Good afternoon, everyone. Thanks for being here with us today. Our next presenter is Adrian Goldfarb with Duos Technologies Group. Take it away, Adrian.
Good afternoon, everyone. I'm going to spend about the next 20 minutes just going over the strategy for the company and introducing a couple of new areas. I put up the obligatory safe harbor statement. I will be talking a little bit about some expectations, so maybe it's a little bit more meaningful at this point. Let me talk about the story so far. From a big-picture standpoint, I have the honor of having been Duos' CFO twice. I actually took the company public in 2015, took it up to NASDAQ in 2020, and in 2022, following a change of CEO to get us onto a growth path, I basically went into semi-retirement and was still continuing to work with the company on the strategic side. In 2024, my replacement decided that he didn't really like public companies, and so he moved on.
He was very, very good, but decided he wanted to move on to something else. So the company asked me to step back in, mainly because of my background and knowledge with the company, and to come back in as the CFO of the company. And so consequently, one of the things that I agreed with the new CEO was that the company had been effectively a development stage company for many, many years. We developed some terrific technology. For those of you who know a little bit of the history, we were kind of known as the railroad company, and you'll see why that is in a moment. But it was time for us to get some expansion going, get us finally into break-even and profitability, and get the revenues growing. And so that's really what this presentation is all about.
We consist today of Duos Technologies Group, which is the public company, and then there are three entities. There's Duos Technologies Inc, which was the original company, has been around for many years. And as you see, there's a picture of what I like to call a sort of a warehouse that's open at both ends that the trains pass through, and I'll do a little bit about the technology. For those of you who have seen my presentations in the past, we focused a lot on that. It's a terrific piece of technology. We have fantastic IP on that, and the company's intention is to continue developing that. But we want to be on a faster growth path.
So we introduced a new division, Duos Edge AI, and the basic principle behind that was to take a part of the railcar inspection portal that was not related to the rail, which was our edge processing. It was interesting for those of you who were in the previous presentation talking about processing and ruggedized at the edge, and we have a lot of experience in that area. And then more recently, we just recently formed Duos Energy Corporation, and that is focused on providing, in effect, the energy gap where people want to build these large mega data centers, but the power is not necessarily available.
It so happens that our company has some of the top human resources around that came with the CEO from the company when he joined us, and we plan to make an expansion into that area, and I'll talk about that in a few minutes. So let's talk about the new age of railroading. So this is the company's original business. As you can see, I describe it as a warehouse that's open on either end, and it's devised to capture high-resolution images of rail cars passing through at speed. In my presentations, we used to go through, and I'll show you a few images here, where it shows that the rail consist, which consists of a locomotive and cars, is moving at speeds of usually on the freight side of anywhere between 40, 50, 60 miles an hour.
When you look at those images, it looks as if the train is standing still. What we're doing is capturing about 50-70 potential issues, defects, defects, for example, that were featured heavily in the Norfolk Southern rail crash, which happened, I think, last year. The railroads are very much focused on safety, and they want to pick up on this, and Duos has had a very significant hand on this. We are the owners of this technology, of the methodology for doing this. In fact, we were granted two patents earlier this year. One was for the methodology of inspecting trains using this type of methodology, and the second one was for our extensive work in AI to allow for the ability to spot defects without having to necessarily have human intervention, although we still do have a considerable input from the rail car inspectors.
To just give you some idea, these are some of the pictures, and what I want you to keep in mind when you look at this is the level of our technology. These look as though they're still photos. This train here is moving at anywhere up to 70 mi an hour. We also, by the way, have a project going with Amtrak, and I'll speak about our base customers here, whereby we're currently building two, and I call them super portals, up in the Secaucus, New Jersey area, which will inspect the new high-speed Amtrak trains that run between Boston and Washington. Those go up to 125 mi an hour plus, and our technology is still able to bring crisp pictures exactly like this.
In fact, so much so that Amtrak has now scheduled for the second year to be a subscriber to data that comes off some of our existing portals, and they'll be able to look at their long-distance passenger trains. What I want to show you here is that, make sure I do this correctly, if you see here, this is actually a picture of one of the Class I railroads, I won't say which one, where our system actually captured about a half an hour before this a rail car which has had what's called a bad journal, or we would know it as a bad bearing. Those can, in fact, catch on fire. In fact, this was exactly what happened with the Norfolk Southern train that eventually derailed and created a billion-dollar catastrophe in terms of spilled chemicals and so forth.
The objective of the railroads taking these railcar inspection portals is to put them in. We are really the leaders in this technology. We've been doing it for many years, and this has basically provided the foundation for the company, and we intend to continue doing this. As the slide says, the plan is to optimize safety and maximize efficiency. The question you might ask, if the technology is so great and you have these patents and so forth, why aren't you growing faster? Well, there's a couple of reasons for that. One of the things is that the railroad industry is somewhat hesitant to employ new technology without really having demonstrated and trusted, so they go very, very slowly on this. CN is probably the leader in this.
