Duos Technologies Group Reports Second Quarter and Six Month 2020 Results

Incrementally Improved Quarterly Results Year-Over-Year

Expected Upside in the Second Half of 2020 in Challenging Market Environment

JACKSONVILLE, FL / ACCESSWIRE / August 13, 2020 / Duos Technologies Group, Inc. ("Duos" or the "Company") (NASDAQ:DUOT), a provider of intelligent security analytical technology solutions, reported financial results for the second quarter ended June 30, 2020.

Second Quarter 2020 and Recent Operational Highlights

Awarded a $2.1 million contract by an existing class one railroad customer to integrate up to one hundred (100) artificial intelligent ("AI") use cases into its proprietary centraco® platform for future use by the railroad in its automation-focused efforts.

Awarded $945,000 follow-on contract for Monroe County Sheriff's office in Florida to provide the Company's Intelligent Correctional Automation System, icas™, which is expected to be implemented starting in late 2020 and completed in 2021.

Awarded a $1.8 million contract for a turn-key Rail Inspection Portal (rip®), which is expected to be completed by the end of the third quarter of this year.

Recently executed master service agreement with major railroad customer covering service and support and upgrades to existing installations.

Second Quarter 2020 Financial Results

It should be noted that the following Financial Results represent the consolidation of the Company with its subsidiaries Duos Technologies, Inc. and truevue360™.

Total revenue increased 47% to $1.98 million compared to $1.35 million in the same quarterly period last year. The increase in total revenue for the quarter was due to completion of customer contracts during the quarter.

Gross profit increased 324% to $739,000 (37% of total revenue) compared to $174,000 (13% of total revenue) in the same quarterly period last year. The increase in gross profit was due to the increase in revenues during the quarter.

Operating expenses increased 2% to $2.17 million from $2.12 million in the same quarterly period last year. The minimal increase in expenses was due to due to anticipation of customer contracts that were delayed due to the COVID-19 pandemic, which was mostly offset by reduced hiring plans during the quarter in response to the pandemic.

Net loss totaled $1.47 million, an improvement from net loss of $1.95 million in the same quarter a year-ago. The decrease in net loss was primarily attributable to both higher revenues and reduction of costs given the anticipated impact of certain business delays.

Cash and cash equivalents at quarter-end totaled $5.37 million, compared to $56,000 at December 31, 2019.

Six Month 2020 Financial Results

Total revenue decreased 48% to $2.97 million from $5.70 million in the same period last year. The decrease in total revenue was driven by a slowdown in overall business bookings during the first six months due to delays in executing new contracts and certain travel restrictions.

Gross profit decreased 63% to $842,000 (28.3% of total revenue) from $2.31 million (40.5% of total revenue) in the same period last year. The decrease in gross profit was mainly the result of lower revenues during the six-month period and the proportion of costs allocated to projects being higher as a percentage against lower revenues.

Operating expenses increased 4% to $4.36 million from $4.21 million in the same period last year. The increase in operating expenses was primarily due to certain one-time expenditures related to the Company's capital raise earlier in the year. The Company has taken actions to reduce certain expenditures to align its spending with the current slowdown in revenues due to delays in execution of existing projects.

Net loss totaled $3.61 million, compared to a net loss of $1.91 million in the same period a year-ago. The greater net loss was primarily attributable to the effect of lower overall revenues during the six-month period.

Management Commentary

"In the second quarter we generated incrementally improved year-over-year results in the face of ongoing, difficult market conditions, and we believe we have effectively adapted our organization to the new normal working environment," said Duos Chairman and CEO Gianni Arcaini. "Deal flow in recent months has begun to resume as evidenced by a few of the notable contracts we were awarded during the period. We are also encouraged by the strength of our pipeline, which continues to portend a backloaded second half as many of the contracts that were delayed by COVID are now being revisited. In the meantime, we've taken decisive measures to control our operational costs to support the long-term viability of our business. As conditions improve, we'll look to make additional adjustments to address our anticipated increased demand over the coming quarters.

"Looking to the future, the Board of Directors remains focused on finding a replacement for the CEO position with the right mix of technical acumen, sales experience and leadership abilities to guide our Company into its next phase of growth. As organizations the world over are looking increasingly to leverage technology to automate and streamline processes in a more distributed fashion, the opportunity for Duos continues to grow. While some timelines have been pushed out, we are confident that the broad applicability of our solutions will enable us to take advantage of this accelerated digital transformation over the long term."

