DUOT

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How DUOT rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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Expansion into Energy and Power Solutions The Company expanded its operations into energy and power solutions through Duos Energy Corporation, which focuses on energy consulting, power infrastructure planning, and behind-the-meter (“BTM”) energy solutions.
The Company entered into an Asset Management Agreement (“AMA”) with New APR beginning in January 2025.
In connection with this agreement, the Company also acquired a minority, non-voting equity interest in the ultimate parent of New APR.
Growth of Technology Solutions and Infrastructure Services In 2025, the Company expanded its Technology Solutions business to provide infrastructure-related services supporting data center and digital infrastructure deployments.
These services include procurement, supply chain management, logistics coordination, and deployment support for infrastructure projects.
The Company’s Technology Solutions platform is intended to complement its EDC strategy and provide additional revenue opportunities through both internal deployments and third-party customer engagements.
The Company believes that demand for integrated infrastructure solutions is increasing; however, the growth of this business is subject to supply chain conditions, vendor availability, and competitive factors.
Development of AI Technologies and Automation The Company continues to invest in the development of proprietary artificial intelligence technologies, including computer vision, machine learning, and predictive analytics.
These technologies are being integrated across the Company’s platforms to enhance performance, enable automation, and support real-time data processing.
The Company is also advancing AI-powered capabilities such as self-diagnostics, predictive maintenance, and system monitoring.
Transition to Recurring Revenue Models The Company continues to transition certain offerings toward subscription-based and recurring revenue models.
This includes expanding hosting services, software-based offerings, and long-term service agreements.
In connection with its inspection technologies, the Company has introduced more modular and flexible deployment options, allowing customers to select specific capabilities aligned with their operational requirements.
This approach is intended to improve scalability and increase recurring revenue over time.
Legacy Technology Systems The Company continues to support its legacy inspection systems and related technologies.
While these systems continue to generate revenue, they are no longer the primary focus of the Company’s growth strategy.
The Company expects that over time, its legacy systems will represent a decreasing percentage of total revenues as newer infrastructure and service-based offerings expand.
Prospects and Outlook The Company’s prospects are influenced by its ability to execute its strategic initiatives and by broader industry trends affecting digital infrastructure, artificial intelligence, and energy markets.
The Company’s primary objectives for 2026 and beyond include: Scaling Edge Data Center Deployments The Company intends to expand its network of Edge Data Centers to support increasing demand for distributed computing and AI workloads.
These deployments are expected to target enterprise customers, telecommunications providers, and public sector organizations, particularly in underserved markets.
The Company believes that localized computing infrastructure will play an important role in supporting next-generation applications; however, adoption rates, capital availability, and competitive factors may impact growth.
Expansion of Energy and Power Solutions The Company intends to build upon its initial energy and consulting activities, including the AMA with New APR, to expand its presence in the distributed energy and fast power markets.
The Company believes that increasing demand for power associated with data centers and AI infrastructure presents a significant opportunity; however, this market is subject to regulatory, operational, and competitive risks.
Growth of Technology Solutions Platform The Company expects to further develop its Technology Solutions capabilities, including infrastructure procurement, logistics, and deployment services.
These offerings are intended to support both the Company’s internal infrastructure initiatives and third-party customer projects, providing additional revenue diversification.
Continued Development of AI and Automation Technologies The Company plans to continue enhancing its AI capabilities to improve system performance, enable automation, and support advanced analytics across its platforms.
Forward-Looking Considerations The Company believes that its diversified strategy, including digital infrastructure, energy solutions, and technology services, positions it to pursue growth opportunities in multiple markets.
However, the Company’s ability to achieve its objectives is subject to numerous risks and uncertainties, including: · The ability to obtain sufficient capital to fund infrastructure development · Execution risks associated with deploying and operating EDCs · Dependence on key contracts · Customer adoption of new technologies and services · Supply chain and vendor risks · Competitive market conditions · Macroeconomic and regulatory factors With the diversification into Edge Computing and power generation, coupled with continued growth in its core machine vision and AI-based inspection technologies, the Company is well-positioned to drive increased revenue, improve profitability, and generate long-term shareholder value.
