offering period. The employee contributions totaled $117,048 for the six months ended June 30, 2023 and represented a purchase price of $1.79 per share. The purchase price for one share of Common Stock under the ESPP is equal to 85% of the fair market value of one share of Common Stock on the first trading day of the offering period or the purchase date, whichever is lower (see below).   Employee Stock Purchase Plan   In the fourth quarter of 2022, the board of directors adopted an Employee Stock Purchase Plan (“ESPP”) which was effective as of January 1, 2023 with a term of 10 years. The ESPP allows eligible employees to purchase shares of the Company's common stock at a discounted price, through payroll deductions from a minimum of 1% and up to 25% of their eligible compensation up to a maximum of $25,000 or the IRS allowable limit per calendar year. The Company’s Chief Financial Officer administers the ESPP in conjunction with approvals from the Company’s Compensation Committee, including with respect to the frequency and duration of offering periods, the maximum number of shares that an eligible employee may purchase during an offering period, and, subject to certain limitations set forth in the ESPP, the per-share purchase price. Currently, the maximum number of shares that can be purchased by an eligible employee under the ESPP is 10,000 shares per offering period and there are two six-month offering periods that begin in the first and third quarters of each fiscal year. The purchase price for one share of Common Stock under the ESPP is currently equal to 85% of the fair market value of one share of Common Stock on the first trading day of the offering period or the purchase date, whichever is lower (look-back feature). Although not required by the ESPP, all payroll deductions received or held by the Company under the ESPP are segregated until the completion of the offering period and redemption of the applicable shares and those withheld amounts are recorded as liabilities. The maximum aggregate number of shares of the Common Stock that may be issued under the ESPP is 1,000,000 shares.   Under ASC 718-50 “Employee Share Purchase Plans” the plan is considered a compensatory plan and the compensation for each six-month offering period is computed based upon the grant date (that is the first date of each offering period) fair value of the estimated shares to be purchased based on the estimated payroll deduction withholdings. Each grant date fair value is computed as the sum of (a) 15% purchase discount off of the grant date quoted trading price of the Company’s common stock and (b) the fair value of the look-back feature of the Company’s common stock on the grant date which consists of a call option on 85% of a share of common stock and a put option on 15% of a share of common stock.   The Company computed the fair value of the look-back feature call and put options for January 1, 2024 to June 30, 2024 using a Black Scholes option pricing model using the following assumptions: Schedule of black scholes option pricing model using assumptions            At June 30, 2024   Grant date share price at January 1, 2024   $ 2.70   Grant date exercise price   $ 2.30   Expected term     0.5 years   Expected volatility     67.3 % Risk-free rate     5.26 % Expected dividend rate     0 %    During the offer period, the Company records stock-based compensation pro rata as an expense and a credit to additional paid-in capital. The Company issued 38,041 and 65,561 common shares on the option exercise date of June 30, 2024 and June 30, 2023 as follows:  Schedule of stock-based compensation            At June 30, 2024   Cash from employee withholdings used to purchase ESPP shares   $ 87,348   Stock based compensation expense     40,589   Total charges related to the Employee Stock Purchase Plan   $ 127,937                   At June 30, 2023   Cash from employee withholdings used to purchase ESPP shares   $ 117,048   Stock based compensation expense     66,217   Total charges related to the Employee Stock Purchase Plan   $ 183,265     Stock-Based Compensation   Stock-based compensation expense recognized under ASC 718-10 for the six months ended June 30, 2024 and 2023, was $201,109 and $236,527, respectively, for stock options granted to employees. This expense is included in general and administrative expenses in the unaudited consolidated statements of operations. Stock-based compensation expense recognized during the periods is based on the grant-date fair value of the portion of share-based payment awards that are ultimately expected to vest during the period. At June 30, 2024, the total compensation cost for stock options not yet recognized was $315,069. This cost will be recognized over the remaining vesting term of the options ranging from six months to two and one-half years.    On May 12, 2021, the Board adopted, with shareholder approval, the 2021 Equity Incentive Plan (the “2021 Plan”) providing for the issuance of up to 1,000,000 shares of our common stock. The purpose of the 2021 Plan is to assist the Company in attracting and retaining key employees, directors and consultants and to provide incentives to such individuals to align their interests with those of our shareholders. During the third quarter of 2021, the shareholders approved the issuance of up to one million shares or share equivalents pursuant to the 2021 Plan. The Company filed an S-8 registration statement in concert with the 2021 Plan which was deemed effective on August 5, 2021. The plan covers a period of ten years.   As of June 30, 2024, and December 31, 2023, options to purchase a total of 1,340,903 (net of forfeitures) shares of common stock and 1,387,775 shares of common stock were outstanding, respectively. At June 30, 2024, 850,629 options were exercisable. Of the total options issued, 269,658 and 269,658 options were outstanding under the 2016 Equity Incentive Plan, 741,245 and 788,117 were outstanding under the 2021 Plan and a further 330,000 and 330,000 non-plan options to purchase common stock were outstanding as of June 30, 2024 and December 31, 2023, respectively. The non-plan options were granted to four executives as hiring incentives, including the Company’s CEO in the fourth quarter of 2020. Schedule of non-plan options                                    Weighted     Average                   Average     Remaining     Aggregate       Number of     Exercise     Contractual     Intrinsic       Options     Price     Term (Years)     Value   Outstanding at December 31, 2022     926,266     $ 5.74       3.3     $ —   Granted     463,117     $ 4.22       4.35     $ —   Forfeited     (1,608 )   $ 14.00       —     $ —   Outstanding at December 31, 2023     1,387,775     $ 5.23       3.0     $ —   Exercisable at December 31, 2023     581,324     $ 5.38       1.8     $ —                                     Outstanding at December 31, 2023     1,387,775     $ 5.23       3.0     $ —   Granted     —     $ —       —     $ —   Exercised/Forfeited/Expired     (46,872 )   $ 5.47       —     $ —   Outstanding at June 30, 2024     1,340,903     $ 5.22       2.5     $ —   Exercisable at June 30, 2024     850,629     $ 5.43       1.8     $ —     Warrants Schedule of warrants                                          Weighted                   Weighted     Average                   Average     Remaining     Aggregate       Number of     Exercise     Contractual     Intrinsic       Warrants     Price     Term (Years)     Value   Outstanding at December 31, 2022     147,591     $ 8.63       0.8     $  —   Warrants expired, forfeited, cancelled or exercised     (102,947 )   $  —       —     $  —   Warrants issued     —     $  —       —     $  —   Outstanding at December 31, 2023     44,644     $ 7.70       0.7     $ —   Exercisable at December 31, 2023     44,644     $ 7.70       0.7     $ —                                     Outstanding at December 31, 2023     44,644     $ 7.70       0.7     $  —   Warrants expired, forfeited, cancelled or exercised     —     $  —       —     $  —   Warrants issued     —     $ —       —     $ —   Outstanding at June 30, 2024     44,644     $ 7.70       0.2     $  —   Exercisable at June 30, 2024     44,644     $ 7.70       0.2     $  —