They actually have seven of these portals that are deployed, sorry, five of them in Canada, and two of them down in the United States. And between those seven portals, plus three that are CSX and two that are CPKC, plus two that are in Mexico, we capture, if there's about 1.5 million-1.6 million rail cars in general, we capture about a third of those on one of these portals, meaning we see them probably on average about 20 times a year. And so this is a way for them to see what's the condition of that. So how are we going to grow off of that? So one of the things that we introduced earlier in the year was moving to a subscription revenue model.
Okay, so this is brand new, and what we've done is the most recent news was from CN is that we have actually taken over the operations, maintenance, and management of the CN portals, all seven of them, plus we also get data from two others, from two other clients. And basically, we use that to sell on to other customers. And from a revenue standpoint, it makes sense because whereas we might get $250,000 in recurring revenue from a particular portal, the likelihood is in recurring subscriptions in a couple of years or so, we can get over $1 million per portal in recurring revenue. That's going to drive part of the revenue growth that I'm speaking about. Why are we expanding, and why are we expanding into other areas?
This slide is entitled A New Age of Computing, and it's with our new division, Duos Edge AI. Duos Edge AI is a wholly-owned subsidiary of Duos Technologies Group, and the plan is to build, and to own, and to operate edge data centers. You ask, what is the connection to what you're doing right now? As I mentioned earlier in the presentation, the railcar inspection portal, part of the methodology and part of the patents based on is the ability to process massive amounts of data right at the edge. If you imagine where railroads are, these are not in big cities like New York or Boston and so forth. The railroads are out really in the heartland of the U.S. Typically, the railcar inspection portals are put anywhere from 50- 100 mi before what they call a hump yard.
That's where the trucks are taken out, and they're changed around and reconfigured, and that's where they have to fix any issues that they discover. So one of the ways we could have done it was to take these railcar inspection portals, put them out there, and then just make some kind of a network connection, and then backhaul the data over the cloud. Simply too slow. It would have taken an hour or more to backhaul all that data, do the processing, with the result that critical items, and I showed you the burning up bearing, basically you needed to deal with that within 30 minutes. So what we did was we came up with a concept long before it was popular to put data at the edge of the edge data centers.
We have, in effect, small mini data centers that sit literally trackside in a pretty hostile environment. It can be very hot, it can be very cold, it's extremely dusty, there's also vibration considering you've got heavy freight trains going by, and we have the ability to design, maintain, and operate those.
So the idea came along, we joined up with actually an individual who is now the president of that particular division, and we had known him for several years, and we had talked about maybe doing something together, but he came to us a few months ago and said, "Hey, I'd like to join up with you because I believe the concept of taking these edge data centers that use the RIP and the RIP can be deployed to other environments, and I think we can build a big business off of that." So long story short, we formed this division, and our focus now is on the Tier 3 and the Tier 4 markets. So what are those?
The Tier 3 and Tier 4 markets are probably the lesser well served, and a good example is, for example, down in Texas. There's about 60 regions of different schools around Texas. Texas is obviously a big state, and the particular region is looking to be able to provide, somewhat funded by the infrastructure bill, to be able to provide higher speed data to their student community. And so in effect, we are partnering with them to take our Edge Data Centers, okay, and put them into these remote locations, maybe on regional facility sites, and then be able to sell that data off to other people who may need remote processing capabilities.
An example might be in Texas, for example, an oil company that maybe has drilling operations that are out, maybe they want to process seismic data, and they may need some space, and they don't want to backhaul the data, just like we don't want to backhaul the data to some big data center somewhere, so they'll actually process locally, so it turns out between our operational skills and the fact that our President of the division, a gentleman by the name of Doug Recker, has about 30 years in the industry, has led to a tremendous opportunity for us.
So we've announced that we probably want to put in around 15 of these data centers in the next probably 18 months, and ultimately deploy. We expect to deploy in the next several years probably about 200 of these, which will produce about a $60 million a year revenue stream, which given that last year we did about $7 million-$8 million means tremendous growth. Very, very good gross margins on this business, and in fact, the difference between that business and the rail business is in the rail business, we are still creating the market. It's technology intense. With this business, there is no problem about the demand. It's a market that's already there, and we're planning to serve that. As I mentioned before, a lot of it is into the Tier 3 and Tier 4 markets.