Conference Call

The Company's management will host a conference call today, Thursday, August 13, 2020 at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss these results, followed by a question and answer period.

Date: Thursday, August 13, 2020
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
U.S. dial-in: (877) 407-3088
International dial-in: +1 (201) 389-0927
Confirmation: 13708192

Please call the conference telephone number 5-10 minutes prior to the start time of the conference call. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.

The conference call will be broadcasted live via telephone and available for online replay via the investor section of the Company's website here.

About Duos Technologies Group, Inc.

Duos Technologies Group, Inc. (Nasdaq: DUOT), based in Jacksonville, Florida, through its wholly owned subsidiary, Duos Technologies, Inc., provides advanced, analytical technology solutions with a strong portfolio of intellectual property. The Company's core competencies include intelligent technologies that combine machine learning, artificial intelligence and advanced video analytics that are delivered through its proprietary integrated enterprise command and control centraco® platform. The Company provides its broad range of technology solutions with an emphasis on mission critical security, inspection and operations within the rail transportation, retail, petrochemical, government, and banking sectors. Duos Technologies also offers professional and consulting services for large data centers. For more information, visit www.duostech.com.

Forward Looking Statements

This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things our plans, strategies and prospects — both business and financial. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Many of the forward-looking statements contained in this news release may be identified by the use of forward-looking words such as "believe," "expect," "anticipate," "should," "planned," "will," "may," "intend," "estimated," and "potential," among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this news release include market conditions and those set forth in reports or documents that we file from time to time with the United States Securities and Exchange Commission. All forward-looking statements attributable to Duos Technologies Group, Inc. or a person acting on its behalf are expressly qualified in their entirety by this cautionary language.

Contacts:

Corporate
Tracie Hutchins
Duos Technologies Group, Inc. (Nasdaq: DUOT)
(904) 652-1601
tlh@duostech.com

Investor Relations
Matt Glover or Tom Colton
Gateway Investor Relations
(949) 574-3860
DUOT@GatewayIR.com

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
For the Three Months Ended
 
 
For the Six Months Ended
 

 
June 30,
 
 
June 30,
 

 
2020
 
 
2019
 
 
2020
 
 
2019
 

REVENUES:

Technology systems

 
$
1,419,409
 
 
$
984,991
 
 
$
1,933,083
 
 
$
4,903,429
 

Technical support

 
 
382,124
 
 
 
280,601
 
 
 
727,311
 
 
 
602,075
 

Consulting services

 
 
2,385
 
 
 
80,213
 
 
 
134,469
 
 
 
192,382
 

AI technologies

 
 
178,224
 
 
 
–
 
 
 
178,224
 
 
 
–
 

Total Revenues

 
 
1,982,142
 
 
 
1,345,805
 
 
 
2,973,087
 
 
 
5,697,886
 

COST OF REVENUES:

Technology systems

 
 
897,514
 
 
 
967,649
 
 
 
1,479,058
 
 
 
3,060,643
 

Technical support

 
 
234,754
 
 
 
156,341
 
 
 
469,030
 
 
 
261,665
 

Consulting services

 
 
–
 
 
 
47,415
 
 
 
72,260
 
 
 
70,334
 

AI technologies

 
 
110,499
 
 
 
–
 
 
 
110,499
 
 
 
–
 

Total Cost of Revenues

 
 
1,242,767
 
 
 
1,171,405
 
 
 
2,130,847
 
 
 
3,392,642
 

GROSS PROFIT

 
 
739,375
 
 
 
174,400
 
 
 
842,240
 
 
 
2,305,244
 

OPERATING EXPENSES:

Research and development

 
 
149,566
 
 
 
487,738
 
 
 
555,958
 
 
 
871,160
 

Engineering

 
 
352,970
 
 
 
289,986
 
 
 
665,406
 
 
 
624,549
 

Sales & marketing

 
 
122,473
 
 
 
270,196
 
 
 
262,325
 
 
 
520,620
 

Administration

 
 
1,023,947
 
 
 
872,972
 
 
 
2,039,497
 
 
 
1,807,645
 

AI technologies

 
 
517,475
 
 
 
202,673
 
 
 
