Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2024 | May 10, 2024 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2024 | |
Document Fiscal Period Focus | Q1 | |
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 $0.001 | |
Trading Symbol | DUOT | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 7,531,986 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
CURRENT ASSETS: | ||
Cash | $ 2,977,592 | $ 2,441,842 |
Accounts receivable, net | 596,090 | 1,462,463 |
Contract assets | 912,046 | 641,947 |
Inventory | 1,502,337 | 1,526,165 |
Prepaid expenses and other current assets | 398,856 | 184,478 |
Total Current Assets | 6,386,921 | 6,256,895 |
Property and equipment, net | 645,342 | 726,507 |
Operating lease right of use asset | 4,289,807 | 4,373,155 |
Security deposit | 550,000 | 550,000 |
OTHER ASSETS: | ||
Note Receivable, net | 155,625 | 153,750 |
Patents and trademarks, net | 127,357 | 129,140 |
Software development costs, net | 587,388 | 652,838 |
Total Other Assets | 870,370 | 935,728 |
TOTAL ASSETS | 12,742,440 | 12,842,285 |
CURRENT LIABILITIES: | ||
Accounts payable | 179,916 | 595,634 |
Notes payable - financing agreements | 183,763 | 41,976 |
Accrued expenses | 240,483 | 164,113 |
Operating lease obligations-current portion | 783,944 | 779,087 |
Contract liabilities | 1,692,940 | 1,666,243 |
Total Current Liabilities | 3,081,046 | 3,247,053 |
Operating lease obligations, less current portion | 4,141,555 | 4,228,718 |
Total Liabilities | 7,222,601 | 7,475,771 |
Commitments and Contingencies (Note 4) | ||
STOCKHOLDERS' EQUITY: | ||
Common stock: $0.001 par value; 500,000,000 shares authorized, 7,315,318 and 7,306,663 shares issued, 7,313,994 and 7,305,339 shares outstanding at March 31, 2024 and December 31, 2023, respectively | 7,315 | 7,306 |
Additional paid-in-capital | 72,025,821 | 69,120,199 |
Accumulated deficit | (66,355,861) | (63,603,552) |
Sub-total | 5,677,291 | 5,523,966 |
Less: Treasury stock (1,324 shares of common stock at March 31, 2024 and December 31, 2023) | (157,452) | (157,452) |
Total Stockholders' Equity | 5,519,839 | 5,366,514 |
Total Liabilities and Stockholders' Equity | 12,742,440 | 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 | 2 | 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 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 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 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 | 7,315,318 | 7,306,663 |
Common stock, shares outstanding | 7,313,994 | 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 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 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 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 designated | 4,000 | 4,000 |
Preferred stock, shares issued | 1,919 | 1,299 |
Preferred stock, shares outstanding | 1,919 | 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 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 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 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
REVENUES: | ||
Total Revenues | $ 1,070,680 | $ 2,644,288 |
COST OF REVENUES: | ||
Total Cost of Revenues | 976,048 | 2,107,116 |
GROSS MARGIN | 94,632 | 537,172 |
OPERATING EXPENSES: | ||
Sales and marketing | 553,486 | 307,577 |
Research and development | 382,142 | 404,885 |
General and Administration | 1,920,050 | 1,971,508 |
Total Operating Expenses | 2,855,678 | 2,683,970 |
LOSS FROM OPERATIONS | (2,761,046) | (2,146,798) |
OTHER INCOME (EXPENSES): | ||
Interest expense | (445) | (1,180) |
Other income, net | 9,182 | 4,295 |
Total Other Income (Expenses) | 8,737 | 3,115 |
NET LOSS | $ (2,752,309) | $ (2,143,683) |
Basic Net Loss Per Share | $ (0.38) | $ (0.30) |
Diluted Net Loss Per Share | $ (0.38) | $ (0.30) |
Weighted Average Shares-Basic | 7,306,949 | 7,156,876 |
Weighted Average Shares-Diluted | 7,306,949 | 7,156,876 |
Technology Service [Member] | ||
REVENUES: | ||
Total Revenues | $ 269,855 | $ 1,827,764 |
COST OF REVENUES: | ||
Total Cost of Revenues | 583,437 | 1,767,209 |
Service, Other [Member] | ||
REVENUES: | ||
Total Revenues | 800,825 | 816,524 |
COST OF REVENUES: | ||
Total Cost of Revenues | $ 392,611 | $ 339,907 |
STATEMENTS OF CHANGES IN STOCKH
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($) | Preferred Stock D [Member] | Preferred Stock E [Member] | Preferred Stock F [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, 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 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Cash from operating activities: | ||
Net loss | $ (2,752,309) | $ (2,143,683) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 158,208 | 116,588 |
Stock based compensation | 159,320 | 75,128 |
Stock issued for services | 37,500 | 32,500 |
Amortization of operating lease right of use asset | 83,348 | 77,101 |
Changes in assets and liabilities: | ||
Accounts receivable | 866,373 | 2,700,917 |
Note receivable | (1,875) | 0 |
Contract assets | (270,099) | (1,000,590) |
Inventory | 23,828 | (101,167) |
Prepaid expenses and other current assets | 57,944 | 228,941 |
Accounts payable | (415,718) | (1,008,207) |
Accrued expenses | 76,370 | (85,371) |
Operating lease obligation | (82,306) | (8,107) |
Contract liabilities | 26,697 | 1,108,864 |
Net cash used in operating activities | (2,032,719) | (7,086) |
Cash flows from investing activities: | ||
Purchase of patents/trademarks | (980) | (7,339) |
Purchase of software development | 0 | (212,067) |
Purchase of fixed assets | (8,830) | (41,738) |
Net cash used in investing activities | (9,810) | (261,144) |
Cash flows from financing activities: | ||
Repayments on financing agreements | (130,535) | (201,485) |
Repayment of finance lease | 0 | (11,285) |
Stock issuance cost | (36,188) | (299,145) |
Proceeds from preferred stock issued | 2,745,002 | 4,000,000 |
Net cash provided by financing activities | 2,578,279 | 3,488,085 |
Net increase in cash | 535,750 | 3,219,855 |
Cash, beginning of period | 2,441,842 | 1,121,092 |
Cash, end of period | 2,977,592 | 4,340,947 |