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” elsewhere in this Annual Report.
For the year ended December 31, 2025 compared to December 31, 2024 The following table sets forth a summary of our Consolidated Statements of Operations that is used in the following discussions of our results of operations: For the Years Ended December 31, 2025 2024 Revenues $ 27,023,651 $ 7,280,885 Cost of revenues 19,145,942 6,811,670 Gross margin 7,877,709 469,215 Operating expenses 17,640,587 11,452,741 Loss from operations (9,762,878 ) (10,983,526 ) Other income (expenses) (72,153 ) 219,069 Net loss $ (9,835,031 ) $ (10,764,457 ) Revenues For the Years Ended December 31, 2025 2024 % Change Revenues: Technology systems $ 373,270 $ 2,252,357 -83 % Technology solutions 349,166 — 100 % Services and consulting 3,888,372 4,106,966 -5 % Services and consulting – Related parties 22,356,843 921,562 2326 % Hosting 56,000 — 100 % Total revenues $ 27,023,651 $ 7,280,885 271 % The decreases in technology systems revenues from $2,252,357 to $373,270 for the year ended December 31, 2025, compared to the year ended December 31, 2024, 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 remain largely ready for deployment, customer delays at the deployment site continue to prevent 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 in 2026.
The Company has begun recognizing its first revenues from the Technology Solutions business unit, which provides manufacturer-agnostic infrastructure sourcing, integration, and value-added supply chain services supporting data center, AI, and enterprise deployments identified as “Technology Solutions”.
The significant increase in services revenue, related parties for the year ended December 31, 2025, was primarily driven by Duos Energy beginning to execute on the AMA with New APR that was established on December 31, 2024.
Under the AMA, Duos Energy oversees the deployment and operations of a fleet of mobile gas turbines and related balance-of-plant inventory, providing management, sales, and operational support services to New APR.
As a result, the Company generated $18,740,343 in revenue from the AMA during the year 2025.
In addition, the Company recognized $3,616,500 in revenue from amortized deferred revenue liability associated with its 5% non-voting equity interest in the ultimate parent of New APR.
Revenue from the AMA and the 5% interest is reported under “Services and consulting – related parties” on the statements of operations.

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Item 1A – Risk Factors” elsewhere in this Annual Report.
For the year ended December 31, 2024 compared to December 31, 2023 The following table sets forth a summary of our Consolidated Statements of Operations that is used in the following discussions of our results of operations: For the Years Ended December 31, 2024 2023 Revenues $ 7,280,885 $ 7,471,198 Cost of revenues 6,811,670 6,162,317 Gross margin 469,215 1,308,881 Operating expenses 11,452,741 12,755,447 Loss from operations (10,983,526 ) (11,446,566 ) Other income 219,069 204,848 Net loss $ (10,764,457 ) $ (11,241,718 ) Revenues For the Years Ended December 31, 2024 2023 % Change Revenues: Technology systems $ 2,252,357 $ 3,618,022 -38 % Services and consulting 5,028,528 3,853,176 31 % Total revenues $ 7,280,885 $ 7,471,198 -3 % For the full year 2024, there was a 3% decrease in overall revenues compared to 2023.
The decrease in overall revenues is primarily attributed to delays outside of the Company’s control with the deployment of our two high-speed Railcar Inspection Portals, which are recorded in the technology systems portion of our business.
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 revenue recognition.
The Company was able to contract an equitable adjustment related to our two high-speed Railcar Inspection Portals project in 2024.
This adjustment added $1.4 million to the contract’s total value, with a substantial portion recognized in 2024.
We believe that the customer is approaching the completion of the local site preparation and is preparing for field installation in 2025.
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.
For the full year 2024, there was a 31% increase in services and consulting revenues compared to 2023.
