Duos Technologies Reports Record Second Quarter 2018 Results; Increases Full Year 2018 Revenue Guidance to $10.1 Million

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JACKSONVILLE, Fla., Aug. 14, 2018 (GLOBE NEWSWIRE) -- Duos Technologies Group, Inc. (“Duos” or the “Company”) (OTCQB: DUOT), a provider of advanced intelligent security and analytical technology solutions, reported financial results for the second quarter ended June 30, 2018. 

Second Quarter 2018 and Recent Operational Highlights

  • Awarded multi-million-dollar contract from CN, a leading North American Class-1 transportation and logistics company (NYSE: CNI), to implement new measures targeted at preventative maintenance, improved reliability, dwell reduction and overall performance
  • Deployment of $3+ million contract with one of the nation's largest retail chains to streamline and automate gatehouse operations across the corporation's national distribution centers, delivering significant operational efficiencies for a rapid return on investment
  • Opened “Engineering and Operations Center of Excellence” facility to be used for pre-assembly and testing of Duos’ proprietary intelligent technologies and sub-systems as well as to house its rapidly growing engineering and operations teams
  • Launched proprietary dcVue™ software platform, which is designed to enable automation and mobile verification of large data center IT assets, supporting the Company’s potential for future growth into adjacent and new industries

Second Quarter 2018 Financial Results

Total revenue increased 179% to a record $3.2 million from $1.2 million in the same quarter last year. The significant increase in total revenue was driven by an increase in project revenue, which was offset by decreases in both maintenance and technical support as well as IT asset management services revenues.  The increase in project revenue is a result of the Company’s ongoing transition to new offerings, including intelligent analytics and machine learning, from traditional legacy security-centric offerings.

Gross profit increased 118% to $1.3 million from $577,000 in the same quarter last year. The increase in gross profit was due to the increase in project revenues as discussed above. On a “like for like” comparison to the equivalent quarter in 2017, gross profit in 2018 was impacted by certain accounting changes related to the implementation of Accounting Standards Codification (ASC) 606. The Company anticipates these profits will be recorded later in the year and, therefore, the current quarter’s accounting changes will have no material impact on the results for the full year.

Operating expenses increased 39% to $1.9 million from $1.4 million in the same quarter last year. The increase in operating expenses was mainly due to a non-cash expense for incentive stock options granted in the quarter. Excluding this amount, operating expenses increased by less than 10% on a cash basis.

Net loss totaled $634,000 or $(0.03) per share, an improvement from net loss of $1.3 million, or $(0.70) per share, in the same quarter a year-ago. The improvement in net loss was primarily attributable to the non-cash charges in 2017 of $832,690 in debt discount expense and $295,061 warrant derivative gain on debt related to debt financing.  On an adjusted EBITDA basis, the net loss for the second quarter of 2018 was $203,000 where the non-cash compensation expense is excluded along with interest costs, depreciation and amortization.

Financial Outlook
For the fiscal year ending December 31, 2018, the Company has increased its revenue outlook to $10.1 million from $9.3 million, which would represent an approximate 160% increase as compared to the $3.9 million reported revenue in the fiscal year ended December 31, 2017. The Company’s guidance is based on numerous contracts in backlog that are already performing and scheduled to be executed during or before the fourth quarter of 2018. Management also anticipates receiving additional awards over the course of 2018.

Management Commentary
“Our record performance in the second quarter represented a successful milestone in our long-term plan to significantly scale our business,” said Duos Chairman and CEO Gianni Arcaini. “In addition to growing our topline nearly 180%, we also made meaningful strides toward our goal of achieving GAAP profitability despite certain non-cash compensation charges that we recognized in the quarter. With the opening of our new engineering and operations facility, we can continue efficiently and organically expanding our operations to meet our current needs as well as our future growth plans.

“As a result of the ongoing success of our operations and increasing business momentum, we are increasing our revenue outlook to approximately $10.1 million in 2018, an approximate 160% increase as compared to the $3.9 million reported revenue in the fiscal year ended December 31, 2017. With our core technology now fully developed and ready to deploy, we anticipate this growth to continue as we win new business and begin deployments throughout the remainder of the year and beyond.”

Conference Call
Duos Technologies management will host a conference call on Tuesday, August 14 at 11:00 a.m. Eastern time (8:00 a.m. Pacific time) to discuss these results, followed by a question and answer period.

Date: Tuesday, August 14, 2018
Time: 11:00 a.m. Eastern time (8:00 a.m. Pacific time)
U.S. dial-in: (888) 339-2688
International dial-in: (617) 847-3007
Passcode: 74066735

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Matt Glover or Tom Colton at Liolios at (949) 574-3860.