Supplemental Disclosure of Cash Flow Information: | ||
Interest paid | 0 | 1,180 |
Taxes paid | 0 | 0 |
Supplemental Non-Cash Investing and Financing Activities: | ||
Notes issued for financing of insurance premiums | $ 272,322 | $ 320,004 |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Pay vs Performance Disclosure [Table] | ||
Net Income (Loss) Attributable to Parent | $ (2,752,309) | $ (2,143,683) |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Mar. 31, 2024 | |
Insider Trading Arrangements [Line Items] | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
NATURE OF OPERATIONS AND SUMMAR
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 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 subsidiary, Duos Technologies, Inc. (“Duos”) (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 50 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. 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 expects to 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 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 from 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 three months ended March 31, 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 subsidiary, Duos Technologies, 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 allowance on accounts receivable and notes receivable, valuation of common stock warrants received in exchange for an asset sale, valuation of deferred tax assets, valuation of intangible and 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 March 31, 2024, the balance in one financial institution exceeded federally insured limits by approximately $ 2,485,140 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 three months ended March 31, 2024, three customers accounted for 31 30 26 70 20 At March 31, 2024, three customers accounted for 49 38 13 83 11 Geographic Concentration For the three months ended March 31, 2024, approximately 61 25 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. 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 March 31, 2024, there were (i) an aggregate of 44,644 1,387,775 639,667 4,541,667 At March 31, 2023, there were (i) an aggregate of 80,091 924,658 433,000 1,333,334 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. |
LIQUIDITY
LIQUIDITY | 3 Months Ended |
Mar. 31, 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 $ 2,752,309 2,032,719 3,305,875 66,355,861 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, late in the first quarter of 2024, the Company raised gross proceeds of $2,745,000 from the issuance of a combination of Series D and E Preferred Stock (See Note 5). 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 will again have access to its S-3 “shelf registration” statement allowing the Company to sell additional common shares. At the time of filing this document, the Company estimates that it has available capacity on its shelf registration which it can utilize to bolster working capital and growth of the business in the event it did not have an uptake in the preferred classes of shares previously noted. Although additional investment is not assured, the Company is comfortable that it would be able to raise sufficient capital to support expanded operations based on an anticipated increase in business activity. 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 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 our shelf registration 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. |
DEBT
DEBT | 3 Months Ended |
Mar. 31, 2024 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE 3 – DEBT Notes Payable - Financing Agreements The Company’s notes payable relating to financing agreements classified as current liabilities consist of the following as of March 31, 2024 and December 31, 2023: Schedule of notes payable March 31, 2024 December 31, 2023 Notes Payable Principal Interest Principal Interest Third Party - Insurance Note 1 $ — — % $ 39,968 8.00 % Third Party - Insurance Note 2 22,438 — 2,008 — Third Party - Insurance Note 3 161,325 — — — Total $ 183,763 — $ 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 8.00 13,501 0 39,968 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 $ 24,140 2,012 22,438 2,008 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 84,473 20,169 161,325 0 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2024 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 4 – 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 4,980,104 at lease commencement. Rent for the first eleven months of the term was calculated based on 30,000 600,000 50,000 4,289,807 As of March 31, 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 8.3 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 Three Months Ended March 31, 2024 2023 Lease cost: Operating lease cost $ 195,410 $ 195,409 Short-term lease cost $ 4,296 $ 7,104 Other information: Operating cash outflow used for operating leases $ 194,367 $ 126,416 Weighted average discount rate 9.0 % 9.0 % Weighted average remaining lease term 8.3 9.2 As of March 31, 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 $ 584,720 2025 798,556 2026 818,518 2027 838,984 2028 859,856 Thereafter 3,183,571 Total undiscounted future minimum lease payments 7,084,205 Less: Impact of discounting (2,158,706 ) Total present value of operating lease obligations 4,925,599 Current portion (783,944 ) Operating lease obligations, less current portion $ 4,141,555 |
STOCKHOLDERS_ EQUITY
STOCKHOLDERS’ EQUITY | 3 Months Ended |
Mar. 31, 2024 | |
Equity [Abstract] | |