v3.24.2.u1

REVENUE AND CONTRACT ACCOUNTING	6 Months Ended
	Jun. 30, 2024
Revenue from Contract with Customer [Abstract]
REVENUE AND CONTRACT ACCOUNTING	NOTE 7 - REVENUE AND CONTRACT ACCOUNTING   Revenue Recognition and Contract Accounting   The Company generates revenue from four sources: (1) Technology Systems; (2) AI Technology which is included in the consolidated statements of operations line-item Technology Systems; (3) Technical Support; and (4) Consulting Services which is included in the consolidated statements of operations line-item Services and Consulting.   Contract assets and contract liabilities on uncompleted contracts for revenues recognized over time are as follows:   Contract Assets   Contract assets on uncompleted contracts represent cumulative revenues recognized in excess of billings and/or cash received on uncompleted contracts accounted for under the cost-to-cost input method, which recognizes revenue based on the ratio of cost incurred to total estimated costs.   At June 30, 2024 and December 31, 2023, contract assets on uncompleted contracts consisted of the following: Schedule of contracts assets on uncompleted contracts                 June 30, 2024     December 31, 2023   Cumulative revenues recognized   $ 9,317,704     $ 8,820,256   Less: Billings or cash received     (8,178,309 )     (8,178,309 ) Contract assets   $ 1,139,395     $ 641,947     Contract Liabilities   Contract liabilities on uncompleted contracts represent billings and/or cash received that exceed cumulative revenues recognized on uncompleted contracts accounted for under the cost-to-cost input method, which recognizes revenues based on the ratio of the cost incurred to total estimated costs.   Contract liabilities on services and consulting revenues represent billings and/or cash received in excess of revenue recognized on service agreements that are not accounted for under the cost-to-cost input method.   At June 30, 2024 and December 31, 2023, contract liabilities on uncompleted contracts and contract liabilities on services and consulting consisted of the following: Schedule of contract liabilities on uncompleted contracts                 June 30, 2024     December 31, 2023   Billings and/or cash receipts on uncompleted contracts   $ 1,264,658     $ 1,264,658   Less: Cumulative revenues recognized     (237,382 )     (199,976 ) Contract liabilities, technology systems     1,027,276       1,064,682   Contract liabilities, services and consulting     2,649,291       601,561   Total contract liabilities, current   $ 3,676,567     $ 1,666,243   Total contract liabilities, services and consulting, non-current   $ 8,495,876     $ —       Contract liabilities at December 31, 2023 were $1,666,243; of which $37,407 for technology systems and $442,610 in services and consulting have been recognized as of June 30, 2024.   The Company expects to recognize all current contract liabilities within 12 months from the respective consolidated balance sheet date.   In May 2024, the Company recorded an initial deferred revenue as a contract liability in the amount of $11,161,428 of which $199,008 related to a pilot program was immediately recognized as revenue (See Note 3). This contract liability resulted from a five-year contract with a customer where the Company received non-monetary consideration recorded as intangible assets (See Note 3). This transaction was accounted for under ASC 606-10-32-21 through ASC-606-10-32-24, Non-Cash Consideration. The performance obligations, which include various support and maintenance services will be recognized as revenue pro-rata over time during the five-year contract term. The current contract liabilities of $2,192,483 as of June 30, 2024 relate to the portion of the contract value the Company expects to recognize pro-rata within the next twelve months. The non-current contract liabilities of $8,495,876 as of June 30, 2024 represent the portion of the contract value that is expected to be recognized pro-rata beyond the next twelve months. If the Digital Image License Agreement is terminated prior to the completion of the five-year term, then the customer will pay for the maintenance and support services annually in cash. As of June 30, 2024 the balance in contract liabilities pertaining to the agreement is as follows: Schedule of balance in contract liabilities         Calendar Year      Amount     2024     $ 1,096,241     2025     2,192,484     2026     2,192,484     2027     2,192,484     2028     2,192,484     2029     822,182     Total CN agreement Contract Liabilities     $ 10,688,359     Disaggregation of Revenue   The Company is following the guidance of ASC 606-10-55-296 and 297 for disaggregation of revenue. Accordingly, revenue has been disaggregated according to the nature, amount, timing and uncertainty of revenue and cash flows. We are providing qualitative and quantitative disclosures.   Qualitative:     1. We have four distinct revenue sources:     a. Technology Systems (Turnkey, engineered projects);     b. AI Technology (Associated maintenance and support services);     c. Technical Support (Licensing and professional services related to auditing of data center assets); and     d. Consulting Services (Predetermined algorithms to provide important operating information to the users of our systems).     2. We currently operate in North America including the USA, Mexico and Canada.     3. Our customers include rail transportation, commercial, government, banking and IT suppliers.     4. Our services & maintenance contracts are fixed price and fall into two duration types:     a. Turnkey engineered projects and professional service contracts that are less than one year in duration and are typically one to two quarters in length; and     b. Maintenance and support contracts ranging from one to five years in length.   Quantitative:   For the Three Months Ended June 30, 2024 Schedule of disaggregation of revenue                               Segments   Rail     Commercial     Government     Artificial Intelligence     Total   Primary Geographical Markets                                                               North America   $ 1,510,496     $ —     $ —     $ —     $ 1,510,496                                             Major Goods and Service Lines                                                                                   Turnkey Projects   $ 264,999     $ —     $ —     $ —     $ 264,999   Maintenance and Support     1,041,661       —       —       —       1,041,661   Algorithms     203,836       —       —       —       203,836       $ 1,510,496     $ —     $ —     $ —     $ 1,510,496                                             Timing of Revenue Recognition                                                                                   Goods transferred over time   $ 264,999     $ —     $ —     $ —     $ 264,999   Services transferred over time     1,245,497       —       —       —       1,245,497       $ 1,510,496     $ —     $ —     $ —     $ 1,510,496     For the Three Months Ended June 30, 2023                                 Segments   Rail     Commercial     Government     Artificial Intelligence     Total   Primary Geographical Markets                                                               North America   $ 1,537,286     $ 42,381     $ —     $ 190,392     $ 1,770,059                                             Major Goods and Service Lines                                                                                   Turnkey Projects   $ 856,942     $ 13,552     $ —     $ —     $ 870,494   Maintenance and Support     680,344       28,829       —       —       709,173   Algorithms     —       —       —       190,392       190,392       $ 1,537,286     $ 42,381     $ —     $ 190,392     $ 1,770,059                                             Timing of Revenue Recognition                                                                                   Goods transferred over time   $ 856,942     $ 13,552     $ —     $ —     $ 870,494   Services transferred over time     680,344       28,829       —       190,392       899,565       $ 1,537,286     $ 42,381     $ —     $ 190,392     $ 1,770,059        For the Six Months Ended June 30, 2024                                 Segments   Rail     Commercial     Government     Artificial Intelligence     Total   Primary Geographical Markets                                                               North America   $ 2,581,176     $ —     $ —     $ —     $ 2,581,176                                             Major Goods and Service Lines                                                                                   Turnkey Projects   $ 534,854     $ —     $ —     $ —     $ 534,854   Maintenance and Support     1,643,283       —       —       —       1,643,283   Algorithms     403,039       —       —       —       403,039       $ 2,581,176     $ —     $ —     $ —     $ 2,581,176                                             Timing of Revenue Recognition                                                                                   Goods transferred over time   $ 534,854     $ —     $ —     $ —     $ 534,854   Services transferred over time     2,049,322       —       —       —       2,046,322       $ 2,581,176     $ —     $ —     $ —     $ 2,581,176       For the Six Months Ended June 30, 2023                                 Segments   Rail     Commercial     Government     Artificial Intelligence     Total   Primary Geographical Markets                                                               North America   $ 3,913,735     $ 71,212     $ 11,353     $ 418,047     $ 4,414,347                                             Major Goods and Service Lines                                                                                   Turnkey Projects   $ 2,684,706     $ 13,552     $ —     $ —     $ 2,698,258   Maintenance and Support     1,229,029       57,660       11,353       —       1,298,042   Algorithms     —       —       —       418,047       418,047       $ 3,913,735     $ 71,212     $ 11,353     $ 418,047     $ 4,414,347                                             Timing of Revenue Recognition                                                                                   Goods transferred over time   $ 2,684,706     $ 13,552     $ —     $ —     $ 2,698,258   Services transferred over time     1,229,029       57,660       11,353       418,047       1,716,089       $ 3,913,735     $ 71,212     $ 11,353     $ 418,047     $ 4,414,347

v3.24.2.u1

DEFINED CONTRIBUTION PLAN	6 Months Ended
	Jun. 30, 2024
Retirement Benefits [Abstract]
DEFINED CONTRIBUTION PLAN	NOTE 8 – DEFINED CONTRIBUTION PLAN   The Company has a 401(k)-retirement savings plan (the “401(k) Plan”) covering all eligible employees. The 401(k) Plan allows employees to defer a portion of their annual compensation, and the Company may match a portion of the employees’ contributions generally after the first six months of service. During the three months ended June 30, 2024, the Company matched 100% of the first 4% of eligible employee compensation that was contributed to the 401(k) Plan. For the three and six months ended June 30, 2024, the Company recognized expense for matching cash contributions to the 401(k) Plan totaling $56,340 and $111,438, respectively.

v3.24.2.u1

RELATED PARTY TRANSACTIONS	6 Months Ended
	Jun. 30, 2024
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	NOTE 9 – RELATED PARTY TRANSACTIONS   Frank Lonegro serves on the Board of Directors and is a member of the Audit Committee. Mr. Lonegro is the Chief Executive Officer of Landstar System, Inc. (“Landstar”), based in Jacksonville, Florida. The Company has previously utilized Landstar for shipping services including transporting large items. Most recently, Landstar was the designated vendor involved in shipping an Edge Data Center to an Amtrak site in Secaucus New Jersey. Mr. Lonegro was not involved in the selection of his company by Duos, with whom there was an existing relationship pre-dating Mr. Lonegro’s appointment to the Board of Duos. Mr. Lonegro did not participate in any Board discussions or votes relating to the selection of Landstar nor approval of the transactions with Landstar. The terms of these transactions were reviewed and approved by the management team, which concluded that they are fair and reasonable to the Company and on terms no less favorable than could have been obtained from an unaffiliated party. For the six months ended June 30, 2024 and June 30, 2023 the Company expensed $43,137 and $11,397, respectively. As of June 30, 2024 and December 31, 2023 the amounts owed were $43,137 and $33,812, respectively, and are included in accounts payable in the accompanying balance sheets.

v3.24.2.u1

SALE OF ASSETS	6 Months Ended
	Jun. 30, 2024
Sale Of Assets
SALE OF ASSETS	NOTE 10 – SALE OF ASSETS   On June 29, 2023, the Company completed a transaction whereby it sold assets related to its Integrated Correctional Automation System (iCAS) business with a single customer. In the fourth quarter of 2022, the Company elected to not renew a support contract due to the limited nature of the business. The transaction was completed with a third-party buyer of which the Company’s former and now current Chief Financial Officer is a director. Said officer did not participate in the transaction on behalf of the Company.   The assets of the iCAS business were sold for a convertible promissory note with a principal amount of $165,000 with a 10% original issue discount as well as common stock purchase warrants. The note matures in 2 years from the date of sale and is convertible immediately through the later of the maturity date or payment by the borrower of the default amount, as defined in the note, into shares of the buyer’s common stock at a conversion price of $0.003 or 55,000,000 shares. The conversion of the note carries restrictions which include limiting conversion to the extent it would exceed 4.99% of the common stock outstanding of the buyer. The convertible promissory note is subject to standard anti-dilution provisions.   The common stock purchase warrants are for a total of 55,000,000 common shares of the buyer at an exercise price of $0.01 per share. The warrants are subject to standard anti-dilution provisions. The warrants are not exercisable until on or after six months from the issuance date and no later than on or before the third anniversary of the issuance date. The Company may exercise the warrants at any time after the six-month anniversary of the issuance date on a cashless basis if there is no effective registration statement covering the resale of the Warrant Shares at prevailing market prices by the holder. The exercise of these warrants is subject to beneficial ownership limits of 4.99% which may be increased by the holder up to 9.99% as defined in the warrant. Given that the shares carried no intrinsic value at the time of the transaction and that the overall fair value is de minimis, the Company has not recorded the warrants associated with the transaction.   The Company recognized a gain on sale of assets of $150,000, which is included in other income in the second quarter of 2023.   The original issue discount is being accrued into interest income over the term of the note.   The note receivable was recorded as follows on June 30, 2024: Schedule of note receivable           June 30, 2024   Convertible note receivable   $ 165,000   Unamortized discount     (7,500 ) Convertible note receivable, net   $ 157,500