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

About Duos Technologies Group Inc.
Duos Technologies Group, Inc. (OTCQB: DUOT), based in Jacksonville, FL, through its wholly owned subsidiary, Duos Technologies, Inc., provides advanced intelligent security and analytical technology solutions with a strong portfolio of intellectual property. Duos Technologies' 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 platform, centraco®. 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 Group also offers professional and consulting services for large data centers. For more information, visit www.duostech.com.

Regarding Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking terminology such as "believes," "expects," "may," "will," "should," "anticipates," "plans," and their opposites or similar expressions are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks, uncertainties and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based and could cause Duos Technologies Group, Inc.'s actual results to differ materially from those anticipated by the forward-looking statements.  These risks and uncertainties include, but are not limited to, those described in Item 1A in Duos' Annual Report on Form 10-K, which is expressly incorporated herein by reference, and other factors as may periodically be described in Duos' filings with the SEC.

Contacts:

Duos Technologies Corporate
Tracie Hutchins
Duos Technology Group, Inc.
904-652-1601
tlh@duostech.com

Investor Relations
Matt Glover or Tom Colton
Liolios
949-574-3860
DUOT@liolios.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,
        2018
   2017
   2018
   2017
                     
REVENUES:                  
  Project   $ 2,940,992     $ 591,119     $ 3,785,706     $ 951,606  
  Maintenance and technical support     252,447       310,974       509,893       626,301  
  IT asset management services     46,617       260,411       92,386       620,327  
                     
  Total Revenues     3,240,056       1,162,504       4,387,985       2,198,234  
                     
COST OF REVENUES:                
  Project     1,846,871       375,729       2,394,670       721,856  
  Maintenance and technical support     108,193       87,592       211,516       234,994  
  IT asset management services     27,751       122,181       47,989       260,039  
                     
  Total Cost of Revenues     1,982,815       585,502       2,654,175       1,216,889  
                     
GROSS PROFIT     1,257,241       577,002       1,733,810       981,345  
                     
OPERATING EXPENSES:                
  Selling and marketing expenses     74,403       50,182       115,624       118,929  
  Salaries, wages and contract labor     1,315,240       840,286       2,081,111       1,575,887  
  Research and development     143,081       72,380       278,361       159,998  
  Professional fees     59,937       84,580       123,801       204,733  
  General and administrative expenses     295,141       310,220       504,976       558,208  
                     
  Total Operating Expenses     1,887,802       1,357,648       3,103,873       2,617,755  
                     
LOSS FROM OPERATIONS     (630,561 )     (780,646 )     (1,370,063 )     (1,636,410 )
                     
OTHER INCOME (EXPENSES):                
Interest Expense     (4,438 )     (832,689 )     (10,166 )     (1,754,004 )
Gain on settlement of debt     -       -       -       64,647  
Warrant derivative gain (loss)     -       295,061       -       (287,327 )
Other income, net     636       -       2,762       1  
                     
  Total Other Income (Expense)     (3,802 )     (537,628 )     (7,404 )     (1,976,683 )
                     
NET LOSS       (634,363 )     (1,318,274 )     (1,377,467 )     (3,613,093 )
                     
Series A preferred stock dividends     -       (5,920 )     -       (11,840 )
                     
Net loss applicable to common stock   $ (634,363 )   $ (1,324,194 )   $ (1,377,467 )   $ (3,624,933 )
                     
                     
NET LOSS APPLICABLE TO COMMON STOCK PER COMMON SHARE:                
  Basic & Diluted   $ (0.03 )   $ (0.70 )   $ (0.07 )   $ (1.91 )
                     
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                
  Basic & Diluted     20,707,153       1,894,923       20,706,712       1,894,549  
                     


DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
                 
             June 30,    December 31,
             2018      2017  
             (Unaudited)    
 ASSETS        
 CURRENT ASSETS:          
   Cash       $   1,753,596     $   1,941,818  
   Accounts receivable, net       751,780         298,304  
   Contract assets         339,921         423,793  
   Prepaid expenses and other current assets       439,811         90,923  
                 
   Total Current Assets       3,285,108         2,754,838  
                 
   Property and equipment, net       169,171         65,362  
                 
 OTHER ASSETS:          
   Software Development Costs, net       50,000         -  
   Patents and trademarks, net       44,270         45,978  
   Total Other Assets         94,270         45,978  
                 
 TOTAL ASSETS     $   3,548,548     $   2,866,178  
                 
 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)        
                 