STOCKHOLDERS’ EQUITY | NOTE 5 – 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 10,000,000 1,000 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 7.00 0 0 Series C Convertible Preferred Stock The Company’s Board of Directors designated 5,000 1,000 Each share of Series C Convertible Preferred Stock has 172 votes 5.50 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 $ 4,500,000 454,546 0 0 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 1,000 Each share of Series D Convertible Preferred Stock has 333 votes 3.00 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 999 999,000 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 300 300,000 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 Purchasers”). Pursuant to the Purchase Agreements, the 2024 Purchasers purchased an aggregate of 620 1,000 620,000 3.00 620 206,667 As of March 31, 2024 and December 31, 2023, respectively, there were 1,919 1,299 In connection with such Purchase Agreements, 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 D Convertible Preferred Stock are convertible. The Registration Rights Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties. The Registration Rights Agreement contains 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 Preferred Stock”). Each share of the Series E Convertible Preferred Stock has a stated value of $ 1,000 Each share of Series E Convertible Preferred Stock has 333 votes 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 1,000 4,000,000 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 1,000 2,500,000 5,000 1,000 3.00 5,000 6.20 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). 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 5,000 7,500 5,000 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 1,000 2,125,002 3.00 2,125 708,333 As of March 31, 2024 and December 31, 2023, respectively, there were 13,625 11,500 In connection with such Purchase Agreements, 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 E Convertible Preferred Stock are convertible. The Registration Rights Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties. The Registration Rights Agreement contains 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 5,000,000 The Company's Board of Directors designated 5,000 1,000 6.20 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 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 3.00 5,000 5,000 0 As of March 31, 2024 and December 31, 2023, respectively, there were zero 0 0 Common stock issued Three Months Ended March 31, 2024 During the three months ended March 31, 2024, the Company issued 8,655 37,500 4.33 Three Months Ended March 31, 2023 During the three months ended March 31, 2023, the Company issued 12,463 32,500 2.61 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 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. 85 % of total cash and is not deemed material, therefore it is not presented separately on the Balance Sheet as “restricted cash”. The maximum aggregate number of shares of the Common Stock that may be issued under the ESPP is 1,000,000 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 fair value of the estimated shares to be purchased based on the estimated payroll deduction withholdings. The grant date fair value was computed as the sum of (a) 15 85 15 As of the three months ended March 31, 2024, the Company has an accrued liability of $ 44,686 18,116 The Company computed the fair value of the look-back feature call and put options for January 1, 2024 to March 31, 2024 using a Black Scholes option pricing model using the following assumptions: Schedule of black scholes option pricing model At March 31, 2024 Grant date share price $ 2.70 4.34 Grant date exercise price $ 2.30 3.69 Expected term 0.25 Expected volatility 66.8 % Risk-free rate 5.41 % 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 following table discloses relevant information for the ESPP at March 31, 2024 and for three months then ended. Schedule of stock-based compensation At Cash payment received from employee withholdings $ 44,686 Cash from employee withholdings used to purchase shares under ESPP — Cash and ESPP employee withholding liability $ 44,686 For the Three Months ended March 31, 2024 Cash from employee withholdings used to purchase ESPP shares $ — Stock based compensation expense 18,116 Total increase to equity for three months ended March 31, 2024 $ 18,116 Stock-Based Compensation Stock-based compensation expense recognized under ASC 718-10 for the three months ended March 31, 2024 and 2023, was $ 141,204 75,128 438,998 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 As of March 31, 2024, and December 31, 2023, options to purchase a total of 1,387,775 1,387,775 766,323 269,658 269,658 788,117 788,117 330,000 330,000 Schedule of stock option issuance of shares 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 — $ — — $ — Outstanding at March 31, 2024 1,387,775 $ 5.23 2.8 $ — Exercisable at March 31, 2024 766,323 $ 5.55 1.8 $ — Warrants Schedule of warrants outstanding Weighted Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Warrants Price Term (Years) Value Outstanding at December 31, 2022 80,091 $ 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 March 31, 2024 44,644 $ 7.70 0.5 — Exercisable at March 31, 2024 44,644 $ 7.70 0.5 — |
REVENUE AND CONTRACT ACCOUNTING
REVENUE AND CONTRACT ACCOUNTING | 3 Months Ended |
Mar. 31, 2024 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE AND CONTRACT ACCOUNTING | NOTE 6 - 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 March 31, 2024 and December 31, 2023, contract assets on uncompleted contracts consisted of the following: Schedule of contract assets on uncompleted contracts March 31, 2024 December 31, 2023 Cumulative revenues recognized $ 9,090,355 $ 8,820,256 Less: Billings or cash received (8,178,309 ) (8,178,309 ) Contract assets $ 912,046 $ 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 March 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 March 31, 2024 December 31, 2023 Billings and/or cash receipts on uncompleted contracts $ 1,264,658 $ 1,264,658 Less: Cumulative revenues recognized (199,976 ) (199,976 ) Contract liabilities, technology systems 1,064,682 1,064,682 Contract liabilities, services and consulting 628,258 601,561 Total contract liabilities $ 1,692,940 $ 1,666,243 Contract liabilities at December 31, 2023 were $ 1,666,243 0 292,947 The Company expects to recognize all contract liabilities within 12 months from the respective consolidated balance sheet date. 