This is the Broadband Equity Access and Deployment Program, something they call BEAD, which the government has given about $42 billion, and fortunately, a lot of that gives the funding for the schools to be able to do that and provide this process from that. So as I kind of wind down my presentation here, let's talk about the third division. This is probably the most exciting thing that we're working on right now, although it's the least developed at this time. About a month ago, we formed a company called Duos Energy Corporation, and Duos Energy Corporation, the primary objective is that is to bridge the gap between all the power that's needed to deploy all these NVIDIA chips that everybody's talking about, okay, from the time that they want to deploy these mega data centers to the time there's actually enough power in the grid to do it.
I've heard a figure somewhere. I'm sorry, I can't cite you the source, that said that if everybody was to deploy everything that they've said into the AI space, into these mega centers, the U.S. grid has about half the amount of power that it actually needs in the few years to do that. So this provides an opportunity. So how on earth did we get into the opportunity? Well, it turns out that our new CEO came from a company called APR Energy, and APR Energy specialized. It was about, when he left, it was about a $500 million-a-year business in providing fast and temporary power to many, many different places around the world.
They've done projects in Bangladesh, in Angola. They've done them in Argentina, and a lot of the people that we hired from that company who followed Chuck Ferry, our CEO, to Duos happened to be, in addition to infrastructure experts and have helped us with building the railcar inspection portals, they also happened to be fast energy experts, and so consequently now, we've built this. We've started this company, and our planning is to do consulting, operations, and management of these types of facilities, and so we're currently in the moment leading a deal to be able to find assets to be able to deploy out into that, and we expect that over the next few months we will make some announcements on that, but we are already starting to record revenue from that, a small amount of which will appear in our Q3.
Duos Energy Corporation is planning to build, own, and operate environmentally friendly energy projects. Okay, now when I say environmentally friendly, I'm not talking about windmills or solar, okay. It simply isn't reliable enough or consistent enough to be able to rely on that. So until we get five to seven years, or maybe longer, when either the U.S. grid has enough power to be able to do it without temporary power, or more likely that there's going to be some other clean energy source, more than likely these nuclear pods that they're talking about, there will be a tremendous amount to fill the power demands for all the AI and machine processing that everybody wants to deploy from there.
So our strategy is to take that opportunity with all the skill sets that we have, which we already have, I mean all the people already work for our company and basically build a business. So the intent is to grow our revenues to multiples of where they are today, and the other thing is my expectation is, and that's why I put the safe harbor statement, is that for the first time in the company's history, we will actually be profitable next year and we'll be generating cash instead of burning cash. We will continue with the railroad business, we're going to drive the Duos Edge AI business with the edge data centers, and we're going to be focusing in on providing power not only for those data centers but also for the larger data centers. There's a tremendous pipeline of projects, of available projects.
You obviously have to have the assets to do that, and that's what we're working on right now. There are two ways when you're doing fast power or temporary power. There's the more traditional way, which is where you're going out to lesser-known regions of the world where you're trying to provide power, and that's fine. There's definitely a business there, and that can definitely be a profitable business, but there's a much bigger profitable business if you focus on the data centers, and that's why I constantly represent that there's all the chips that want to get deployed, all the AI processing that wants to be done. For the next five to seven years, there's going to be a tremendous market demand from that, and we plan to grow Duos up to be able to meet that demand and provide a return to our shareholders right now.
So I'm just going to give you some summary data. It's not particularly relevant at this time. We've got the Q2, or let me start with the team here. So this is the team. It's led by Chuck Ferry. Chuck Ferry has 38 years of military and private sector leadership, 26 years in the U.S. Army, and he's a very modest individual if you meet him, but I'll put it this way, in those 26 years in the U.S. Army, he wasn't working in personnel and records, okay?
He was on the sharp end of action in Afghanistan, Somalia, Iraq, came into the commercial world, I think it was about 12 years ago, led a company from about $20 million in revenues to $200 million in revenues, was with APR Energy, was about a $500 million- a- year business, and he joined Duos in 2020 principally to do a turnaround from where we are but get the company onto the growth path. So it's under his leadership now. He's assembled a team. I'm proud to be a part of that team. On the very left-hand slide is Doug Recker.
He's the president of Duos Edge AI, as I said, he has about a 30-year background, and then a couple of other people I want to point out, Jeff Necciai, who's our Chief Technology Officer, has stepped into the role of running now the railroad, the technology business, which is primarily running on the railroad side. Chris King has been serving as the Chief Commercial Officer and is taking a bigger lead in the operations side given he also came from APR Energy. There's Leah Brown, who's our Controller, and then John McKee, and Dave McKee is, sorry, John White, VP of Operations, and then Dave McKee, who's a Strategic Advisor on rail, so he's advising us on the rail business. There's a consolidated income statement. This presentation is filed. We'll be announcing Q3 results probably in and around the 14th of November.