v3.24.2.u1

SUBSEQUENT EVENTS	6 Months Ended
	Jun. 30, 2024
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	NOTE 11 – SUBSEQUENT EVENTS   On July 5, 2024, a holder of our Series D Preferred Stock converted 120 shares of Series D Preferred Stock into 40,000 shares of Common Stock.   On July 22, 2024, the Company and Duos Edge AI, Inc. (“Edge”), a wholly owned subsidiary of the Company, entered into secured promissory notes (the “Notes”) with two institutional investors in the Company. Under the Notes, Edge received an aggregate of $2.2 million. The Notes mature on December 31, 2025, and bear interest at the rate of 10% per annum. All principal and accrued interest under the Notes is due and payable on the maturity date. Edge will use the proceeds under the Notes solely to pay for the equipment and any services necessary to complete the installation of its previously announced edge data centers. As security for the Notes, Edge and the Company entered into a Security Agreement (the “Security Agreement”), pursuant to which Edge granted a first priority security interest in the equipment installed at the edge data centers, as well as all revenues from such equipment, and the Company pledged all proceeds from its previously announced “at-the-market” offering of its common stock pursuant to the prospectus dated May 17, 2024. All of the pledged revenues from the equipment and the at-the-market offering will be deposited in a blocked account and used solely to repay the Notes. In connection with the Notes, the Company issued warrants (the “Warrants”) to purchase an aggregate of 300,000 shares of common stock. The Warrants are exercisable at $3.00 per share (subject to adjustment) and expire in five 5 years. In the event the Notes are not paid by the maturity date, the interest rate on the Notes will increase to 18% per annum and the Company will issue additional warrants (with the same terms as the Warrants) to purchase an aggregate of 75,000 shares of common stock for each 30 days that the Notes are not paid after maturity. The Company has guaranteed all of Edge’s obligations under the Notes pursuant to the terms of a Guaranty (the “Guaranty”). The Notes, Security Agreement and Guaranty contain customary representations, warranties, agreements, and indemnification rights and obligations of the parties.   Subsequent to the balance sheet date, in July 2024 the Company issued 27,695 shares of common stock at a weighted average price of $3.04 per share through its At-The-Market (ATM) offering program, generating total net proceeds of approximately $81,495.