834,024
 
 
 
383,986
 

Total Operating Expenses

 
 
2,166,431
 
 
 
2,123,565
 
 
 
4,357,211
 
 
 
4,207,960
 

LOSS FROM OPERATIONS

 
 
(1,427,056
)
 
 
(1,949,165
)
 
 
(3,514,971
)
 
 
(1,902,716
)

OTHER INCOME (EXPENSES):

Interest Expense

 
 
(58,243
)
 
 
(3,692
)
 
 
(127,175
)
 
 
(6,313
)

Other income, net

 
 
19,410
 
 
 
3,066
 
 
 
29,208
 
 
 
3,407
 

Total Other Income (Expense)

 
 
(38,833
)
 
 
(626
)
 
 
(97,967
)
 
 
(2,906
)

NET LOSS

 
 
(1,465,889
)
 
 
(1,949,791
)
 
 
(3,612,938
)
 
 
(1,905,622
)

Basic & Diluted Net Loss Per Share

 
$
(0.42
)
 
$
(1.09
)
 
$
(1.16
)
 
$
(1.14
)

Weighted Average Shares-Basic & Diluted

 
 
3,526,382
 
 
 
1,788,659
 
 
 
3,106,660
 
 
 
1,665,439
 

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 

 
June 30,
 
 
December 31,
 

 
2020
 
 
2019
 

 
(Unaudited)
 
 
 
 

ASSETS

CURRENT ASSETS:

Cash

 
$
5,374,786
 
 
$
56,249
 

Accounts receivable, net

 
 
496,807
 
 
 
2,611,608
 

Contract assets

 
 
845,810
 
 
 
1,375,920
 

Prepaid expenses and other current assets

 
 
698,158
 
 
 
716,598
 

Total Current Assets

 
 
7,415,561
 
 
 
4,760,375
 

Property and equipment, net

 
 
346,979
 
 
 
260,181
 

Operating lease right of use asset

 
 
316,726
 
 
 
430,146
 

OTHER ASSETS:

Software Development Costs, net

 
 
10,000
 
 
 
20,000
 

Patents and trademarks, net

 
 
66,649
 
 
 
61,598
 

Total Other Assets

 
 
76,649
 
 
 
81,598
 

TOTAL ASSETS

 
$
8,155,915
 
 
$
5,532,300
 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:

Accounts payable

 
$
632,043
 
 
$
2,641,437
 

Accounts payable – related parties

 
 
12,491
 
 
 
12,791
 

Notes payable – financing agreements

 
 
175,796
 
 
 
42,299
 

Notes payable – related parties, net of discounts

 
 
–
 
 
 
905,373
 

Line of credit

 
 
–
 
 
 
27,615
 

Payroll taxes payable

 
 
10,730
 
 
 
115,111
 

Accrued expenses

 
 
130,798
 
 
 
393,272
 

Current portion – financing lease agreements

 
 
84,635
 
 
 
45,072
 

Current portion-operating lease obligations

 
 
252,907
 
 
 
239,688
 

Current portion-SBA loan

 
 
627,465
 
 
 
–
 

Contract liabilities

 
 
3,283
 
 
 
8,661
 

Deferred revenue

 
 
493,830
 
 
 
936,428
 

Total Current Liabilities

 
 
2,423,978
 
 
 
5,367,747
 

Finance lease payable

 
 
149,314
 
 
 
89,026
 

Operating lease obligations

 
 
74,713
 
 
 
202,797
 

SBA loan

 
 
782,805
 
 
 
–
 

Total Liabilities

 
 
3,430,810
 
 
 
5,659,570
 

Commitments and Contingencies (Note 6)

STOCKHOLDERS' EQUITY (DEFICIT):

Series A redeemable convertible cumulative preferred stock, $10 stated value per share,

500,000 shares designated; 0 issued and outstanding at June 30, 2020 and

December 31, 2019, convertible into common stock at $6.30 per share

 
 
–
 
 
 
–
 

Series B convertible cumulative preferred stock, $1,000 stated value per share,

convertible into common stock at $7 per share

 
 
1,705,000
 
 
 
1,705,000
 

Common stock: $0.001 par value; 500,000,000 shares authorized,

3,527,470 and 1,982,039 shares issued, 3,526,146

 
 
3,528
 
 
 
