Duos Technologies Group, Inc. (“Duos” or the
“Company”) (Nasdaq: DUOT) a provider of machine vision and
artificial intelligence that analyzes fast moving vehicles,
reported financial results for the fourth quarter (“Q4 2023”) and
full year ended December 31, 2023.
Fourth Quarter 2023 and Recent
Operational Highlights
- Secured contract for expansion of
recurring revenues including $2.4 million, multiyear AI
subscription and services agreement with Class 1 railroad for
advanced AI-Based Defect Detection models.
- Closed $360,000 in annual recurring
revenue with Mexican rail operator encompassing expanded support
through Duos’ Preventative Maintenance Checks and Services (PMCS)
Program and Field Services Support.
- Scanned more than 8.5 million
railcars on over 665,000 unique railcars for the full year. This
metric encompasses all railcars scanned at locations across the
U.S., Canada, and Mexico, representing approximately 40% of the
total freight car population in North America.
- Granted wide ranging Patent "Use of
Artificial Intelligence to Detect Defects in Trains and Method to
Use". This innovative AI patent reinforces Duos’ strong commitment
to improving rail safety through technology.
- Appointed power and logistics
industry veteran Christopher King as Chief Commercial Officer. King
joins Duos with over 20 years of operational and commercial
leadership experience within the energy and supply chain
sectors.
- At the end of the year, the Company
had $6.6 million of revenue in backlog and more than $100 million
in identified opportunities.
- Strengthened industry
collaborations with Dell Technologies and NVIDIA to support AI
development and achieve significant increases in performance at
near “real-time” reporting. Duos featured in Dell promotional video
released in Q1 2024.
Fourth Quarter 2023 Financial
ResultsIt should be noted that the following Financial
Results represent the consolidation of the Company with its
subsidiaries Duos Technologies, Inc. and truevue360™.
Total revenue for Q4 2023
decreased 74% to $1.53 million compared to $5.93 million in the
fourth quarter of 2022 (“Q4 2022”). Total revenue for Q4 2023
includes approximately $1.31 million in recurring services and
consulting revenue, an increase of 29% over the same period. The
increase in recurring revenues was driven by a new AI subscription
with a major Class 1 and subscription data services with a large
passenger railway.
Cost of revenues for Q4 2023
decreased 68% to $1.22 million compared to $3.79 million for Q4
2022. The decrease in costs year-over-year stems from overall lower
revenues. Services and consulting cost of revenues increased by
38%, reflective of the transition to software support and data
provision for the subscription business and timing of
pre-programmed maintenance calls.
Gross margin for Q4 2023
decreased 86% to $303 thousand compared to $2.14 million for Q4
2022. The decline in margin during the quarter was a direct result
of lower business activity timing in the technology systems area of
the business in line with the refocus of the business to data
subscription, AI software and support services as previously noted.
The Company expects higher gross margins overall in the coming
periods as a result of this transition.
Operating expenses for Q4 2023
increased 12% to $3.48 million compared to $3.10 million for Q4
2022. There was an increase in sales and marketing related to
continued increased investment in the overall capability of the
commercial team. Additionally, general and administration costs
increased primarily due to a focus on employee retention to support
the Company’s long-term operating plan.
Net operating loss for Q4 2023
totaled $3.18 million compared to net operating loss of $960,038
for Q4 2022. The increase in net operating loss was as a result of
lower revenues recorded during the quarter.
Net loss for Q4 2023 totaled
$3.16 million compared to a net loss of $952,427 for Q4 2022.
Cash and cash equivalents at
December 31, 2023 totaled $2.44 million compared to $1.12 million
at December 31, 2022. As of yearend, the Company had an additional
$1.46 million in receivables, bolstering its liquidity position to
approximately $3.90 million. Duos also had an additional $1.53
million of inventory as of December 31, 2023, consisting primarily
of long-lead items for two ongoing RIP installations.
In March 2024, the Company entered into a
securities purchase agreement with certain new and existing
investors resulting in the issuance of an aggregate of 2,745 shares
of Series D and Series E Convertible Preferred Stock. Duos received
aggregate proceeds of $2.75 million through the transaction.
Full Year 2023 Financial
ResultsTotal revenue for the full year
2023, decreased 50% compared to 2022. Much of the decrease was due
to customer-driven delays beyond the Company’s control related to
the ongoing production of the two high-speed transit-focused RIPs.