The increase in the services portion of our revenues stems from the addition of new AI and subscription customers that were not present in for the full year in 2023, as well as increases in service contract revenue due to higher service contract prices.
We also generated $921,562 in services and consulting revenue from power consulting work, which was not present in 2023.
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 2025.
The Company anticipates revenue growth from new and existing customers related to the subscription offering starting in 2025, giving access to RIP data and images to a much broader target market including Class 1 railroads, railcar owners and lessors, and short-line railroads.
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.
The Company also expects new revenue growth in 2025 related to its 5% non-voting ownership equity interest in Sawgrass Parent, including revenue attributable to the AMA.
While customer-driven delays in the installation of our high-speed transit-focused Railcar Inspection Portals have impacted revenue growth timing year-over-year, the Company's capital structure remains resilient, allowing us to pursue large projects despite unexpected delays.
It should be noted that the Company recently increased its working capital to account for an increase in pre-contract procurement activities to avoid a slowdown in revenues caused by delays in receiving certain components as had been the case in previous years.
Overall, in 2024, the Company made significant strides in advancing the procurement and manufacturing of its transit-focused RIPs.
The Company also successfully grew its service contracts and secured new agreements in AI, enhancing its AI portfolio.
Additionally, the Company launched the Duos Edge AI and Duos Energy business lines, which are expected to start contributing to the Company's success in 2025.
Recurring revenue from services and consulting continues to grow and is expected to contribute significantly to future revenue streams, bolstered by new long-term contracts with existing customers expected to commence in the coming months.
Cost of Revenues For the Years Ended December 31, 2024 2023 % Change Cost of revenues: Technology systems $ 2,818,078 $ 4,352,247 -35 % Services and consulting 3,993,592 1,810,070 121 % Total cost of revenues $ 6,811,670 $ 6,162,317 11 % Cost of revenues primarily includes inventory, shipping, certain fixed labor and overhead and allocated depreciation and amortization as applicable necessary to support the implementation of new systems and support and maintenance of existing systems.
Cost of revenues on technology systems decreased during the period compared to the equivalent period in 2023 in-line with the decline in project revenues.
The decline in costs generally follows the same year-over-year trend as project revenues due to timing differences in major project work.
This is primarily related to the procurement and manufacturing of transit-focused RIPs.
As we near the end of the manufacturing cycle and begin preparations for field installation in 2025, the cost of revenues for technology systems decreases accordingly.
In contrast, during the same period in 2023, the Company was still progressing through the advanced stages of procurement and manufacturing for these RIPs.
Completion is expected in late 2025 or early 2026, depending on customer-related constraints for track access.
These internal costs of revenue noted above are being recognized against project and support revenues with a similar reduction in costs previously recognized for research and development, engineering and internal support.
The project costs reflect subsequent allocations of fixed costs related to the staff and departmental costs associated with procurement, manufacturing and installation of RIP installations.
As such, in 2024, this fixed component contributed to a negative margin on the technology systems revenues.
In concert with this, there is a continued focus on construction costs and savings through efficiency, and there were some targeted staff reductions during 2024.
However, the Company has elected to retain its key employees in anticipation of expected sales growth in technology systems and services in 2025 and beyond.
The cost of revenues increased on services and consulting year-over-year.
The increase in costs is primarily due to $1,569,311 in amortization expense of the intangible asset related to a nonmonetary transaction, which was not present in 2023.
The Company also generated $921,562 in services and consulting revenue from power consulting work, which was provided at cost, further increasing the cost of revenues for services and consulting, which was also not present in 2023.
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 For the Years Ended December 31, 2024 2023 % Change Revenues $ 7,280,885 $ 7,471,198 -3 % Cost of revenues 6,811,670 6,162,317 11 % Gross margin $ 469,215 $ 1,308,881 -64 % Gross margin showed a decrease for the year ended December 31, 2024, as compared to the same period in 2023.
As noted above, the decrease in margin was a direct result of the timing of business activity related to the manufacturing of two high-speed, transit-focused Railcar Inspection Portals compared to the activity in 2023.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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