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 March 31, 2024 Schedule of disaggregation of revenue Segments Rail Commercial Government Artificial Intelligence Total Primary Geographical Markets North America $ 1,067,449 $ 3,231 $ — $ — $ 1,070,680 Major Goods and Service Lines Turnkey Projects $ 270,099 $ — $ — $ — $ 270,099 Maintenance and Support 601,379 3,231 — — 604,610 Algorithms 195,971 — — — 195,971 $ 1,067,449 $ 3,231 $ — $ $ 1,070,680 Timing of Revenue Recognition Goods transferred over time $ 270,099 $ — $ — $ — $ 270,099 Services transferred over time 797,350 3,231 — — 800,581 $ 1,067,449 $ 3,231 $ — $ — $ 1,070,680 For the Three Months Ended March 31, 2023 Segments Rail Commercial Government Artificial Intelligence Total Primary Geographical Markets North America $ 2,376,449 $ 28,831 $ 11,353 $ 227,655 $ 2,644,288 Major Goods and Service Lines Turnkey Projects $ 1,827,764 $ — $ — $ — $ 1,827,764 Maintenance and Support 548,685 28,831 11,353 — 588,869 Algorithms — — — 227,655 227,655 $ 2,376,449 $ 28,831 $ 11,353 $ 227,655 $ 2,644,288 Timing of Revenue Recognition Goods transferred over time $ 1,827,764 $ — $ — $ — $ 1,827,764 Services transferred over time 548,685 28,831 11,353 227,655 816,524 $ 2,376,449 $ 28,831 $ 11,353 $ 227,655 $ 2,644,288 |
DEFINED CONTRIBUTION PLAN
DEFINED CONTRIBUTION PLAN | 3 Months Ended |
Mar. 31, 2024 | |
Retirement Benefits [Abstract] | |
DEFINED CONTRIBUTION PLAN | NOTE 7 – 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 March 31, 2024, the Company matched 100% of the first 4% of eligible employee compensation that was contributed to the 401(k) Plan. For the three months ended March 31, 2024, the Company recognized expense for matching cash contributions to the 401(k) Plan totaling $ 55,099 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2024 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 8 – RELATED PARTY TRANSACTIONS There were no related party transactions for the periods reflected in this report. |
SALE OF ASSETS
SALE OF ASSETS | 3 Months Ended |
Mar. 31, 2024 | |
Sale Of Assets | |
SALE OF ASSETS | NOTE 9 – 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 10 0.003 55,000,000 The common stock purchase warrants are for a total of 55,000,000 0.01 The Company recognized a gain on sale of assets of $ 150,000 The original issue discount is being accrued into interest income over the term of the note. The note receivable was recorded as follows on March 31, 2024: Schedule of note receivable March 31, 2024 Convertible note receivable $ 165,000 Unamortized discount (9,375 ) Convertible note receivable, net $ 155,625 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2024 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 10 – SUBSEQUENT EVENTS On April 3, 2024, the Company received aggregate proceeds of $ 250,000 250 3.00 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 shall file with the SEC a registration statement covering the resale by the Purchasers of the shares of common stock into which the shares of Series D Preferred Stock are convertible. Subject to certain conditions, the Company must cause the registration statement to be declared effective by 90 days after closing (or in the event of a full review by the SEC, by 120 days). The Registration Rights Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the parties. Under the Purchase Agreement, the Company is required to hold a meeting of shareholders at the earliest practical date, but in no event later than 120 days after closing (or 150 days in the event of a review of the proxy statement by the Securities and Exchange Commission (the “SEC”)). On April 23, 2024, the Company changed the name of its dormant subsidiary “Duos Technologies International, Inc.” to “Duos Edge AI, Inc.” On April 23, 2024, a holder of our Series D Preferred Stock converted 225 75,000 On April 30, 2024, two holders of our Series D Preferred Stock converted an aggregate of 350 116,668 On May 7, 2024, a holder of our Series D Preferred Stock converted 75 25,000 |
NATURE OF OPERATIONS AND SUMM_2
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2024 | |
Accounting Policies [Abstract] | |
Nature of Operations | Nature of Operations Duos Technologies Group, Inc. (the “Company”), through its operating subsidiary, Duos Technologies, Inc. (“Duos”) (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 50 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. 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 expects to 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 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 from 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 three months ended March 31, 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 subsidiary, Duos Technologies, 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 allowance on accounts receivable and notes receivable, valuation of common stock warrants received in exchange for an asset sale, valuation of deferred tax assets, valuation of intangible and 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 March 31, 2024, the balance in one financial institution exceeded federally insured limits by approximately $ 2,485,140 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 three months ended March 31, 2024, three customers accounted for 31 30 26 70 20 At March 31, 2024, three customers accounted for 49 38 13 83 11 Geographic Concentration For the three months ended March 31, 2024, approximately 61 25 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. |
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 March 31, 2024, there were (i) an aggregate of 44,644 1,387,775 639,667 4,541,667 At March 31, 2023, there were (i) an aggregate of 80,091 924,658 433,000 1,333,334 |
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. |
DEBT (Tables)