The resultant timing delays of the overall project delivery
timeline shifts anticipated revenues into the second half of 2024.
The Company also began its transition into a greater focus on AI
software and support services, much of which are recurring revenues
and there was a small increase in services and consulting revenues.
Underlying recurring revenues climbed by approximately 23% on a
year-over-year basis. This growth is fueled by the expansion of
service contracts following the completion of new portals in early
2023, coupled with the deployment of AI services with several
customers and data subscription services for a large passenger
transit customer. The Company anticipates these revenue sources
will continue growing throughout 2024 and beyond.
Cost of revenues decreased
40% overall for the year due to the overall decrease in revenues.
Cost of revenues on services and consulting decreased by 4%
year-over-year despite a small increase in revenues for this
category, which is a positive trend. The Company continues to put
into service additional artificial intelligence algorithms and
maintenance and support services which are high margin and
represent only marginal increases in the requisite costs to deliver
these services.
Gross margin decreased 72%
for the year ended December 31, 2023 as compared to the same period
in 2022. As noted above, the decline in margin was a direct result
of project delays that were experienced in the latter half of 2023
offset by a slight increase in services and consulting margins. The
business activity in 2023 consisted primarily of continued
progression into the advanced stages of procurement and
manufacturing for the transit-focused RIPs.
Operating expenses were
higher by 10% in 2023 as compared to the full-year 2022. There was
a 12% increase in sales and marketing related to increased
investment into the capability of the commercial team, including
the addition of professionals with extensive experience and
leadership in the rail industry. Additionally, a small increase in
general and administration costs was influenced by several factors,
including non-cash amortization charges associated with roughly
400,000 share options that were issued during 2023. In late 2023,
the Company took steps to rationalize some non-essential staff
positions given the lower performance in 2023 with an anticipated
impact of around $1 million saving in operating costs in 2024.
Net operating loss The losses
from operations for the years ended, December 31, 2023 and 2022
were $11,446,566 and $6,865,149, respectively. The increase in
losses from operations during the year was the result of temporary
decline in system revenues stemming from a timing shift in business
activity as well as project delays experienced in the latter half
of 2023 that were beyond the Company’s control.
Net loss The net loss for the
years ended December 31, 2023 and 2022 was $11,241,718 and
$6,864,783, respectively. The increase in overall net loss was
offset slightly with an increase in the Company’s recurring
services and consulting. Net loss per common share was $1.56 and
$1.11 for the years ended December 31, 2023 and 2022,
respectively.
Financial Outlook At the end of
2023, the Company’s contracts in backlog represented approximately
$6.6 million in revenue, of which approximately $4.4 million is
expected to be recognized in calendar 2024 not including an
estimated $6.0 - $7.0 million in expected near-term awards and
renewals. The balance of contract backlog is comprised of
multi-year service and software agreements as well as project
revenues spanning through fiscal 2024.
In the fourth quarter of 2023 the Company
withdrew its previously issued guidance due to unforeseen delays
from three major projects which delayed recognition of a
substantial portion of expected revenues into 2024. Duos expects an
improvement in operating results to be reflected over the course of
the full year 2024 from the realization of these projects and other
anticipated new projects. As a result of typical business
seasonality as well as timing and other factors, the Company
expects revenues in the first quarter of 2024 to be similar to the
fourth quarter of 2023 before sequentially increasing throughout
the remainder of the year.
Management Commentary“2023 was
a challenging year for our Company with strong progress in many
areas of operations offset by project delays from three major
clients which were out of our control,” said Duos Chief Executive
Officer Chuck Ferry. “However, during the year we made substantial
progress in the delivery of our AI algorithms and Centraco software
update, the backbone of our Railcar Inspection Portal. We have
significantly increased the breadth of our AI applications to also
include passenger rail use cases, and continued to grow our
recurring revenue base through strong renewals and add-on work as
evidenced by the renewed and added contracts in early 2024.
“We continue to engage with the Class 1s,
Passenger Railroads, labor unions, and Congress in a concerted
effort to see this cutting-edge technology adopted on a larger
scale while also using our expertise to address the broader AI
Value Chain which I will discuss further in our upcoming earnings
call.”