 CURRENT LIABILITIES:          
   Accounts payable    $   1,154,824     $   812,618  
   Accounts payable - related parties       14,598         12,598  
   Notes payable - financing agreements       109,572         49,657  
   Notes payable - related parties       -         9,078  
   Line of credit         32,833         34,513  
   Payroll taxes payable       178,390         149,448  
   Accrued expenses         378,787         497,277  
   Contract liabilities         1,768,966         200,410  
   Deferred revenue         188,732         438,907  
                 
   Total Current Liabilities       3,826,702         2,204,506  
                 
   Notes payable - related party       -         39,137  
                 
   Total Liabilities         3,826,702         2,243,643  
                 
 Commitments and Contingencies (Note 6)        
                 
 STOCKHOLDERS' EQUITY (DEFICIT):        
   Preferred stock:  $0.001 par value, 10,000,000 authorized, 9,485,000 shares available to be designated    
    Series A redeemable convertible cumulative preferred stock, $10 stated value per share,      
    500,000 shares designated; 0 issued and outstanding at June 30, 2018 and       
    December 31, 2017, convertible into common stock at $6.30 per share      -         -  
    Series B convertible cumulative preferred stock, $1,000 stated value per share,      
    15,000 shares designated; 2,830 issued and outstanding at June 30, 2018 and December 31, 2017,     
    convertible into common stock at $0.50 per share        2,830,000         2,830,000  
                 
   Common stock:  $0.001 par value; 500,000,000 shares authorized,      
   20,710,437 and 20,657,850 shares issued, 20,707,157 and 20,654,570 shares      20,710         20,658  
   outstanding at June 30, 2018 and December 31, 2017, respectively      
   Additional paid-in capital       27,085,549         26,608,823  
   Total stock & paid-in-capital       29,936,259         29,459,481  
   Accumulated deficit       (30,066,413 )       (28,688,946 )
   Sub-total         (130,154 )       770,535  
   Less:  Treasury stock (3,280 shares of common stock)       (148,000 )       (148,000 )
 Total Stockholders' Equity (Deficit)       (278,154 )       622,535  
                 
 Total Liabilities and Stockholders' Equity (Deficit)   $   3,548,548     $   2,866,178  
                 


DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
  For the Six Months Ended
  June 30,
   2018     2017 
       
Cash from operating activities:      
Net loss $   (1,377,467 )   $   (3,613,093 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization     43,714         24,599  
Gain on settlement of debt     -         (64,647 )
Stock based compensation     403,070         -  
Stock issued for services     -         15,000  
Interest expense related to debt discounts of notes payable     -         1,607,026  
Warrant derivative loss     -         287,327  
Changes in assets and liabilities:      
Accounts receivable     (453,476 )       (11,503 )
Contract assets     83,872         191,504  
Prepaid expenses and other current assets     (150,340 )       123,750  
Accounts payable     351,832         190,335  
Accounts payable-related party     2,000         4,198  
Payroll taxes payable     28,942         526,861  
Accrued expenses     (54,781 )       123,779  
Contract liabilities     1,568,554         47,133  
Deferred revenue     (250,175 )       (300,532 )
       
Net cash provided by (used in) operating activities     195,745         (848,263 )
       
Cash flows from investing activities:      
Software development costs     (60,000 )       -  
Purchase of patents/trademarks     (1,000 )       -  
Purchase of fixed assets     (134,814 )       (22,009 )
       
Net cash used in investing activities     (195,814 )       (22,009 )
       
Cash flows from financing activities:      
       
Repayments of line of credit     (1,305 )       -  
Repayments of related party notes     (48,215 )       (17,791 )
Repayments of insurance and equipment financing     (138,633 )       (94,960 )
Repayments of notes payable     -         (172,500 )
Proceeds of notes payable, net of 152,750 cash fees     -         1,022,250  
       
Net cash (used in) provided by financing activities     (188,153 )       736,999  
       
Net decrease in cash     (188,222 )       (133,273 )
Cash, beginning of period     1,941,818         174,376  
Cash, end of period     1,753,596         41,103  
       
Supplemental Disclosure of Cash Flow Information:      
Interest paid $   5,327     $   109,884  
       
Supplemental Non-Cash Investing and Financing Activities:      
Common stock issued for accrued BOD fees $   73,709     $   -  
Accrued interest forgiven related to note payable settlement $   -     $   20,697  
Debt discount related to notes payable $   -     $   1,295,592  
Note issued for financing of insurance premiums $   198,548     $   189,136  
       


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Source: Duos Technologies Group, Inc.

Released August 14, 2018