DEBT (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable | Schedule of notes payable March 31, 2024 December 31, 2023 Notes Payable Principal Interest Principal Interest Third Party - Insurance Note 1 $ — — % $ 39,968 8.00 % Third Party - Insurance Note 2 22,438 — 2,008 — Third Party - Insurance Note 3 161,325 — — — Total $ 183,763 — $ 41,976 — |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of supplemental information related to leases | Schedule of supplemental information related to leases Three Months Ended March 31, 2024 2023 Lease cost: Operating lease cost $ 195,410 $ 195,409 Short-term lease cost $ 4,296 $ 7,104 Other information: Operating cash outflow used for operating leases $ 194,367 $ 126,416 Weighted average discount rate 9.0 % 9.0 % Weighted average remaining lease term 8.3 9.2 |
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 $ 584,720 2025 798,556 2026 818,518 2027 838,984 2028 859,856 Thereafter 3,183,571 Total undiscounted future minimum lease payments 7,084,205 Less: Impact of discounting (2,158,706 ) Total present value of operating lease obligations 4,925,599 Current portion (783,944 ) Operating lease obligations, less current portion $ 4,141,555 |
STOCKHOLDERS_ EQUITY (Tables)
STOCKHOLDERS’ EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Equity [Abstract] | |
Schedule of black scholes option pricing model | Schedule of black scholes option pricing model At March 31, 2024 Grant date share price $ 2.70 4.34 Grant date exercise price $ 2.30 3.69 Expected term 0.25 Expected volatility 66.8 % Risk-free rate 5.41 % Expected dividend rate 0 % |
Schedule of stock-based compensation | Schedule of stock-based compensation At Cash payment received from employee withholdings $ 44,686 Cash from employee withholdings used to purchase shares under ESPP — Cash and ESPP employee withholding liability $ 44,686 For the Three Months ended March 31, 2024 Cash from employee withholdings used to purchase ESPP shares $ — Stock based compensation expense 18,116 Total increase to equity for three months ended March 31, 2024 $ 18,116 |
Schedule of stock option issuance of shares | Schedule of stock option issuance of shares 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 — $ — — $ — Outstanding at March 31, 2024 1,387,775 $ 5.23 2.8 $ — Exercisable at March 31, 2024 766,323 $ 5.55 1.8 $ — |
Schedule of warrants outstanding | Schedule of warrants outstanding Weighted Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Warrants Price Term (Years) Value Outstanding at December 31, 2022 80,091 $ 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 March 31, 2024 44,644 $ 7.70 0.5 — Exercisable at March 31, 2024 44,644 $ 7.70 0.5 — |
REVENUE AND CONTRACT ACCOUNTI_2
REVENUE AND CONTRACT ACCOUNTING (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of contract assets on uncompleted contracts | Schedule of contract assets on uncompleted contracts March 31, 2024 December 31, 2023 Cumulative revenues recognized $ 9,090,355 $ 8,820,256 Less: Billings or cash received (8,178,309 ) (8,178,309 ) Contract assets $ 912,046 $ 641,947 |
Schedule of contract liabilities on uncompleted contracts | Schedule of contract liabilities on uncompleted contracts March 31, 2024 December 31, 2023 Billings and/or cash receipts on uncompleted contracts $ 1,264,658 $ 1,264,658 Less: Cumulative revenues recognized (199,976 ) (199,976 ) Contract liabilities, technology systems 1,064,682 1,064,682 Contract liabilities, services and consulting 628,258 601,561 Total contract liabilities $ 1,692,940 $ 1,666,243 |
Schedule of disaggregation of revenue | Schedule of disaggregation of revenue Segments Rail Commercial Government Artificial Intelligence Total Primary Geographical Markets North America $ 1,067,449 $ 3,231 $ — $ — $ 1,070,680 Major Goods and Service Lines Turnkey Projects $ 270,099 $ — $ — $ — $ 270,099 Maintenance and Support 601,379 3,231 — — 604,610 Algorithms 195,971 — — — 195,971 $ 1,067,449 $ 3,231 $ — $ $ 1,070,680 Timing of Revenue Recognition Goods transferred over time $ 270,099 $ — $ — $ — $ 270,099 Services transferred over time 797,350 3,231 — — 800,581 $ 1,067,449 $ 3,231 $ — $ — $ 1,070,680 For the Three Months Ended March 31, 2023 Segments Rail Commercial Government Artificial Intelligence Total Primary Geographical Markets North America $ 2,376,449 $ 28,831 $ 11,353 $ 227,655 $ 2,644,288 Major Goods and Service Lines Turnkey Projects $ 1,827,764 $ — $ — $ — $ 1,827,764 Maintenance and Support 548,685 28,831 11,353 — 588,869 Algorithms — — — 227,655 227,655 $ 2,376,449 $ 28,831 $ 11,353 $ 227,655 $ 2,644,288 Timing of Revenue Recognition Goods transferred over time $ 1,827,764 $ — $ — $ — $ 1,827,764 Services transferred over time 548,685 28,831 11,353 227,655 816,524 $ 2,376,449 $ 28,831 $ 11,353 $ 227,655 $ 2,644,288 |
SALE OF ASSETS (Tables)
SALE OF ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Sale Of Assets | |
Schedule of note receivable | Schedule of note receivable March 31, 2024 Convertible note receivable $ 165,000 Unamortized discount (9,375 ) Convertible note receivable, net $ 155,625 |
NATURE OF OPERATIONS AND SUMM_3
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | |
Product Information [Line Items] | |||
Federally insured limits | $ 2,485,140 | ||
Share-Based Payment Arrangement, Option [Member] | |||
Product Information [Line Items] | |||
Number of incentive stock options | 1,387,775 | 924,658 | |
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 | 639,667 | 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 | 31% | 70% | |
Customer 1 [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member] | |||
Product Information [Line Items] | |||
Concentration risk, percentage | 49% | 83% | |
Customer 2 [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | |||
Product Information [Line Items] | |||
Concentration risk, percentage | 30% | 20% | |
Customer 2 [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member] | |||
Product Information [Line Items] | |||
Concentration risk, percentage | 38% | 11% | |
Customer 3 [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | |||
Product Information [Line Items] | |||
Concentration risk, percentage | 26% | ||
Customer 3 [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member] | |||
Product Information [Line Items] | |||
Concentration risk, percentage | 13% | ||