Conference CallThe Company’s
management will host a conference call today, April 1, 2024, at
4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these
results, followed by a question-and-answer period.
Date:Time:U.S. dial-in:International dial-in:Confirmation: |
|
Monday, April 1, 20244:30 p.m. Eastern time (1:30 p.m. Pacific
time)877-407-3088201-389-092713744636 |
Please call the conference telephone number 5-10 minutes prior
to the start time of the conference call. An operator will register
your name and organization.
If you have any difficulty connecting with the
conference call, please contact DUOT@duostech.com.
The conference call will be broadcast live via
telephone and available for online replay via the investor section
of the Company's website here.
About Duos Technologies Group,
Inc.Duos Technologies Group, Inc. (Nasdaq: DUOT), based in
Jacksonville, Florida, through its wholly owned subsidiary, Duos
Technologies, Inc., designs, develops, deploys and operates
intelligent vision-based technology solutions using Machine Vision
and Artificial Intelligence (“AI”) to analyze fast moving freight,
passenger and transit trains and trucks streamlining operations,
improving safety and reducing costs. The Company provides cutting
edge solutions that automate the mechanical and security inspection
of fast-moving trains, trucks and automobiles through a broad range
of proprietary hardware, software, information technology and
artificial intelligence. For more information, visit
www.duostech.com.
Forward-Looking StatementsThis
news release includes forward-looking statements regarding the
Company's financial results and estimates and business prospects
that involve substantial risks and uncertainties that could cause
actual results to differ materially. Forward-looking statements
relate to future events and typically address the Company's
expected future business and financial performance. The
forward-looking statements in this news release relate to, among
other things, information regarding anticipated timing for the
installation, development and delivery dates of our systems;
anticipated entry into additional contracts; anticipated effects of
macro-economic factors (including effects relating to supply chain
disruptions and inflation); timing with respect to revenue
recognition; trends in the rate at which our costs increase
relative to increases in our revenue; anticipated reductions in
costs due to changes in the Company's organizational structure;
potential increases in revenue, including increases in recurring
revenue; potential changes in gross margin (including the timing
thereof); statements regarding our backlog and potential revenues
deriving therefrom; and statements about future profitability and
potential growth of the Company. Words such as "believe," "expect,"
"anticipate," "should," "plan," "aim," "will," "may," "should,"
"could," "intend," "estimate," "project," "forecast," "target,"
"potential" and other words and terms of similar meaning, typically
identify such forward-looking statements. Forward-looking
statements involve risks and uncertainties and there are important
factors that could cause actual results to differ materially from
those expressed or implied by these forward-looking statements.
These factors include, but are not limited 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 U.S.
Securities and Exchange Commission (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.
DUOS TECHNOLOGIES GROUP, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
OPERATIONS |
|
|
For the Years Ended |
|
December 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
REVENUES: |
|
|
|
Technology systems |
$ |
3,618,022 |
|
|
$ |
11,190,292 |
|
Services and consulting |
|
3,853,176 |