v3.24.2.u1

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	6 Months Ended
	Jun. 30, 2024
Accounting Policies [Abstract]
Nature of Operations	Nature of Operations   Duos Technologies Group, Inc. (the “Company”), through its operating subsidiaries, Duos Technologies, Inc. (“Duos”) and Duos Edge AI, Inc. (“Edge”) (collectively the “Company”), is a company that specializes in machine vision and artificial intelligence to analyze fast moving objects such as trains, trucks, automobiles, and aircraft. This technology can help improve safety, maintenance, and operating metrics.   The Company is the inventor of the Railcar Inspection Portal (RIP) and is currently the rail industry leader for machine vision/camera wayside detection systems that include the use of Artificial Intelligence at speeds up to 125 mph. The RIP inspects a train at full speed from the top, sides, and bottom looking at FRA/AAR mandated safety inspection points. The system also detects illegal riders, which can assist law enforcement agencies. Each rail car is scanned with machine vision cameras and other sensors from the top, sides, and bottom, where images are produced within seconds of the railcar passing. These images can then be used by the customer to help prevent derailments, improve maintenance operations, and assist with security. The Company self-performs all aspects of hardware, software, Information Technology (“IT”), and Artificial Intelligence development and engineering. The Company maintains significant intellectual property and continues to be awarded additional patents for both the technology and methodologies used. The Company also has a proprietary portfolio of approximately 53 Artificial Intelligence “Use Cases” that automatically flag defects. The Company has deployed this system with several Class 1 railroads and one major passenger carrier and anticipates an increased demand in the future from railcar operators, owners, shippers, transit railroads as well as law enforcement agencies.   During the three months ended June 30, 2024, the Company initiated a study to determine how to expand its market reach into non-rail markets. Using the information technology (IT) investments already made into the RIP in conjunction with the recently awarded patents for both methodology and artificial intelligence, the Company has determined that its use of Edge Data Centers for the processing of large volumes of image data has broad applicability to enabling local, high-speed processing in similar environments as being undertaken at the 13 current RIPs, that is, in rural and underserved areas. Accordingly, the Company has recently announced that effective early in the third quarter, it will be expanding into the market for the provision of bespoke Edge Data Centers (EDCs) for certain markets including remote education and healthcare facilities as well as other applications where high-speed, local processing is required.   The Company has also developed the Automated Logistics Information System (“ALIS”) which automates gatehouse operations where trucks enter and exit large logistics and intermodal facilities. This solution also incorporates sensors and data points as necessary for each operation and directly interconnects with backend logistics databases and processes to streamline and significantly improve operations and security and, importantly, dramatically improve throughput on each lane on which the technology is deployed. The Company is not currently actively pursuing further customers for ALIS but will continue to analyze the potential market and, depending on market demand, may deploy an upgraded Truck Inspection Portal (TIP) which uses the same technology and lessons learned from the ALIS and RIP systems at some point in the future.   The Company’s strategy for the rail industry is to expand beyond our existing customer base in the Class 1 and major passenger transit market and we expect to add additional users in the short line, industrial and regional transit markets in North America. In addition, we plan to expand our subscription offering to car owners and shippers and expand operations to meet the demand from international customers. The Company is prepared to respond and scale, if necessary, to react to increased demand for potential regulations that may be imposed around wayside detection technology. In the future the Company may put more emphasis on the trucking and intermodal sector with an updated Truck Inspection Portal solution. The Company continues to focus on operational and technical excellence, customer satisfaction, and maintaining a highly skilled and performance-based work force. The Company is also further investigating market opportunities for subsets of its technology including deployment and management of Edge Data Centers, a fundamental component of the distributed, rapid response data analysis used in the RIP.
Basis of Presentation	Basis of Presentation   The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (all of which are of a normal recurring nature) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other future period. These unaudited consolidated financial statements and the unaudited condensed notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2024.
Principles of Consolidation	Principles of Consolidation   The unaudited consolidated financial statements include Duos Technologies Group, Inc. and its wholly owned subsidiaries, Duos Technologies, Inc. and Duos Edge AI, Inc. All inter-company transactions and balances are eliminated in consolidation.
Use of Estimates	Use of Estimates   The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. The most significant estimates in the accompanying unaudited consolidated financial statements include the initial valuation of a non-monetary transaction with a customer, valuation of intangible assets for impairment analysis, allowance on accounts receivable and notes receivable, valuation of common stock warrants received in exchange for an asset sale, valuation of deferred tax assets, and valuation of other long-lived assets, estimates of net contract revenues and the total estimated costs to determine progress towards contract completion, valuation of inventory, estimates of the valuation of right of use assets and corresponding lease liabilities, valuation of warrants issued with debt and valuation of stock-based awards. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Concentrations	Concentrations   Cash Concentrations   Cash is maintained at financial institutions and at times, balances may exceed federally insured limits. We have not experienced any losses related to these balances. As of June 30, 2024, the balance in one financial institution exceeded federally insured limits by approximately $163,603. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s consolidated financial condition, results of operation and cash flows.   Significant Customers and Concentration of Credit Risk   The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:   For the six months ended June 30, 2024, three customers accounted for 43%, 25% and 18% of revenues. For the six months ended June 30, 2023, two customers accounted for 61%, and 25% of revenues. In all cases, there are no minimum contract values stated. Each contract covers an agreement to deliver a Railcar Inspection Portal or services 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 may be paid annually in advance with revenues recorded ratably over the contract period.    At June 30, 2024, two customers accounted for 53%, and 38% of accounts receivable. At December 31, 2023, two customers accounted for 83%, and 11% of accounts receivable. Much of the credit risk is mitigated since all the customers listed here are Class 1 railroads with a history of timely payments to us.      Geographic Concentration   For the six months ended June 30, 2024, approximately 65% of revenue was generated from three customers outside of the United States. For the six months ended June 30, 2023, approximately 31% of revenue was generated from three customers outside of the United States.   Significant Vendors and Concentration of Credit Risk   In some instances, the Company relies on a limited pool of vendors for key components related to the manufacturing of its subsystems. These vendors are primarily focused on camera, server, and lighting technologies integral to the Company’s solution. Where possible, the Company seeks multiple vendors for key components to mitigate vendor concentration risk.
Fair Value of Financial Instruments and Fair Value Measurements	Fair Value of Financial Instruments and Fair Value Measurements   The Company follows Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that requires the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements.   ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.   These inputs are prioritized below:    Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities.  Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.  Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions that the market participants would use in the valuation of the asset or liability based on the best available information.   The Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.   The estimated fair value of certain financial instruments, including accounts receivable, prepaid expenses, accounts payable, accrued expenses and notes payable are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
Accounts Receivable	Accounts Receivable    On January 1, 2023, the Company adopted ASC 326, “Financial Instruments - Credit Losses”. In accordance with ASC 326, an allowance is maintained for estimated forward-looking losses resulting from the possible inability of customers to make the required payments (current expected losses). The amount of the allowance is determined principally on the basis of past collection experience and known financial factors regarding specific customers.   Accounts receivable are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers net of estimated credit loss allowances for uncollectible accounts. In determining the collections on the account, historical trends are evaluated, and specific customer issues are reviewed to arrive at appropriate allowances. The Company reviews its accounts to estimate losses resulting from the inability of its customers to make the required payments. Any required allowance is based on specific analysis of past due accounts and also considers historical trends of write-offs. Past due status is based on how recently payments have been received from customers.
Inventory	Inventory   Inventory consists primarily of spare parts and consumables and long-lead time components to be used in the production of our technology systems or in connection with maintenance agreements with customers. Any inventory deemed to be obsolete is written off. Inventory is stated at the lower of cost or net realizable value. Inventory cost is primarily determined using the weighted average cost method.
Intangible Asset	Intangible Asset   In May 2024, the Company recognized an intangible asset which represents digital image data rights received under a license agreement as non-monetary consideration under a five-year customer contract. The intangible asset will be amortized over the five-year contractual term.
Long-lived assets	Long-lived assets   Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company estimates the future undiscounted net cash flows of the related asset or asset group over the remaining life of the asset in measuring whether the long-lived asset should be written down to fair value. Measurement of the amount of impairment would be based on generally accepted valuation methodologies, as deemed appropriate. If the carrying amount is greater than the undiscounted cash flows, the carrying amount of the asset is reduced to the asset’s fair value. An impairment loss is recognized immediately as an operating expense in the consolidated statements of operations. Reversal of previously recorded impairment losses are prohibited.
Software Development Costs	Software Development Costs   Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs. The technological feasibility of a software product is established when the Company has completed all planning, designing, coding, and testing activities that are necessary to establish that the product meets its design specifications, including functionality, features, and technical performance requirements. Software development costs incurred after establishing technological feasibility for software sold as a perpetual license, as defined within ASC 985-20 (Software – Costs of Software to be Sold, Leased, or Marketed), are capitalized and amortized on a product-by-product basis when the product is available for general release to customers. Software development costs are evaluated for impairment annually by comparing the net realizable value to the unamortized capitalized costs and writing these costs down to net realizable value.
Stock-Based Compensation	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 stock-based compensation carries a graded vesting feature subject to the condition of time of employment service with awarded stock-based compensation tranches vesting evenly upon the anniversary date of the award.   The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. In accordance with ASC 718-10-35-8, the Company elected to recognize the fair value of the stock award using the graded vesting method as time of employment service is the criteria for vesting. The Company’s determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding a number of highly subjective variables.   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.
Revenue Recognition	Revenue Recognition   The Company follows Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), that affects the timing of when certain types of revenues will be recognized. The basic principles in ASC 606 include the following: a contract with a customer creates distinct contract assets and performance obligations, satisfaction of a performance obligation creates revenue, and a performance obligation is satisfied upon transfer of control to a good or service to a customer.   Revenue is recognized by evaluating our revenue contracts with customers based on the five-step model under ASC 606:     1. Identify the contract with the customer;     2. Identify the performance obligations in the contract;     3. Determine the transaction price;     4. Allocate the transaction price to separate performance obligations; and     5. Recognize revenue when (or as) each performance obligation is satisfied.   The Company generates revenue from four sources:   (1) Technology Systems   (2) AI Technologies   (3) Technical Support   (4) Consulting Services   Technology Systems   For revenues related to 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. These estimated costs are then used to determine the progress towards contract completion and the corresponding amount of revenue to recognize.   Accordingly, the Company now bases its revenue recognition on ASC 606-10-25-27, where control of a good or service transfers over time if the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date including a profit margin or reasonable return on capital. Control is deemed to pass to the customer instantaneously as the goods are manufactured and revenue is recognized accordingly.   In addition, the Company has adopted ASC 606-10-55-21 such that if the cost incurred is not proportionate to the progress in satisfying the performance obligation, we adjust the input method to recognize revenue only to the extent of the cost incurred. Therefore, the Company will recognize revenue at an equal amount to the cost of the goods to satisfy the performance obligation. To accurately reflect revenue recognition based on the input method, the Company has adopted the implementation guidance as set out in ASC-606-10-55-187 through 192.   Under this method, contract revenues are recognized over the performance period of the contract in direct proportion to the costs incurred. Costs include direct material, direct labor, subcontract labor and other allocable indirect costs. All un-allocable indirect costs and corporate general and administrative costs are also charged to the periods as incurred. Any recognized revenues that have not been billed to a customer are recorded as an asset in “contract assets”. Any billings of customers more than recognized revenues are recorded as a liability in “contract liabilities”. However, in the event a loss on a contract is foreseen, the Company will recognize the loss when such loss is determined to be both probable and reasonably estimable.   AI Technologies   The Company has revenue from applications that incorporate artificial intelligence (AI) in the form of predetermined algorithms which provide important operating information to the users of our systems. The revenue generated from these applications of AI consists of a fixed fee related to the design, development, testing and incorporation of new algorithms into the system, which is recognized as revenue at a point in time upon acceptance, as well as an annual application maintenance fee, which is recognized as revenue ratably over the contracted maintenance term.   Technical Support   Technical support services are provided on both an as-needed and extended-term basis and may include providing both parts and labor. Maintenance and technical support provided outside of a maintenance contract are on an “as-requested” basis, and revenue is recognized over time as the services are provided. Revenue for maintenance and technical support provided on an extended-term basis is recognized over time ratably over the term of the contract.   Consulting Services   The Company’s consulting services business generates revenues under contracts with customers from three sources: (1) Professional Services (consulting and auditing); (2) Customer service training and (3) Maintenance/support.   (1) Revenues for professional services, which are of short-term duration, are recognized when services are completed;   (2) Training sales are one-time upfront short-term training sessions and are recognized after the service has been performed; and   (3) Maintenance/support is an optional product sold to our software license customers under one-year or longer contracts. Accordingly, maintenance payments received upfront are deferred and recognized over the contract term.
Multiple Performance Obligations and Allocation of Transaction Price	Multiple Performance Obligations and Allocation of Transaction Price   Arrangements with customers may involve multiple performance obligations including project revenue and maintenance services in our Technology Systems business. Maintenance will occur after the project is completed and may be provided on an extended-term basis or on an as-needed basis. In our consulting services business, multiple performance obligations may include any of the above four sources. Training and maintenance on software products may occur after the software product sale while other services may occur before or after the software product sale and may not relate to the software product. Revenue recognition for a multiple performance obligations arrangement is as follows:   Each performance obligation is accounted for separately when each has value to the customer on a standalone basis and there is Company specific objective evidence of the selling price of each deliverable. For revenue arrangements with multiple deliverables, the Company allocates the total customer arrangement to the separate units of accounting based on their relative selling prices as determined by the price of the items when sold separately. Once the selling price is allocated, the revenue for each performance obligation is recognized using the applicable criteria under GAAP as discussed above for performance obligations sold in single performance obligation arrangements. A delivered item or items that do not qualify as a separate unit of accounting within the arrangement are combined with the other applicable undelivered items within the arrangement. The allocation of arrangement consideration and the recognition of revenue is then determined for those combined deliverables as a single unit of accounting. The Company sells its various services and software and hardware products at established prices on a standalone basis which provides Company specific objective evidence of selling price for purposes of performance obligations relative selling price allocation. The Company only sells maintenance services or spare parts based on its established rates after it has completed a system integration project for a customer. The customer is not required to purchase maintenance services. All elements in multiple performance obligations arrangements with Company customers qualify as separate units of account for revenue recognition purposes.
Leases	Leases   The Company follows ASC 842 “Leases”. This guidance requires lessees to recognize right-of-use (“ROU”) assets and lease liabilities for most operating leases. In addition, this guidance requires that lessors separate lease and non-lease components in a contract in accordance with the revenue guidance in ASC 606.   The Company made an accounting policy election to not recognize short-term leases with terms of twelve months or less on the balance sheet and instead recognize the lease payments as an expense when incurred. The Company has also elected to account for real estate leases that contain both lease and non-lease components as a single lease component.   At the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset.   Operating ROU assets represent the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the lease commencement date to determine the present value of future payments. The lease term includes all periods covered by renewal and termination options where the Company is reasonably certain to exercise the renewal options or not to exercise the termination options. Operating lease expense is recognized on a straight-line basis over the lease term and is included in general and administration expenses in the consolidated statements of operations.
Earnings (Loss) Per Share	Earnings (Loss) Per Share   Basic earnings per share (EPS) are computed by dividing the net loss applicable to common stock by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss applicable to common stock by the weighted average number of common shares outstanding for the period and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise or conversion of stock options, stock warrants, convertible debt instruments, convertible preferred stock or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.     At June 30, 2024, there were (i) an aggregate of 44,644 outstanding warrants to purchase shares of common stock, (ii) employee stock options to purchase an aggregate of 1,340,903 shares of common stock, (iii) 506,333 common shares issuable upon conversion of Series D Convertible Preferred Stock, and (iv) subject to receipt of shareholder approval, 4,541,667 common shares issuable upon conversion of Series E Convertible Preferred Stock, all of which were excluded from the computation of diluted net earnings per share because their inclusion would have been anti-dilutive. At June 30, 2023, there were (i) an aggregate of 80,091 outstanding warrants to purchase shares of common stock, (ii) employee stock options to purchase an aggregate of 1,217,775 shares of common stock, (iii) 433,000 common shares issuable upon conversion of Series D Convertible Preferred Stock and (iv) 1,333,334 common shares issuable upon conversion of Series E Convertible Preferred Stock, all of which were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive.
Recent Accounting Pronouncements	Recent Accounting Pronouncements   From time to time, the FASB or other standards setting bodies will issue new accounting pronouncements. Updates to the FASB ASC are communicated through issuance of an Accounting Standards Update (“ASU”).   In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker. ASU 2023-07 is effective for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025. ASU 2023-07 must be applied retrospectively to all prior periods presented in the financial statements. The Company has evaluated the disclosure impact of ASU 2023-07; and determined the standard will not have an impact on the Company’s consolidated financial statements.   In December 2023, the FASB issued ASU No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Further, ASU 2023-09 requires companies to disclose additional information about income taxes paid. ASU 2023-09 is effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is evaluating the disclosure impact of ASU 2023-09; however, the standard will not have an impact on the Company’s consolidated financial statements.   Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