We expect that revenue. We've had fairly de minimis revenues up until through the second quarter. We expect revenues to be growing a little bit off a small base, and then we expect significant revenue growth next year. This is our balance sheet. That's also expected to be a lot stronger as we move into next year, and then most importantly, our capital structure. I like to run a very clean and straightforward capital structure. So we have about 8.2 million shares of common stock, about 1.25 million shares of options, obviously employee options. I have no warrants. I got rid of my last warrants about a month ago, and I see someone clapping here. And then you see all these series of convertible preferred. These are basically can be considered like common stock.
It's just that about half of our company is owned by three investors, and they want to use the ability of blockers. But in those common stocks, there's no ratchets in them, there's no coupon, it's just another way to hold common stock. So I said very, very clean cap table. As of the price of October 25th, it's about that today, $35 million market cap, about $58 million fully diluted. And with that, I'd like to thank everybody for attending the presentation. I've got four minutes and 27 seconds for questions. Just on that cap, so the preferred is just so you said another way of holding it, are they allowed to do certain things with the stock, like lend it or borrow against it?
Yes, let me repeat the question. So it was asked about some more details on the preferred stock, could they lend it out? The answer is no. It is in effect just a conversion mechanism. They can convert into common stock. On one of the series, there was at one point, if we did a raise that was below $3, that would be reset. So because we executed to get rid of our warrants, we did that at $2.61, so once that did reset to $2.61, the ratchet now is gone, and now it is exactly as if you would hold common stock. It's a very good question.
When did you say the key period happens?
It'll be in and around November 14th.
Okay, and so I'm just looking at you're losing money.
Yes.
You should be able to make it.
Yes, I'm absolutely going to make it. I'm very lucky. The question was, are we going to, you know, we're losing money and burning a fair amount of cash, are we going to make it? First of all, my Q3 revenues are significantly better than the other two quarters. Second of all, I'm very lucky that, as I said, 50% of the company is owned by effectively three shareholders. One is particularly large. They have been extremely supportive. Where we've needed to raise capital, and we haven't necessarily wanted to go into the markets because we didn't want to trade tremendous dilution and issue a lot of warrants to that, they have pretty much stepped up every time. At this point, we're working on some things. I cannot disclose them today, but we'll be fine.
In terms of?
In terms of cash, yes, absolutely. We have a, just so you know, we have an ATM in place, and the volume has been picking up. It's not huge, but our average volume has gone from about 35,000 to about 57,000 in the last probably four weeks. So there's becoming more and more interest just because we're moving into some of these other businesses. Other questions? Yes, Jay.
So what do you think your cash needs will be? If you're starting to make money next year, do you need to raise again, do you think, or do you think?
The question was, will we need to raise again? So the likelihood is we probably will do somewhat of a raise, probably towards the end of this year, to shore up our working capital. We don't have a tremendous amount of cash on hand at the moment, and I try to do the best that I can with the resources that we have available. So I try not to overraise when I know that things are going to shorten out. So we're definitely going to have a lot more cash coming in from the revenue. We will be breaking into profitable next year, so we won't be burning cash anymore. I just want to shore up the balance sheet a little bit going into that. For some of the projects on the energy side, there is no issue with there. We're already set with that.
The likelihood is from a strategy standpoint, we'll be doing some of that with joint venture, so we won't be using most or any of our own cash to do that. So we'll be able to provide good growth for our shareholders without basically doing any dilution. Yes, Jay.
On the last call, I think you mentioned that the three basically building right now, that'll be about a $1 million kind of a run rate for three combined in terms of revenues?
That is correct, yes.
Is the 15 that will be built next year? Is that similar or is it bigger, smaller?
So let me give you a handle on numbers. The question is about the Edge Data Center business. We've announced in other presentations, we plan to have three in place with about, as Jay pointed out, about a $1 million run rate from that. I've actually contracted for the next three because we're running ahead. The demand is running ahead of that. In terms of the 15, okay, once again, our expectation is that the 15 will include the six that I've already got. We're planning to put another nine. Ultimately, we're expecting to deploy about 200 of these, but yes, the average revenue will be somewhere between $300,000-$400,000. Yes, sir.
What about your patents?
So the patents are primarily on the tech business, so primarily they're in the rail side. The question was about the patents, so can you just, I mean, from what standpoint?
Have you done a third-party evaluation on them? How many do you have? Are they security through technology just ahead of time, or is it back?
Yes, so I'm getting the hook here, but I'll answer the question. No, we haven't done evaluation on them. However, they are very defendable, okay, and we do have people that are trying to challenge those now a little bit on the railroad side because they can believe they can do it cheaper and better and so forth, and it's easy to do things cheaper and better when you copy our stuff, but we will defend those, and they are expected to give us a significant milestone as we move forward in the railroad business. Thank you.