|
|
|
3,822,074 |
|
|
|
|
|
Total Revenues |
|
7,471,198 |
|
|
|
15,012,366 |
|
|
|
|
|
COST OF REVENUES: |
|
|
|
Technology systems |
|
4,352,247 |
|
|
|
8,376,649 |
|
Services and consulting |
|
1,810,070 |
|
|
|
1,887,614 |
|
|
|
|
|
Total Cost of Revenues |
|
6,162,317 |
|
|
|
10,264,263 |
|
|
|
|
|
GROSS MARGIN |
|
1,308,881 |
|
|
|
4,748,103 |
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
Sales and marketing |
|
1,493,309 |
|
|
|
1,337,186 |
|
Research and development |
|
1,812,951 |
|
|
|
1,651,064 |
|
General and Administration |
|
9,449,187 |
|
|
|
8,625,002 |
|
|
|
|
|
Total Operating Expenses |
|
12,755,447 |
|
|
|
11,613,252 |
|
|
|
|
|
LOSS FROM OPERATIONS |
|
(11,446,566 |
) |
|
|
(6,865,149 |
) |
|
|
|
|
OTHER INCOME (EXPENSES): |
|
|
|
Interest expense |
|
(7,159 |
) |
|
|
(9,191 |
) |
Other income, net |
|
212,007 |
|
|
|
9,557 |
|
|
|
|
|
Total Other Income (Expenses) |
|
204,848 |
|
|
|
366 |
|
|
|
|
|
NET LOSS |
$ |
(11,241,718 |
) |
|
$ |
(6,864,783 |
) |
|
|
|
|
Basic and Diluted Net Loss Per
Share |
$ |
(1.56 |
) |
|
$ |
(1.11 |
) |
|
|
|
|
Weighted Average Shares-Basic
and Diluted |
|
7,204,177 |
|
|
|
6,175,193 |
|
|
|
|
|
|
|
|
|
DUOS TECHNOLOGIES GROUP, INC. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS |
|
|
December 31, |
|
December 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
ASSETS |
|
|
|
CURRENT ASSETS: |
|
|
|
Cash |
$ |
2,441,842 |
|
|
$ |
1,121,092 |
|
Accounts receivable, net |
|
1,462,463 |
|
|
|
3,418,263 |
|
Contract assets |
|
641,947 |
|
|
|
425,722 |
|
Inventory |
|
1,526,165 |
|
|
|
1,428,360 |
|
Prepaid expenses and other current assets |
|
184,478 |
|
|
|
441,320 |
|
|
|
|
|
Total Current Assets |
|
6,256,895 |
|
|
|
6,834,757 |
|
|
|
|
|
Property and equipment, net |
|
726,507 |
|
|
|
629,490 |
|
Operating lease right of use asset |
|
4,373,155 |
|
|
|
4,689,931 |
|
Security deposit |
|
550,000 |
|
|
|
600,000 |
|
|
|
|
|
OTHER ASSETS: |
|
|
|
Note Receivable, net |
|
153,750 |
|
|
|
- |
|
Patents and trademarks, net |
|
129,140 |
|
|
|
69,733 |
|
Software development costs, net |
|
652,838 |
|
|
|
265,208 |
|
Total Other Assets |
|
935,728 |
|
|
|
334,941 |
|
|
|
|
|
TOTAL ASSETS |
$ |
12,842,285 |
|
|
$ |
13,089,119 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
Accounts payable |
$ |
595,634 |
|
|
$ |
2,290,390 |
|
Notes payable - financing agreements |
|
41,976 |
|
|
|
74,575 |
|
Accrued expenses |
|
164,113 |
|
|
|
453,023 |
|
Equipment financing payable-current portion |
|
- |
|
|
|
22,851 |
|
Operating lease obligations-current portion |
|
779,087 |
|
|
|
696,869 |
|
Contract liabilities |
|
1,666,243 |
|
|
|
957,997 |
|
|
|
|
|
Total Current Liabilities |
|
3,247,053 |
|
|
|
4,495,705 |
|
|
|
|
|
Operating lease obligations, less current portion |
|
4,228,718 |
|
|
|
4,542,943 |
|
|
|
|
|
Total Liabilities |
|
7,475,771 |
|
|
|
9,038,648 |
|
|
|
|
|
Commitments and Contingencies
(Note 10) |
|
|
|
|
|
|
|
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 issued and outstanding
at December 31, 2023 and December 31, 2022, 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 December 31, 2023 and December 31, 2022,
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 December 31, 2023 and December 31, 2022,
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; 1,299 and 1,299
issued and outstanding at December 31, 2023 and December 31,
2022, 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; 11,500 and 0 issued and
outstanding at December 31, 2023 and December 31, 2022,
respectively, convertible into common stock at $3 per
share |
|
12 |
|
|
|
- |
|
Series F convertible preferred stock, $1,000 stated value per
share, 5,000 shares designated; 0 and 0 issued and outstanding at
December 31, 2023 and December 31, 2022,