Three Customer [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | UNITED STATES | |||
Product Information [Line Items] | |||
Concentration risk, percentage | 61% | 25% |
LIQUIDITY (Details Narrative)
LIQUIDITY (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Net loss | $ 2,752,309 | ||
Cash used in operating activities | 2,032,719 | $ 7,086 | |
Working capital surplus | 3,305,875 | ||
Accumulated deficit | $ 66,355,861 | $ 63,603,552 |
DEBT (Details - Notes payable f
DEBT (Details - Notes payable financing agreements) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Short-Term Debt [Line Items] | ||
Notes payable, principal | $ 183,763 | $ 41,976 |
Third Party - Insurance Note 1 [Member] | ||
Short-Term Debt [Line Items] | ||
Notes payable, principal | 0 | $ 39,968 |
Notes payable, interest | 8% | |
Third Party - Insurance Note 2 [Member] | ||
Short-Term Debt [Line Items] | ||
Notes payable, principal | 22,438 | $ 2,008 |
Third Party - Insurance Note 3 [Member] | ||
Short-Term Debt [Line Items] | ||
Notes payable, principal | $ 161,325 | $ 0 |
DEBT (Details Narrative)
DEBT (Details Narrative) - USD ($) | 3 Months Ended | |||
Feb. 03, 2024 | Apr. 15, 2023 | Mar. 31, 2024 | Dec. 31, 2023 | |
Third Party - Insurance Note 1 [Member] | ||||
Short-Term Debt [Line Items] | ||||
Notes payable outstanding balance | $ 142,734 | $ 0 | $ 39,968 | |
Derivative, Fixed Interest Rate | 8% | |||
Monthly instalments of principal and interest | $ 13,501 | |||
Third Party - Insurance Note 2 [Member] | ||||
Short-Term Debt [Line Items] | ||||
Notes payable outstanding balance | $ 24,140 | 22,438 | 2,008 | |
Monthly instalments of principal and interest | 2,012 | |||
Third Party - Insurance Note 3 [Member] | ||||
Short-Term Debt [Line Items] | ||||
Purchase of insurance policy | 245,798 | |||
Down payment paid | $ 84,473 | |||
Monthly installments | 20,169 | |||
Third Party - Insurance Note 4 [Member] | ||||
Short-Term Debt [Line Items] | ||||
Notes payable outstanding balance | $ 161,325 | $ 0 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details - Supplemental information related to leases) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Operating lease cost | $ 195,410 | $ 195,409 |
Short term lease Cost | 4,296 | 7,104 |
Operating cash outflow used for operating leases | $ 194,367 | $ 126,416 |
Weighted average discount rate | 9% | 9% |
Weighted average remaining lease term | 8 years 3 months 18 days | 9 years 2 months 12 days |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details - Future minimum lease payments) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Commitments and Contingencies Disclosure [Abstract] | ||
2024 | $ 584,720 | |
2025 | 798,556 | |
2026 | 818,518 | |
2027 | 838,984 | |
2028 | 859,856 | |
Thereafter | 3,183,571 | |
Total undiscounted future minimum lease payments | 7,084,205 | |
Less: Impact of discounting | (2,158,706) | |
Total present value of operating lease obligations | 4,925,599 | |
Current portion | (783,944) | $ (779,087) |
Operating lease obligations, less current portion | $ 4,141,555 | $ 4,228,718 |
COMMITMENTS AND CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES (Details Narrative) | Jul. 26, 2021 USD ($) ft² | Mar. 31, 2024 USD ($) | Dec. 31, 2023 USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |||
Area of lease | ft² | 40,000 | ||
Accumulated amortization | $ 4,980,104 | $ 4,289,807 | $ 4,373,155 |
Rentable space | ft² | 30,000 | ||
Security deposit payment | $ 600,000 | ||
Security deposit value | $ 50,000 | $ 550,000 | $ 550,000 |
STOCKHOLDERS' EQUITY (Details -
STOCKHOLDERS' EQUITY (Details - Assumptions ) - Share-Based Payment Arrangement, Option [Member] | 3 Months Ended |
Mar. 31, 2024 $ / shares | |
Expected term | 3 months |
Expected volatility | 66.80% |
Risk-free rate | 5.41% |
Expected dividend rate | 0% |
Minimum [Member] | |
Grant date share price | $ 2.70 |
Grant date exercise price | 2.30 |
Maximum [Member] | |
Grant date share price | 4.34 |
Grant date exercise price | $ 3.69 |
STOCKHOLDERS' EQUITY (Details_2
STOCKHOLDERS' EQUITY (Details - Employee stock purchase plan) | 3 Months Ended |
Mar. 31, 2024 USD ($) | |
Equity [Abstract] | |
Cash payment received from employee withholdings | $ 44,686 |
Cash from employee withholdings used to purchase shares under ESPP | 0 |
Cash and ESPP employee withholding liability | 44,686 |
Cash from employee withholdings used to purchase ESPP shares | 0 |
Stock based compensation expense | 18,116 |
Total increase to equity for three months ended March 31, 2024 | $ 18,116 |
STOCKHOLDERS' EQUITY (Details_3
STOCKHOLDERS' EQUITY (Details - Non plan options) - Share-Based Payment Arrangement, Option [Member] - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 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) | 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 | 0 | (1,608) | |
Weighted average exercise price, Exercised/forfeited/expired | $ 0 | $ 14 | |
Outstanding ending balance | 1,387,775 | 1,387,775 | 926,266 |
Weighted average exercise price, Outstanding ending balance | $ 5.23 | $ 5.23 | $ 5.74 |
Weighted average remaining contractual term (Years) | 2 years 9 months 18 days | 3 years | |
Aggregate intrinsic value, Outstanding ending balance | $ 0 | $ 0 | $ 0 |
Number of options, Exercisable | 766,323 | 581,324 | |
Weighted average exercise price, Exercisable | $ 5.55 | $ 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 |
STOCKHOLDERS' EQUITY (Details_4
STOCKHOLDERS' EQUITY (Details - Warrants) - Warrant [Member] - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2024 | Dec. 31, 2023 | Dec. 31, 2022 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Outstanding beginning balance | 44,644 | 80,091 | |
Weighted average exercise price, Outstanding beginning balance | $ 7.70 | $ 8.63 | |
Weighted average remaining contractual term (Years) | 6 months | 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 | 80,091 |
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 | 6 months | 8 months 12 days | |
Aggregate intrinsic value, Exercisable | $ 0 | $ 0 |