v3.24.2.u1

INTANGIBLE ASSET (Tables)	6 Months Ended
	Jun. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]
Schedule of intangible asset	Schedule of intangible asset                  June 30,     December 31,       2024     2023   Intangible Asset, gross   $ 11,161,428     $  —   Accumulated Amortization     (473,069 )     —   Intangible Asset, net   $ 10,688,359     $  —
Schedule of future amortization of intangible assets	Schedule of future amortization of intangible assets         Calendar Year      Amount     2024     $ 1,096,241     2025       2,192,484     2026       2,192,484     2027       2,192,484     2028       2,192,484     2029       822,182     Total Intangible Asset Amortization     $ 10,688,359

v3.24.2.u1

DEBT (Tables)	6 Months Ended
	Jun. 30, 2024
Debt Disclosure [Abstract]
Schedule of notes payable related to financing agreements	Schedule of notes payable related to financing agreements                             June 30, 2024     December 31, 2023   Notes Payable   Principal     Interest     Principal     Interest                             Third Party - Insurance Note 1   $ 124,311       8.25 %   $ 39,968       8.00 % Third Party - Insurance Note 2     16,316       —       2,008       —   Third Party - Insurance Note 3     100,825       —       —       —   Total   $ 241,452       —     $ 41,976       —

v3.24.2.u1

COMMITMENTS AND CONTINGENCIES (Tables)	6 Months Ended
	Jun. 30, 2024
Commitments and Contingencies Disclosure [Abstract]
Schedule of supplemental information related to leases	Schedule of supplemental information related to leases                  Six Months Ended June 30,       2024     2023   Lease cost:                 Operating lease cost   $ 390,819     $ 390,819   Short-term lease cost   $ 10,916     $ 46,717                     Other information:                 Operating cash outflow used for operating leases   $ 388,734     $ 316,040   Weighted average discount rate     9.0 %     9.0 % Weighted average remaining lease term     8.0 years       9.0 years
Schedule of future minimum lease payments due under the operating lease	Schedule of future minimum lease payments due under the operating lease           Amount   Calendar year:         2024   $ 390,353   2025     798,556   2026     818,518   2027     838,984   2028     859,856   Thereafter     3,183,571   Total undiscounted future minimum lease payments     6,889,838   Less: Impact of discounting     (2,048,510 ) Total present value of operating lease obligations     4,841,328   Current portion, operating lease obligation     (788,801 ) Operating lease obligations, less current portion   $ 4,052,527

v3.24.2.u1

STOCKHOLDERS’ EQUITY (Tables)	6 Months Ended
	Jun. 30, 2024
Equity [Abstract]
Schedule of black scholes option pricing model using assumptions	Schedule of black scholes option pricing model using assumptions            At June 30, 2024   Grant date share price at January 1, 2024   $ 2.70   Grant date exercise price   $ 2.30   Expected term     0.5 years   Expected volatility     67.3 % Risk-free rate     5.26 % Expected dividend rate     0 %
Schedule of stock-based compensation	Schedule of stock-based compensation            At June 30, 2024   Cash from employee withholdings used to purchase ESPP shares   $ 87,348   Stock based compensation expense     40,589   Total charges related to the Employee Stock Purchase Plan   $ 127,937                   At June 30, 2023   Cash from employee withholdings used to purchase ESPP shares   $ 117,048   Stock based compensation expense     66,217   Total charges related to the Employee Stock Purchase Plan   $ 183,265
Schedule of non-plan options	Schedule of non-plan options                                    Weighted     Average                   Average     Remaining     Aggregate       Number of     Exercise     Contractual     Intrinsic       Options     Price     Term (Years)     Value   Outstanding at December 31, 2022     926,266     $ 5.74       3.3     $ —   Granted     463,117     $ 4.22       4.35     $ —   Forfeited     (1,608 )   $ 14.00       —     $ —   Outstanding at December 31, 2023     1,387,775     $ 5.23       3.0     $ —   Exercisable at December 31, 2023     581,324     $ 5.38       1.8     $ —                                     Outstanding at December 31, 2023     1,387,775     $ 5.23       3.0     $ —   Granted     —     $ —       —     $ —   Exercised/Forfeited/Expired     (46,872 )   $ 5.47       —     $ —   Outstanding at June 30, 2024     1,340,903     $ 5.22       2.5     $ —   Exercisable at June 30, 2024     850,629     $ 5.43       1.8     $ —
Schedule of warrants	Schedule of warrants                                          Weighted                   Weighted     Average                   Average     Remaining     Aggregate       Number of     Exercise     Contractual     Intrinsic       Warrants     Price     Term (Years)     Value   Outstanding at December 31, 2022     147,591     $ 8.63       0.8     $  —   Warrants expired, forfeited, cancelled or exercised     (102,947 )   $  —       —     $  —   Warrants issued     —     $  —       —     $  —   Outstanding at December 31, 2023     44,644     $ 7.70       0.7     $ —   Exercisable at December 31, 2023     44,644     $ 7.70       0.7     $ —                                     Outstanding at December 31, 2023     44,644     $ 7.70       0.7     $  —   Warrants expired, forfeited, cancelled or exercised     —     $  —       —     $  —   Warrants issued     —     $ —       —     $ —   Outstanding at June 30, 2024     44,644     $ 7.70       0.2     $  —   Exercisable at June 30, 2024     44,644     $ 7.70       0.2     $  —

v3.24.2.u1

REVENUE AND CONTRACT ACCOUNTING (Tables)	6 Months Ended
	Jun. 30, 2024
Revenue from Contract with Customer [Abstract]
Schedule of contracts assets on uncompleted contracts	Schedule of contracts assets on uncompleted contracts                 June 30, 2024     December 31, 2023   Cumulative revenues recognized   $ 9,317,704     $ 8,820,256   Less: Billings or cash received     (8,178,309 )     (8,178,309 ) Contract assets   $ 1,139,395     $ 641,947
Schedule of contract liabilities on uncompleted contracts	Schedule of contract liabilities on uncompleted contracts                 June 30, 2024     December 31, 2023   Billings and/or cash receipts on uncompleted contracts   $ 1,264,658     $ 1,264,658   Less: Cumulative revenues recognized     (237,382 )     (199,976 ) Contract liabilities, technology systems     1,027,276       1,064,682   Contract liabilities, services and consulting     2,649,291       601,561   Total contract liabilities, current   $ 3,676,567     $ 1,666,243   Total contract liabilities, services and consulting, non-current   $ 8,495,876     $ —
Schedule of balance in contract liabilities	Schedule of balance in contract liabilities         Calendar Year      Amount     2024     $ 1,096,241     2025     2,192,484     2026     2,192,484     2027     2,192,484     2028     2,192,484     2029     822,182     Total CN agreement Contract Liabilities     $ 10,688,359
Schedule of disaggregation of revenue	Schedule of disaggregation of revenue                               Segments   Rail     Commercial     Government     Artificial Intelligence     Total   Primary Geographical Markets                                                               North America   $ 1,510,496     $ —     $ —     $ —     $ 1,510,496                                             Major Goods and Service Lines                                                                                   Turnkey Projects   $ 264,999     $ —     $ —     $ —     $ 264,999   Maintenance and Support     1,041,661       —       —       —       1,041,661   Algorithms     203,836       —       —       —       203,836       $ 1,510,496     $ —     $ —     $ —     $ 1,510,496                                             Timing of Revenue Recognition                                                                                   Goods transferred over time   $ 264,999     $ —     $ —     $ —     $ 264,999   Services transferred over time     1,245,497       —       —       —       1,245,497       $ 1,510,496     $ —     $ —     $ —     $ 1,510,496     For the Three Months Ended June 30, 2023                                 Segments   Rail     Commercial     Government     Artificial Intelligence     Total   Primary Geographical Markets                                                               North America   $ 1,537,286     $ 42,381     $ —     $ 190,392     $ 1,770,059                                             Major Goods and Service Lines                                                                                   Turnkey Projects   $ 856,942     $ 13,552     $ —     $ —     $ 870,494   Maintenance and Support     680,344       28,829       —       —       709,173   Algorithms     —       —       —       190,392       190,392       $ 1,537,286     $ 42,381     $ —     $ 190,392     $ 1,770,059                                             Timing of Revenue Recognition                                                                                   Goods transferred over time   $ 856,942     $ 13,552     $ —     $ —     $ 870,494   Services transferred over time     680,344       28,829       —       190,392       899,565       $ 1,537,286     $ 42,381     $ —     $ 190,392     $ 1,770,059        For the Six Months Ended June 30, 2024                                 Segments   Rail     Commercial     Government     Artificial Intelligence     Total   Primary Geographical Markets                                                               North America   $ 2,581,176     $ —     $ —     $ —     $ 2,581,176                                             Major Goods and Service Lines                                                                                   Turnkey Projects   $ 534,854     $ —     $ —     $ —     $ 534,854   Maintenance and Support     1,643,283       —       —       —       1,643,283   Algorithms     403,039       —       —       —       403,039       $ 2,581,176     $ —     $ —     $ —     $ 2,581,176                                             Timing of Revenue Recognition                                                                                   Goods transferred over time   $ 534,854     $ —     $ —     $ —     $ 534,854   Services transferred over time     2,049,322       —       —       —       2,046,322       $ 2,581,176     $ —     $ —     $ —     $ 2,581,176       For the Six Months Ended June 30, 2023                                 Segments   Rail     Commercial     Government     Artificial Intelligence     Total   Primary Geographical Markets                                                               North America   $ 3,913,735     $ 71,212     $ 11,353     $ 418,047     $ 4,414,347                                             Major Goods and Service Lines                                                                                   Turnkey Projects   $ 2,684,706     $ 13,552     $ —     $ —     $ 2,698,258   Maintenance and Support     1,229,029       57,660       11,353       —       1,298,042   Algorithms     —       —       —       418,047       418,047       $ 3,913,735     $ 71,212     $ 11,353     $ 418,047     $ 4,414,347                                             Timing of Revenue Recognition                                                                                   Goods transferred over time   $ 2,684,706     $ 13,552     $ —     $ —     $ 2,698,258   Services transferred over time     1,229,029       57,660       11,353       418,047       1,716,089       $ 3,913,735     $ 71,212     $ 11,353     $ 418,047     $ 4,414,347