1,982
 

and 1,980,715 shares outstanding at June 30, 2020

and December 31, 2019, respectively

Additional paid-in capital

 
 
39,527,682
 
 
 
31,063,915
 

Total stock & paid-in-capital

 
 
41,236,210
 
 
 
32,770,897
 

Accumulated deficit

 
 
(36,353,653
)
 
 
(32,740,715
)

Sub-total

 
 
4,882,557
 
 
 
30,182
 

Less: Treasury stock (1,324 shares of common stock

at June 30, 2020 and December 31, 2019)

 
 
(157,452
)
 
 
(157,452
)

Total Stockholders' Equity (Deficit)

 
 
4,725,105
 
 
 
(127,270
)

Total Liabilities and Stockholders' Equity (Deficit)

 
$
8,155,915
 
 
$
5,532,300
 

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
For the Six Months Ended
 

 
June 30,
 

 
2020
 
 
2019
 

Cash from operating activities:

Net loss

 
$ 
(3,612,938
)
 
$ 
(1,905,622
)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

 
 
97,353
 
 
 
87,325
 

Stock based compensation

 
 
8,100
 
 
 
28,134
 

Modification of employee stock options

 
 
190,970
 
 
 
–
 

Stock issued for services

 
 
15,000
 
 
 
–
 

Interest expense related to debt discounts

 
 
94,627
 
 
 
–
 

Changes in assets and liabilities:

Accounts receivable

 
 
2,114,802
 
 
 
(302,986
)

Contract assets

 
 
530,110
 
 
 
904,543
 

Prepaid expenses and other current assets

 
 
235,194
 
 
 
86,411
 

Operating lease right of use asset

 
 
113,419
 
 
 
(565,926
)

Accounts payable

 
 
(2,009,394
)
 
 
(519,468
)

Related payable-related party

 
 
(300
)
 
 
–
 

Payroll taxes payable

 
 
(104,381
)
 
 
(196,609
)

Accrued expenses

 
 
(262,474
)
 
 
15,671
 

Operating lease obligation

 
 
(114,865
)
 
 
592,402
 

Contract liabilities

 
 
(5,378
)
 
 
(1,170,197
)

Deferred revenue

 
 
(442,598
)
 
 
234,988
 

Net cash used in operating activities

 
 
(3,152,753
)
 
 
(2,711,334
)

Cash flows from investing activities:

Purchase of patents/trademarks

 
 
(7,735
)
 
 
(3,000
)

Purchase of fixed assets

 
 
(171,467
)
 
 
(223,549
)

Net cash used in investing activities

 
 
(179,202
)
 
 
(226,549
)

Cash flows from financing activities:

Repurchase of common stock

 
 
–
 
 
 
(1,151
)

Repayments of line of credit

 
 
(27,615
)
 
 
(2,497
)

Issuance cost

 
 
(1,001,885
)
 
 
(10,000
)

Repayments of notes payable

 
 
(1,000,000
)
 
 
–
 

Repayments of insurance and equipment financing

 
 
(83,257
)
 
 
(141,105
)

Repayment of finance lease

 
 
(21,786
)
 
 
–
 

Proceeds from SBA loan

 
 
1,410,270
 
 
 
–
 

Proceeds from equipment leasing

 
 
121,637
 
 
 
–
 

Proceeds from common stock issued

 
 
9,253,128
 
 
 
–
 

Proceeds from warrants exercised

 
 
–
 
 
 
2,164,019
 

Net cash provided by financing activities

 
 
8,650,492
 
 
 
2,009,266
 

Net increase (decrease) in cash

 
 
5,318,537
 
 
 
(928,617
)

Cash, beginning of period

 
 
56,249
 
 
 
1,209,301
 

Cash, end of period

 
 
5,374,786
 
 
 
280,684
 

Supplemental Disclosure of Cash Flow Information:

Interest paid

 
$ 
29,830
 
 
$ 
4,109
 

Supplemental Non-Cash Investing and Financing Activities:

Common stock issued for accrued BOD fees

 
$ 
15,000
 
 
$ 
–
 

Lease right of use asset and liability

 
$ 
644,245
 
 
$ 
–
 

Note issued for financing of insurance premiums

 
$ 
216,754
 
 
$ 
217,804
 

SOURCE: Duos Technologies Group, Inc.

ReleaseID: 601628