STOCKHOLDERS_ EQUITY (Details N
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | ||||||||||||
Nov. 09, 2023 | Aug. 02, 2023 | Mar. 27, 2023 | Oct. 29, 2022 | Sep. 30, 2022 | May 12, 2021 | Feb. 26, 2021 | Jan. 31, 2022 | Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Nov. 10, 2023 | Sep. 28, 2022 | |
Class of Stock [Line Items] | ||||||||||||||
Preferred stock, shares designated | 9,441,000 | 9,441,000 | ||||||||||||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | ||||||||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | ||||||||||||
Conversion price | $ 0.003 | |||||||||||||
Proceeds from convertible preferred stock | $ 5,000,000 | |||||||||||||
Series F preferred convertible preferred stock, shares | 5,000 | |||||||||||||
Stock issued for services, value | $ 37,500 | $ 32,500 | ||||||||||||
Total compensation cost for stock options | $ 438,998 | |||||||||||||
Share-Based Payment Arrangement, Option [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Number of incentive stock options | 1,387,775 | 926,266 | 1,387,775 | |||||||||||
Number of incentive stock options exercisable | 766,323 | 581,324 | ||||||||||||
Employee Stock Purchase Plan [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Fair market value percentage | 85% | |||||||||||||
Accrued liability | $ 44,686 | |||||||||||||
Stock-based compensation expense | $ 18,116 | |||||||||||||
Employee Stock Purchase Plan [Member] | Call Option [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Purchase discount, percentage | 85% | |||||||||||||
Employee Stock Purchase Plan [Member] | Put Option [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Purchase discount, percentage | 15% | |||||||||||||
Employee Stock Purchase Plan [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
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. | |||||||||||||
Maximum aggregate number of shares of common stock | 1,000,000 | |||||||||||||
Plan 2021 [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Number of shares issued, shares | 1,000,000 | |||||||||||||
Number of incentive stock options | 788,117 | 788,117 | ||||||||||||
Plan 2016 [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Number of incentive stock options | 269,658 | 269,658 | ||||||||||||
Non Plan [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Number of incentive stock options | 330,000 | 330,000 | ||||||||||||
Common Stock [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Stock issued for services , shares | 8,655 | 12,463 | ||||||||||||
Stock issued for services, value | $ 9 | $ 12 | ||||||||||||
Common Stock [Member] | Employee Stock Purchase Plan [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Purchase discount, percentage | 15% | |||||||||||||
Three Directors [Member] | Common Stock [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Stock issued for services , shares | 8,655 | 12,463 | ||||||||||||
Stock issued for services, value | $ 37,500 | $ 32,500 | ||||||||||||
Weighted average price per share | $ 4.33 | $ 2.61 | ||||||||||||
Employees And Directors [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Stock-based compensation expense | $ 141,204 | $ 75,128 | ||||||||||||
Convertible Series B Preferred Stock [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Preferred stock, shares designated | 15,000 | 15,000 | ||||||||||||
Preferred stock, par value | $ 1,000 | $ 1,000 | ||||||||||||
Conversion of stock shares converted | $ 1,000 | |||||||||||||
Conversion price | $ 7 | |||||||||||||
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] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Preferred stock, shares designated | 5,000 | 5,000 | ||||||||||||
Preferred stock, par value | $ 1,000 | $ 1,000 | ||||||||||||
Preferred stock, shares issued | 0 | 0 | ||||||||||||
Preferred stock, shares outstanding | 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 | ||||||||||||
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 | |||||||||||
Preferred stock, shares issued | 1,919 | 1,299 | ||||||||||||
Preferred stock, shares outstanding | 1,919 | 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 | ||||||||||||
Conversion price | $ 3 | |||||||||||||
Number of shares issued, shares | 620 | |||||||||||||
Shares price | $ 1,000 | |||||||||||||
Shares purchased, value | $ 620,000 | |||||||||||||
Conversion of stock shares converted | 620 | |||||||||||||
Conversion of stock shares issued | 206,667 | |||||||||||||
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 | ||||||||||||
Convertible Series E Preferred Stock [Member] | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Preferred stock, shares designated | 30,000 | 30,000 | ||||||||||||
Preferred stock, par value | $ 1,000 | $ 1,000 | $ 1,000 | $ 1,000 | ||||||||||
Preferred stock, shares issued | 4,000 | 13,625 | 11,500 | |||||||||||
Preferred stock, shares outstanding | 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 | ||||||||||||
Proceeds from convertible preferred stock | $ 2,500,000 | |||||||||||||
Conversion price | $ 3 | $ 3 | ||||||||||||
Number of shares issued, shares | 2,125 | |||||||||||||
Shares price | $ 1,000 | $ 1,000 | ||||||||||||
Shares purchased, value | $ 2,125,002 | |||||||||||||
Conversion of stock shares converted | 2,125 | |||||||||||||
Conversion of stock shares issued | 708,333 | |||||||||||||
Series E preferred convertible preferred stock, Shares | 2,500 | |||||||||||||
Additional shares | 5,000 | 7,500 | ||||||||||||
Price per common share | $ 3 | |||||||||||||
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 | ||||||||||||
Preferred stock, par value | $ 1,000 | $ 1,000 | $ 6.20 | |||||||||||
Preferred stock, shares issued | 0 | 0 | ||||||||||||
Preferred stock, shares outstanding | 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 | ||||||||||||
Conversion price | $ 6.20 | |||||||||||||
Additional shares | 2,500 | |||||||||||||
Price per common share | $ 6.20 | |||||||||||||
Exchange of shares | 5,000 | 5,000 | ||||||||||||
Number of shares exchanged | 5,000 | |||||||||||||