v3.24.2.u1

SALE OF ASSETS (Tables)	6 Months Ended
	Jun. 30, 2024
Sale Of Assets
Schedule of note receivable	Schedule of note receivable           June 30, 2024   Convertible note receivable   $ 165,000   Unamortized discount     (7,500 ) Convertible note receivable, net   $ 157,500

v3.24.2.u1

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Product Information [Line Items]
Federally insured limits	$ 163,603
Share-Based Payment Arrangement, Option [Member]
Product Information [Line Items]
Number of incentive stock options	1,340,903	1,217,775
Common Stock [Member]
Product Information [Line Items]
Outstanding warrants	44,644	80,091
Series D Convertible Preferred Stock [Member]
Product Information [Line Items]
Common shares issuable upon conversion	506,333	433,000
Series E Convertible Preferred Stock [Member]
Product Information [Line Items]
Common shares issuable upon conversion	4,541,667	1,333,334
Customer 1 [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage	43.00%	61.00%
Customer 1 [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage	53.00%		83.00%
Customer 2 [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage	25.00%	25.00%
Customer 2 [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage	38.00%		11.00%
Customer 3 [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage	18.00%
Three Customer [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | UNITED STATES
Product Information [Line Items]
Concentration risk, percentage	65.00%	31.00%

v3.24.2.u1

LIQUIDITY (Details Narrative) - USD ($)		6 Months Ended
	Jul. 22, 2024	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Net loss		$ 5,956,480
Cash used in operating activities		3,940,984	$ 1,923,071
Working capital surplus		2,380,098
Accumulated deficit		$ 69,560,032		$ 63,603,552
Two Institutional Investors [Member] | Secured Promissory Notes [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Notes payable	$ 2,200,000
Maturity date	Dec. 31, 2025
Interest rate	10.00%
ATM Sales Agreement [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sale of stock price		$ 0.001
Sale of stock aggregate offering price		$ 7,500,000

v3.24.2.u1

INTANGIBLE ASSET (Details) - USD ($)	Jun. 30, 2024	Dec. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible Asset, gross	$ 11,161,428	$ 0
Accumulated Amortization	(473,069)	0
Intangible Asset, net	$ 10,688,359	$ 0

v3.24.2.u1

INTANGIBLE ASSET (Details - Future amortization) - USD ($)	Jun. 30, 2024	Dec. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
2024	$ 1,096,241
2025	2,192,484
2026	2,192,484
2027	2,192,484
2028	2,192,484
2029	822,182
Total Intangible Asset Amortization	$ 10,688,359	$ 0

v3.24.2.u1

INTANGIBLE ASSET (Details Narrative) - USD ($)		3 Months Ended		6 Months Ended
	May 31, 2024	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]
Intangible asset fair value		$ 11,161,428		$ 11,161,428		$ 0
Amortization of intangible asset				473,069	$ 0
Revenues		$ 1,510,496	$ 1,770,059	$ 2,581,176	$ 4,414,347
Customer Contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible asset fair value	$ 11,161,428
Term of contract	5 years
Amortization of intangible asset	$ 199,008
Revenues	199,008
Deferred revenue	11,161,428
Recognized deferred revenue	$ 199,008
Term of deferred revenue	5 years

v3.24.2.u1

DEBT (Details - Notes payable financing agreements) - USD ($)	Jun. 30, 2024	Dec. 31, 2023
Short-Term Debt [Line Items]
Notes payable, Principal	$ 241,452	$ 41,976
Third Party - Insurance Note 1 [Member]
Short-Term Debt [Line Items]
Notes payable, Principal	$ 124,311	$ 39,968
Notes payable, Interest	8.25%	8.00%
Third Party - Insurance Note 2 [Member]
Short-Term Debt [Line Items]
Notes payable, Principal	$ 16,316	$ 2,008
Third Party - Insurance Note 3 [Member]
Short-Term Debt [Line Items]
Notes payable, Principal	$ 100,825	$ 0

v3.24.2.u1

DEBT (Details Narrative) - USD ($)	Apr. 15, 2024	Feb. 03, 2024	Apr. 15, 2023	Jun. 30, 2024	Dec. 31, 2023
Third Party - Insurance Note 1 [Member]
Short-Term Debt [Line Items]
Purchase of insurance policy	$ 154,338		$ 142,734
Annual interest rate	8.25%		8.00%
Monthly installments	$ 16,023		$ 13,501
Notes payable				$ 124,311	$ 39,968
Third Party - Insurance Note 2 [Member]
Short-Term Debt [Line Items]
Purchase of insurance policy		$ 24,480
Monthly installments		2,040
Notes payable				16,316	2,008
Third Party - Insurance Note 2 [Member] | Renewed Agreement [Member]
Short-Term Debt [Line Items]
Purchase of insurance policy		24,140
Monthly installments		2,012
Third Party - Insurance Note 3 [Member]
Short-Term Debt [Line Items]
Purchase of insurance policy		245,798
Monthly installments		20,166
Notes payable				$ 100,825	$ 0
Down payment paid		$ 84,473

v3.24.2.u1

COMMITMENTS AND CONTINGENCIES (Details - Supplemental information related to leases) - USD ($)	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023
Lease cost:
Operating lease cost	$ 390,819	$ 390,819
Short-term lease cost	10,916	46,717
Other information:
Operating cash outflow used for operating leases	$ 388,734	$ 316,040
Weighted average discount rate	9.00%	9.00%
Weighted average remaining lease term	8 years	9 years

v3.24.2.u1

COMMITMENTS AND CONTINGENCIES (Details - Future minimum lease payments) - USD ($)	Jun. 30, 2024	Dec. 31, 2023
Commitments and Contingencies Disclosure [Abstract]
2024	$ 390,353
2025	798,556
2026	818,518
2027	838,984
2028	859,856
Thereafter	3,183,571
Total undiscounted future minimum lease payments	6,889,838
Less: Impact of discounting	(2,048,510)
Total present value of operating lease obligations	4,841,328
Current portion, operating lease obligation	(788,801)	$ (779,087)
Operating lease obligations, less current portion	$ 4,052,527	$ 4,228,718

v3.24.2.u1

COMMITMENTS AND CONTINGENCIES (Details Narrative)	Jul. 26, 2021 USD ($) ft²	Jun. 30, 2024 USD ($)	Dec. 31, 2023 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Area of lease | ft²	40,000
Accumulated amortization	$ 4,980,104	$ 4,204,593	$ 4,373,155
Rentable space | ft²	30,000
Security deposit payment	$ 600,000
Security deposit value	$ 50,000	$ 500,000	$ 550,000

v3.24.2.u1

STOCKHOLDERS' EQUITY (Details - Assumptions ) - Share-Based Payment Arrangement, Option [Member]	6 Months Ended
	Jun. 30, 2024 $ / shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Grant date share price	$ 2.70
Grant date exercise price	$ 2.30
Expected term	6 months
Expected volatility	67.30%
Risk-free rate	5.26%
Expected dividend rate	0.00%

v3.24.2.u1

STOCKHOLDERS' EQUITY (Details - Employee stock purchase plan) - USD ($)	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023
Equity [Abstract]
Cash from employee withholdings used to purchase ESPP shares	$ 87,348	$ 117,048
Stock based compensation expense	40,589	66,217
Total charges related to the Employee Stock Purchase Plan	$ 127,937	$ 183,265

