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REVENUES AND CONTRACT ACCOUNTING | 12 Months Ended
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Dec. 31, 2024
Revenues And Contract Accounting |
REVENUES AND CONTRACT ACCOUNTING | NOTE 11 – REVENUES 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 costs incurred to total estimated costs. At December 31, 2024 and 2023, contract assets on uncompleted contracts consisted of the following:
Schedule of contract assets on uncompleted contracts |  |  |  |  |  |
|  | 2024 |  |  | 2023 |
Cumulative revenues recognized |  | $ | 9,916,761 |  |  | $ | 8,820,256 |
Less: Billings or cash received |  |  | (9,280,987 | ) |  |  | (8,178,309 | )
Contract Assets |  | $ | 635,774 |  |  | $ | 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 December 31, 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 |  |  |  |  |  |
|  | 2024 |  |  | 2023 |
Billings and/or cash receipts on uncompleted contracts |  | $ | 1,264,658 |  |  | $ | 1,264,658 |
Less: Cumulative revenues recognized |  |  | (861,024 | ) |  |  | (199,976 | )
Contract liabilities, technology systems, current |  | $ | 403,634 |  |  | $ | 1,064,682 |
Contract liabilities, services and consulting, current |  |  | 11,401,384 |  |  |  | 601,561 |
Total contract liabilities, current |  | $ | 11,805,018 |  |  | $ | 1,666,243 |
Total contract liabilities, services and consulting, non-current |  | $ | 11,016,134 |  |  | $ | — |
Contract liabilities at December 31, 2023 were $1,666,243; of which $661,048 for technology systems and $601,560 in services and consulting have been recognized as of December 31, 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 4) and another $1,569,310 was recognized in 2024.. 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 4) 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 $2,192,484 for just this contract as of December 31, 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 $7,399,634 as of December 31, 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. In December 2024, the Company entered into a series of contracts with Fortress under which the Company will deploy and operate a fleet of mobile gas turbines and balance-of-plant inventory, providing management, sales and operations functions to Sawgrass in connection with the assets. In exchange for services performed under the Asset Management Agreement (“AMA”), the Company received an advance cash payments and common units in Sawgrass (see Note 9). Sawgrass paid the Company $5.0 million in cash upon execution of the contract, which will be applied ratably on a monthly basis against amounts incurred under the AMA for a period of 12 months in 2025. In the event that the AMA is terminated within the first 12 months, any balance remaining of the advanced funds would be credited in full to Duos. As of December 31, 2024, deferred revenue under the arrangement was $5.0 million, comprised of the $5.0 million advance payment. The Company did not recognize any revenue under the AMA during the year ended December 31, 2024. The Company also concluded that the arrangement with Sawgrass is within the scope of ASC 606, Revenue from contracts with customers, and the common units issued to the Company by Sawgrass Parent represented non-cash consideration. The initial carrying value as of December 31, 2024 of $7.2 million was measured equal to the fair value of the common units received for future services to be performed under the AMA. The Company recorded $7.2 million of deferred revenue for services to be performed under the AMA (see Note 9). During the year ended December 31, 2024, the Company did not recognize any revenue associated with the AMA. The Company initially recorded the equity method investment in Sawgrass of $7.2 million, equal to the fair value of the common units as of December 31, 2024. As of December 31, 2024, the balance in contract liabilities pertaining to the non-monetary transaction agreement is as follows:
Schedule of balance in contract liabilities |  |  |  |
Calendar Year |  |  | Amount |
| 2025 |  |  | $ | 2,192,484 |
| 2026 |  |  |  | 2,192,484 |
| 2027 |  |  |  | 2,192,484 |
| 2028 |  |  |  | 2,192,484 |
| 2029 |  |  |  | 822,182 |
| Total Contract Liabilities |  |  | $ | 9,592,118 |
The Company will fully recognize $5.0 million in revenue pertaining to the AMA during 2025. As of December 31, 2024, the balance in contract liabilities pertaining to the value of the equity method interest will be recognized as revenue as follows:
Schedule of balance in contract liabilities |  |  |  |
| Calendar Year |  |  |  | Amounts |
| 2025 |  |  | $ | 3,616,500 |
| 2026 |  |  |  | 3,616,500 |
| Contract Assets |  |  | $ | 7,233,000 |
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 (Operational support, asset management of power generation systems); 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, and commercial. 4. Our technology systems and equipment projects fall into two types: a. Transfer of goods and services over time. b. Goods delivered at point in time. 5. 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 Year Ended December 31, 2024
Schedule of disaggregation of revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Segments |  | Rail |  |  | Commercial |  |  | Government |  |  | Artificial Intelligence |  |  | Total |
Primary Geographical Markets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
North America |  | $ | 5,696,931 |  |  | $ | 921,562 |  |  | $ | — |  |  | $ | 662,392 |  |  | $ | 7,280,885 |
Major Goods and Service Lines |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Turnkey Projects |  | $ | 2,252,357 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,252,357 |
Maintenance and Support |  |  | 3,444,574 |  |  |  | 921,562 |  |  |  | — |  |  |  | — |  |  |  | 4,366,136 |
Algorithms |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 662,392 |  |  |  | 662,392 |
|  | $ | 5,696,931 |  |  | $ | 921,562 |  |  | $ | — |  |  | $ | 662,392 |  |  | $ | 7,280,885 |
Timing of Revenue Recognition |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goods transferred over time |  | $ | 2,252,357 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,252,357 |
Services transferred over time |  |  | 3,444,574 |  |  |  | 921,562 |  |  |  | — |  |  |  | 662,392 |  |  |  | 5,028,528 |
|  | $ | 5,696,931 |  |  | $ | 921,562 |  |  | $ | — |  |  | $ | 662,392 |  |  | $ | 7,280,885 |
Quantitative: For the Year Ended December 31, 2023
Segments |  | Rail |  |  | Commercial |  |  | Government |  |  | Artificial Intelligence |  |  | Total |
Primary Geographical Markets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
North America |  | $ | 6,261,748 |  |  | $ | 78,575 |  |  | $ | 11,353 |  |  | $ | 1,119,522 |  |  | $ | 7,471,198 |
Major Goods and Service Lines |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Turnkey Projects |  | $ | 3,616,334 |  |  | $ | 1,694 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,618,028 |
Maintenance and Support |  |  | 2,645,414 |  |  |  | 76,881 |  |  |  | 11,353 |  |  |  | — |  |  |  | 2,733,648 |
Data Center Auditing Services |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Software License |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Algorithms |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,119,522 |  |  |  | 1,119,522 |
|  | $ | 6,261,748 |  |  | $ | 78,575 |  |  | $ | 11,353 |  |  | $ | 1,119,522 |  |  | $ | 7,471,198 |
Timing of Revenue Recognition |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goods transferred over time |  | $ | 3,616,334 |  |  | $ | 1,694 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,218,028 |
Services transferred over time |  |  | 2,645,414 |  |  |  | 76,881 |  |  |  | 11,353 |  |  |  | 1,119,522 |  |  |  | 3,853,170 |
|  | $ | 6,261,748 |  |  | $ | 78,575 |  |  | $ | 11,353 |  |  | $ | 1,119,522 |  |  | $ | 7,471,198 |
Segment Information 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 2024, the Company principally operated in one reportable segment related to the development and commercialization of technology solutions in the transportation and industrial sectors. The Chief Operating Decision Maker (“CODM”) for the Company is Mr. Chuck Ferry, the Chief Executive Officer (the “CEO”). The Company’s CEO reviews operating results on an aggregate basis and manages the Company’s operations as a whole for the purpose of evaluating financial performance and allocating resources. Accordingly, the Company has determined that it has a single reportable and operating segment structure. The CEO evaluates financial performance regularly by comparing actual results with established budgets and forecasts. The CEO assesses performance for the Company and decides how to allocate resources based on the aggregate net loss that is reported on the accompanying consolidated statement of operations as net loss. The measure of segment assets is reported on the consolidated balance sheets as total assets.

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