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.



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