v3.24.2.u1

STOCKHOLDERS' EQUITY (Details - Non plan options) - Share-Based Payment Arrangement, Option [Member] - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2024	Dec. 31, 2023	Dec. 31, 2022
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Outstanding beginning balance	1,387,775	926,266
Weighted average exercise price, Outstanding beginning balance	$ 5.23	$ 5.74
Weighted average remaining contractual term (Years)	2 years 6 months	3 years	3 years 3 months 18 days
Aggregate intrinsic value, Outstanding beginning balance	$ 0	$ 0
Number of options, Granted	0	463,117
Weighted average exercise price, Granted	$ 0	$ 4.22
Weighted average remaining contractual term (Years), Granted		4 years 4 months 6 days
Number of options, Exercised/Forfeited/Expired	(46,872)	(1,608)
Weighted average exercise price, Exercised/forfeited/expired	$ 5.47	$ 14.00
Outstanding ending balance	1,340,903	1,387,775	926,266
Weighted average exercise price, Outstanding ending balance	$ 5.22	$ 5.23	$ 5.74
Aggregate intrinsic value, Outstanding ending balance	$ 0	$ 0	$ 0
Number of options, Exercisable	850,629	581,324
Weighted average exercise price, Exercisable	$ 5.43	$ 5.38
Weighted average remaining contractual term (Years), Exercisable	1 year 9 months 18 days	1 year 9 months 18 days
Aggregate intrinsic value, Exercisable	$ 0	$ 0

v3.24.2.u1

STOCKHOLDERS' EQUITY (Details - Warrants) - Warrant [Member] - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2024	Dec. 31, 2023	Dec. 31, 2022
Accumulated Other Comprehensive Income (Loss) [Line Items]
Outstanding beginning balance	44,644	147,591
Weighted average exercise price, Outstanding beginning balance	$ 7.70	$ 8.63
Weighted average remaining contractual term (Years)	2 months 12 days	8 months 12 days	9 months 18 days
Aggregate intrinsic value, Outstanding beginning balance	$ 0	$ 0
Number of warrants, Warrants expired, forfeited, cancelled or exercised	0	(102,947)
Weighted average exercise price, Warrants expired, forfeited, cancelled or exercised	$ 0	$ 0
Number of warrants, Warrants issued	0	0
Weighted average exercise price, Warrants issued	$ 0	$ 0
Outstanding ending balance	44,644	44,644	147,591
Weighted average exercise price, Outstanding ending balance	$ 7.70	$ 7.70	$ 8.63
Aggregate intrinsic value, Outstanding ending balance	$ 0	$ 0	$ 0
Number of warrants, Exercisable	44,644	44,644
Weighted average exercise price, Exercisable	$ 7.70	$ 7.70
Weighted average remaining contractual term (Years), Exercisable	2 months 12 days	8 months 12 days
Aggregate intrinsic value, Exercisable	$ 0	$ 0

v3.24.2.u1

STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($)																		1 Months Ended		3 Months Ended					6 Months Ended
	Jun. 25, 2024	Jun. 18, 2024	Jun. 17, 2024	Jun. 13, 2024	Jun. 12, 2024	May 17, 2024	May 07, 2024	Apr. 30, 2024	Apr. 23, 2024	Apr. 03, 2024	Nov. 09, 2023	Aug. 02, 2023	Mar. 27, 2023	Oct. 29, 2022	Sep. 30, 2022	May 12, 2021	Feb. 26, 2021	May 31, 2024	Jan. 31, 2022	Jun. 30, 2024	Mar. 31, 2024	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023	Nov. 10, 2023	Sep. 28, 2022
Class of Stock [Line Items]
Preferred stock, shares designated																				9,441,000					9,441,000		9,441,000
Preferred stock, shares authorized																				10,000,000					10,000,000		10,000,000
Preferred stock, par value																				$ 0.001					$ 0.001		$ 0.001
Conversion price																				$ 0.003					0.003
Stock issued for services, value																				$ 42,500	$ 37,500	$ 32,500	$ 32,500
Common stock, par value																				$ 0.001					$ 0.001		$ 0.001
Employee contributions																									$ 87,348	$ 117,048
Recognized compensation expense																									40,589
Total compensation cost for stock options																				$ 315,069					$ 315,069
Employee Stock Purchase Plan [Member] | Call Option [Member]
Class of Stock [Line Items]
Purchase discount, percentage																									85.00%
Employee Stock Purchase Plan [Member] | Put Option [Member]
Class of Stock [Line Items]
Purchase discount, percentage																									15.00%
Employee Stock Purchase Plan [Member]
Class of Stock [Line Items]
Stock issued under the Employee Stock Purchase Plan, shares																									38,041	65,561
Employee contributions																									$ 87,348	$ 117,048
Purchase price per share																				$ 2.30		$ 1.79			$ 2.30	$ 1.79
Plan, term																								10 years
Plan, description																									The ESPP allows eligible employees to purchase shares of the Company's common stock at a discounted price, through payroll deductions from a minimum of 1% and up to 25% of their eligible compensation up to a maximum of $25,000 or the IRS allowable limit per calendar year.
Fair market value percentage																								85.00%
Maximum aggregate number of shares of common stock																				1,000,000					1,000,000
Plan 2021 [Member]
Class of Stock [Line Items]
Number of shares issued, shares																1,000,000
Number of incentive stock options																				741,245					741,245		788,117
Plan 2016 [Member]
Class of Stock [Line Items]
Number of incentive stock options																				269,658					269,658		269,658
Non Plan [Member]
Class of Stock [Line Items]
Number of incentive stock options																				330,000					330,000		330,000
At The Market [Member]
Class of Stock [Line Items]
Number of shares issued, shares	15,610	1,534	400	9,747	11,239															38,530
Share price	$ 3.15	$ 3.03	$ 3.02	$ 3.15	$ 3.05
Total net proceeds	$ 47,004	$ 4,507	$ 1,165	$ 29,626	$ 33,261															$ 115,563
Share-Based Payment Arrangement, Option [Member]
Class of Stock [Line Items]
Option exercise																									38,041	65,561
Number of incentive stock options																				1,340,903				926,266	1,340,903		1,387,775
Number of incentive stock options exercisable																				850,629					850,629
Sales Agreement [Member]
Class of Stock [Line Items]
Common stock, par value						$ 0.001
Aggregate sales						$ 7,500,000
Common Stock [Member]
Class of Stock [Line Items]
Stock issued for services , shares																				15,041	8,655	5,645	12,463
Stock issued for services, value																				$ 15	$ 9	$ 6	$ 12
Stock issued under the Employee Stock Purchase Plan, shares																				38,041		65,561
Common Stock [Member] | Employee Stock Purchase Plan [Member]
Class of Stock [Line Items]
Purchase discount, percentage																									15.00%
Four Directors [Member] | Common Stock [Member]
Class of Stock [Line Items]
Stock issued for services , shares																					8,655
Stock issued for services, value																					$ 37,500
Weighted average price per share																				$ 4.33					$ 4.33
Three Directors [Member] | Common Stock [Member]
Class of Stock [Line Items]
Stock issued for services , shares																				15,041		5,645	12,463
Stock issued for services, value																				$ 42,500		$ 32,500	$ 32,500
Weighted average price per share																				$ 2.83		$ 5.76	$ 2.61		$ 2.83	$ 5.76
Employees And Directors [Member]
Class of Stock [Line Items]
Stock-based compensation expense																									$ 201,109	$ 236,527
Convertible Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares designated																				15,000					15,000		15,000
Preferred stock, par value																				$ 1,000					$ 1,000		$ 1,000
Converted value																									$ 1,000
Conversion price																				$ 7.00					$ 7.00
Preferred stock, shares issued																				0					0		0
Preferred stock, shares outstanding																				0					0		0
Preferred stock, conversion price per share																				$ 7					$ 7		$ 7
Convertible Series C Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares designated																				5,000					5,000		5,000
Preferred stock, par value																				$ 1,000					$ 1,000		$ 1,000
Preferred stock, shares issued																				0					0		0
Preferred stock, shares outstanding																				0					0		0
Preferred stock voting rights																									Each share of Series C Convertible Preferred Stock has 172 votes
Preferred stock, conversion price per share																				$ 5.50					$ 5.50		$ 5.50
Series C preferred converted to common stock shares																			454,546
Convertible Series C Preferred Stock [Member] | Purchase Agreement [Member]
Class of Stock [Line Items]
Proceeds from convertible preferred stock																	$ 4,500,000
Convertible Series D Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares designated																				4,000					4,000		4,000
Preferred stock, par value																				$ 1,000					$ 1,000		$ 1,000		$ 1,000
Converted value							$ 75,000	$ 350,000	$ 225,000
Preferred stock, shares issued																				1,519					1,519		1,299
Preferred stock, shares outstanding																				1,519					1,519		1,299
Preferred stock voting rights																									Each share of Series D Convertible Preferred Stock has 333 votes
Preferred stock, conversion price per share																				$ 3					$ 3		$ 3
Preferred stock conversion price							$ 3.00	$ 3.00	$ 3.00											3.00					$ 3.00
Number of shares issued, shares										250															620
Share price										$ 1,000										$ 1,000					$ 1,000
Total net proceeds										$ 250,000															$ 620,000
Converted shares								350	225
Convertible Series D Preferred Stock [Member] | One Shareholders [Member]
Class of Stock [Line Items]
Converted shares								100	147
Converted shares issued								33,334	49,000
Convertible Series D Preferred Stock [Member] | Two Shareholders [Member]
Class of Stock [Line Items]
Converted shares								250	78
Converted shares issued								83,334	26,000
Convertible Series D Preferred Stock [Member] | Shareholders [Member]
Class of Stock [Line Items]
Converted shares							75
Convertible Series D Preferred Stock [Member] | Purchase Agreement [Member]
Class of Stock [Line Items]
Preferred stock, shares issued														300	999
Proceeds from convertible preferred stock														$ 300,000	$ 999,000
Series E Convertible Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares outstanding								650										650
Converted shares								216,668										216,668
Convertible Series E Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares designated																				30,000					30,000		30,000
Preferred stock, par value											$ 1,000		$ 1,000							$ 1,000					$ 1,000		$ 1,000
Preferred stock, shares issued													4,000							13,625					13,625		11,500
Preferred stock, shares outstanding																				13,625					13,625		11,500
Preferred stock voting rights																									Each share of Series E Convertible Preferred Stock has 333 votes
Preferred stock, conversion price per share																				$ 3					$ 3		$ 3
Proceeds from convertible preferred stock											$ 2,500,000
Preferred stock conversion price																				3.00					$ 3.00			$ 3.00
Number of shares issued, shares																									2,125
Share price																				$ 1,000					$ 1,000
Total net proceeds																									$ 2,125,002
Preferred convertible preferred stock, Shares											2,500
Additional shares																												7,500
Exchange of shares																												5,000
Convertible Series E Preferred Stock [Member] | Purchase Agreement [Member]
Class of Stock [Line Items]
Proceeds from convertible preferred stock													$ 4,000,000
Convertible Series F Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares designated																				5,000					5,000		5,000
Preferred stock, par value																				$ 1,000					$ 1,000		$ 1,000	$ 6.20
Preferred stock, shares issued																				0					0		0
Preferred stock, shares outstanding																				0					0		0
Preferred stock voting rights																									Each share of Series F Preferred Stock had 161 votes
Preferred stock, conversion price per share																				$ 6.20					$ 6.20		$ 6.20
Proceeds from convertible preferred stock												$ 5,000,000
Preferred stock conversion price																				$ 6.20					$ 6.20
Number of shares exchanged																												5,000
Additional shares																												2,500
Number of shares cancelled																												5,000
Preferred convertible preferred stock, shares												5,000
Exchange of shares																												5,000
Shares outstanding																												0