respectively, convertible into common stock at $6.20 per
share |
|
- |
|
|
|
- |
|
|
|
|
|
Common stock: $0.001 par value; 500,000,000 shares authorized,
7,306,663 and 7,156,876 shares issued, 7,305,339 and
7,155,552 shares outstanding at December 31, 2023 and December
31, 2022, respectively |
|
7,306 |
|
|
|
7,156 |
|
Additional paid-in-capital |
|
69,120,199 |
|
|
|
56,562,600 |
|
Accumulated deficit |
|
(63,603,552 |
) |
|
|
(52,361,834 |
) |
Sub-total |
|
5,523,966 |
|
|
|
4,207,923 |
|
Less: Treasury stock (1,324 shares of common stock at December 31,
2023 and December 31, 2022) |
|
(157,452 |
) |
|
|
(157,452 |
) |
Total Stockholders'
Equity |
|
5,366,514 |
|
|
|
4,050,471 |
|
|
|
|
|
Total Liabilities and
Stockholders' Equity |
$ |
12,842,285 |
|
|
$ |
13,089,119 |
|
|
|
|
|
|
|
|
|
DUOS TECHNOLOGIES GROUP, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
|
For the Years Ended |
|
December 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
Cash from operating
activities: |
|
|
|
Net loss |
$ |
(11,241,718 |
) |
|
$ |
(6,864,783 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
Depreciation and
amortization |
|
550,201 |
|
|
|
350,192 |
|
Stock based compensation |
|
710,047 |
|
|
|
819,191 |
|
Stock issued for services |
|
143,065 |
|
|
|
157,500 |
|
Amortization of operating
lease right of use asset |
|
316,776 |
|
|
|
235,834 |
|
Changes in assets and
liabilities: |
|
|
|
Accounts receivable |
|
1,955,800 |
|
|
|
(1,679,720 |
) |
Note receivable |
|
(153,750 |
) |
|
|
- |
|
Contract assets |
|
(216,225 |
) |
|
|
(422,273 |
) |
Inventory |
|
(97,804 |
) |
|
|
(1,130,022 |
) |
Security deposit |
|
50,000 |
|
|
|
- |
|
Prepaid expenses and other current assets |
|
744,771 |
|
|
|
266,539 |
|
Accounts payable |
|
(1,694,756 |
) |
|
|
1,245,890 |
|
Accrued expenses |
|
(289,209 |
) |
|
|
(165,069 |
) |
Operating lease obligation |
|
(232,007 |
) |
|
|
184,728 |
|
Contract liabilities |
|
708,245 |
|
|
|
(871,314 |
) |
|
|
|
|
Net cash used in
operating activities |
|
(8,746,564 |
) |
|
|
(7,873,307 |
) |
|
|
|
|
Cash flows from investing
activities: |
|
|
|
Purchase of patents/trademarks |
|
(69,327 |
) |
|
|
(18,190 |
) |
Purchase of software development |
|
(527,896 |
) |
|
|
(281,783 |
) |
Purchase of fixed assets |
|
(496,686 |
) |
|
|
(344,915 |
) |
|
|
|
|
Net cash used in
investing activities |
|
(1,093,909 |
) |
|
|
(644,888 |
) |
|
|
|
|
Cash flows from financing
activities: |
|
|
|
Repayments of insurance and equipment financing |
|
(520,529 |
) |
|
|
(331,175 |
) |
Repayment of finance lease |
|
(22,851 |
) |
|
|
(80,335 |
) |
Proceeds from common stock issued |
|
- |
|
|
|
8,801,003 |
|
Issuance cost |
|
(25,797 |
) |
|
|
(942,926 |
) |
Proceeds from shares issued under Employee Stock Purchase Plan |
|
230,400 |
|
|
|
- |
|
Proceeds from preferred stock issued |
|
11,500,000 |
|
|
|
1,299,000 |
|
|
|
|
|
Net cash provided by
financing activities |
|
11,161,223 |
|
|
|
8,745,567 |
|
|
|
|
|
Net increase in
cash |
|
1,320,750 |
|
|
|
227,372 |
|
Cash, beginning of
year |
|
1,121,092 |
|
|
|
893,720 |
|
Cash, end of
year |
$ |
2,441,842 |
|
|
$ |
1,121,092 |
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information: |
|
|
|
Interest paid |
$ |
7,159 |
|
|
$ |
9,292 |
|
Taxes paid |
$ |
29,085 |
|
|
$ |
1,264 |
|
|
|
|
|
Supplemental Non-Cash
Investing and Financing Activities: |
|
|
|
Notes issued for financing of
insurance premiums |
$ |
487,929 |
|
|
$ |
353,244 |
|
|
|
|
|
|
|
|
|
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/35922dd8-a8e3-4ee0-9c75-4394c2a2e280
Contacts
Corporate
Fei Kwong, Director, Corporate Communications
Duos Technologies Group, Inc. (Nasdaq: DUOT)
904-652-1625
fk@duostech.com
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