Number of shares cancelled | 5,000 | |||||||||||||
Shares outstanding | 0 |
REVENUE AND CONTRACT ACCOUNTI_3
REVENUE AND CONTRACT ACCOUNTING (Details - Contract assets) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Revenue from Contract with Customer [Abstract] | ||
Cumulative revenues recognized | $ 9,090,355 | $ 8,820,256 |
Less: Billings or cash received | (8,178,309) | (8,178,309) |
Contract assets | $ 912,046 | $ 641,947 |
REVENUE AND CONTRACT ACCOUNTI_4
REVENUE AND CONTRACT ACCOUNTING (Details - Contract liabilities) - USD ($) | Mar. 31, 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 | (199,976) | (199,976) |
Contract liabilities, technology systems | 1,064,682 | 1,064,682 |
Contract liabilities, services and consulting | 628,258 | 601,561 |
Total contract liabilities | $ 1,692,940 | $ 1,666,243 |
REVENUE AND CONTRACT ACCOUNTI_5
REVENUE AND CONTRACT ACCOUNTING (Details -Disaggregated revenue) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 1,070,680 | $ 2,644,288 |
Goods Transferred Over Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 270,099 | 1,827,764 |
Services Transferred Over Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 800,581 | 816,524 |
Turnkey Projects [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 270,099 | 1,827,764 |
Maintenance And Support [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 604,610 | 588,869 |
Algorithms [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 195,971 | 227,655 |
Rail [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 1,067,449 | 2,376,449 |
Rail [Member] | Goods Transferred Over Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 270,099 | 1,827,764 |
Rail [Member] | Services Transferred Over Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 797,350 | 548,685 |
Rail [Member] | Turnkey Projects [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 270,099 | 1,827,764 |
Rail [Member] | Maintenance And Support [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 601,379 | 548,685 |
Rail [Member] | Algorithms [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 195,971 | 0 |
Commercial [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 3,231 | 28,831 |
Commercial [Member] | Goods Transferred Over Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 0 |
Commercial [Member] | Services Transferred Over Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 3,231 | 28,831 |
Commercial [Member] | Turnkey Projects [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 0 |
Commercial [Member] | Maintenance And Support [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 3,231 | 28,831 |
Commercial [Member] | Algorithms [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 0 |
Governments [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 11,353 |
Governments [Member] | Goods Transferred Over Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 0 |
Governments [Member] | Services Transferred Over Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 11,353 |
Governments [Member] | Turnkey Projects [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 0 |
Governments [Member] | Maintenance And Support [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 11,353 |
Governments [Member] | Algorithms [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 0 |
Artificial Intelligence [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 227,655 | |
Artificial Intelligence [Member] | Goods Transferred Over Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 0 |
Artificial Intelligence [Member] | Services Transferred Over Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 227,655 | |
Artificial Intelligence [Member] | Turnkey Projects [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 0 |
Artificial Intelligence [Member] | Maintenance And Support [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 0 |
Artificial Intelligence [Member] | Algorithms [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 227,655 |
North America [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 1,070,680 | 2,644,288 |
North America [Member] | Rail [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 1,067,449 | 2,376,449 |
North America [Member] | Commercial [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 3,231 | 28,831 |
North America [Member] | Governments [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 0 | 11,353 |
North America [Member] | Artificial Intelligence [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 0 | $ 227,655 |
REVENUE AND CONTRACT ACCOUNTI_6
REVENUE AND CONTRACT ACCOUNTING (Details Narrative) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Revenue from Contract with Customer [Abstract] | ||
Contract liabilities | $ 1,692,940 | $ 1,666,243 |
Contract liabilities for technology systems | $ 0 | |
Services and consulting recognized | $ 292,947 |
DEFINED CONTRIBUTION PLAN (Deta
DEFINED CONTRIBUTION PLAN (Details Narrative) | 3 Months Ended |
Mar. 31, 2024 USD ($) | |
Retirement Benefits [Abstract] | |
Cash contributions | $ 55,099 |
SALE OF ASSETS (Details)
SALE OF ASSETS (Details) | Mar. 31, 2024 USD ($) |
Sale Of Assets | |
Convertible note receivable | $ 165,000 |
Unamortized discount | (9,375) |
Convertible note receivable, net | $ 155,625 |
SALE OF ASSETS (Details Narrati
SALE OF ASSETS (Details Narrative) | 3 Months Ended |
Mar. 31, 2024 USD ($) $ / shares shares | |
Sale Of Assets | |
Principal amount | $ | $ 165,000 |
Original issue discount | 10% |
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 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | May 07, 2024 | Apr. 30, 2024 | Apr. 23, 2024 | Apr. 03, 2024 |
Series D Preferred Stock [Member] | ||||
Subsequent Event [Line Items] | ||||
Conversion of shares | 75 | 350 | 225 | |
Common Stock [Member] | ||||
Subsequent Event [Line Items] | ||||
Conversion of shares | 25,000 | 116,668 | 75,000 | |
Subsequent Event [Member] | Series D Preferred Stock [Member] | ||||
Subsequent Event [Line Items] | ||||
Aggregate proceeds | $ 250,000 | |||
Sale of stock, shares | 250 | |||
Conversion price | $ 3 |