v3.24.2.u1

REVENUE AND CONTRACT ACCOUNTING (Details - Contract assets) - USD ($)	Jun. 30, 2024	Dec. 31, 2023
Revenue from Contract with Customer [Abstract]
Cumulative revenues recognized	$ 9,317,704	$ 8,820,256
Less: Billings or cash received	(8,178,309)	(8,178,309)
Contract assets	$ 1,139,395	$ 641,947

v3.24.2.u1

REVENUE AND CONTRACT ACCOUNTING (Details - Contract liabilities) - USD ($)	Jun. 30, 2024	Dec. 31, 2023
Revenue from Contract with Customer [Abstract]
Billings and/or cash receipts on uncompleted contracts	$ 1,264,658	$ 1,264,658
Less: Cumulative revenues recognized	(237,382)	(199,976)
Contract liabilities, technology systems	1,027,276	1,064,682
Contract liabilities, services and consulting	2,649,291	601,561
Total contract liabilities, current	3,676,567	1,666,243
Total contract liabilities, services and consulting, non-current	$ 8,495,876	$ 0

v3.24.2.u1

REVENUE AND CONTRACT ACCOUNTING (Details - Contract liabilities agreement)	Jun. 30, 2024 USD ($)
Revenue from Contract with Customer [Abstract]
2024	$ 1,096,241
2025	2,192,484
2026	2,192,484
2027	2,192,484
2028	2,192,484
2029	822,182
Total CN agreement Contract Liabilities	$ 10,688,359

v3.24.2.u1

REVENUE AND CONTRACT ACCOUNTING (Details - Disaggregated revenue) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Disaggregation of Revenue [Line Items]
Revenue	$ 1,510,496	$ 1,770,059	$ 2,581,176	$ 4,414,347
Goods Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Revenue	264,999	870,494	534,854	2,698,258
Services Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Revenue	1,245,497	899,565	2,046,322	1,716,089
Turnkey Projects [Member]
Disaggregation of Revenue [Line Items]
Revenue	264,999	870,494	534,854	2,698,258
Maintenance And Support [Member]
Disaggregation of Revenue [Line Items]
Revenue	1,041,661	709,173	1,643,283	1,298,042
Algorithms [Member]
Disaggregation of Revenue [Line Items]
Revenue	203,836	190,392	403,039	418,047
Rail [Member]
Disaggregation of Revenue [Line Items]
Revenue	1,510,496	1,537,286	2,581,176	3,913,735
Rail [Member] | Goods Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Revenue	264,999	856,942	534,854	2,684,706
Rail [Member] | Services Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Revenue	1,245,497	680,344	2,049,322	1,229,029
Rail [Member] | Turnkey Projects [Member]
Disaggregation of Revenue [Line Items]
Revenue	264,999	856,942	534,854	2,684,706
Rail [Member] | Maintenance And Support [Member]
Disaggregation of Revenue [Line Items]
Revenue	1,041,661	680,344	1,643,283	1,229,029
Rail [Member] | Algorithms [Member]
Disaggregation of Revenue [Line Items]
Revenue	203,836	0	403,039	0
Commercial [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	42,381	0	71,212
Commercial [Member] | Goods Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	13,552	0	13,552
Commercial [Member] | Services Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	28,829	0	57,660
Commercial [Member] | Turnkey Projects [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	13,552	0	13,552
Commercial [Member] | Maintenance And Support [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	28,829	0	57,660
Commercial [Member] | Algorithms [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Governments [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	11,353
Governments [Member] | Goods Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Governments [Member] | Services Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	11,353
Governments [Member] | Turnkey Projects [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Governments [Member] | Maintenance And Support [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	11,353
Governments [Member] | Algorithms [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Artificial Intelligence [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	190,392	0	418,047
Artificial Intelligence [Member] | Goods Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Artificial Intelligence [Member] | Services Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	190,392	0	418,047
Artificial Intelligence [Member] | Turnkey Projects [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Artificial Intelligence [Member] | Maintenance And Support [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Artificial Intelligence [Member] | Algorithms [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	190,392	0	418,047
North America [Member]
Disaggregation of Revenue [Line Items]
Revenue	1,510,496	1,770,059	2,581,176	4,414,347
North America [Member] | Rail [Member]
Disaggregation of Revenue [Line Items]
Revenue	1,510,496	1,537,286	2,581,176	3,913,735
North America [Member] | Commercial [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	42,381	0	71,212
North America [Member] | Governments [Member]
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	11,353
North America [Member] | Artificial Intelligence [Member]
Disaggregation of Revenue [Line Items]
Revenue	$ 0	$ 190,392	$ 0	$ 418,047

v3.24.2.u1

REVENUE AND CONTRACT ACCOUNTING (Details Narrative) - USD ($)	Jun. 30, 2024	May 31, 2024	Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]
Contract liabilities	$ 3,676,567		$ 1,666,243
Contract liabilities for technology systems			$ 37,407
Services and consulting recognized	442,610
Current contract liabilities	2,192,483
Non-current contract liabilities	$ 8,495,876
Customer Contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Deferred revenue		$ 11,161,428
Recognized deferred revenue		$ 199,008

v3.24.2.u1

DEFINED CONTRIBUTION PLAN (Details Narrative) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2024
Retirement Benefits [Abstract]
Cash contributions	$ 56,340	$ 111,438

v3.24.2.u1

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Related Party Transactions [Abstract]
Related party expenses	$ 43,137	$ 11,397
Accounts payable	$ 43,137		$ 33,812

v3.24.2.u1

SALE OF ASSETS (Details)	Jun. 30, 2024 USD ($)
Sale Of Assets
Convertible note receivable	$ 165,000
Unamortized discount	(7,500)
Convertible note receivable, net	$ 157,500

v3.24.2.u1

SALE OF ASSETS (Details Narrative)	6 Months Ended
	Jun. 30, 2024 USD ($) $ / shares shares
Sale Of Assets
Principal amount | $	$ 165,000
Original issue discount	10.00%
Conversion price | $ / shares	$ 0.003
Common stock shares | shares	55,000,000
Purchase of common stock warrants | shares	55,000,000
Exercise price | $ / shares	$ 0.01
Sale of asset | $	$ 150,000

v3.24.2.u1

SUBSEQUENT EVENTS (Details Narrative) - USD ($)			1 Months Ended	6 Months Ended
	Jul. 22, 2024	Jul. 05, 2024	Jul. 31, 2024	Jun. 30, 2024	Jun. 30, 2023
Subsequent Event [Line Items]
Net proceeds				$ 115,563	$ 0
Subsequent Event [Member]
Subsequent Event [Line Items]
Share issued			27,695
Weighted average price			$ 3.04
Net proceeds			$ 81,495
Subsequent Event [Member] | Secured Promissory Notes [Member]
Subsequent Event [Line Items]
Aggregate promissory note	$ 2,200,000
Maturity date	Dec. 31, 2025
Interest rate	10.00%
Warrants purchase	300,000
Warrants exercisable per share	$ 3.00
Warrant term	5 years
Interest rate notes increase	18.00%
Additional warrants purchase	75,000
Series D Preferred Stock [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Conversion of shares common stock		120
Common Stock [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Conversion of shares common stock		40,000

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