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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2024
 
OR
   
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________________ to ________________ 

 

Commission file number 000-55497

 

Duos Technologies Group, Inc.
(Exact name of registrant as specified in its charter)

 

Florida 65-0493217

(State or other jurisdiction of

incorporation or organization)

(IRS Employer Identification No.)

 

7660 Centurion Parkway, Suite 100, Jacksonville, Florida 32256

(Address of principal executive offices)

 

(904) 296-2807

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.001   DUOT   The Nasdaq Capital Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No 

  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No 

  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer    Accelerated filer 
Non-accelerated filer    Smaller reporting company 
Emerging growth company      

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No 

  

As of November 13, 2024, the registrant has one class of common equity, and the number of shares outstanding of such common equity is 8,410,625.

 

 

 
 

 

 

 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION
     
Item 1. Financial Statements 1
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 47
     
Item 4. Controls and Procedures 47
     
PART II – OTHER INFORMATION
     
Item 1. Legal Proceedings 48
     
Item 1A. Risk Factors 48
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 48
     
Item 3. Defaults Upon Senior Securities 48
     
Item 4. Mine Safety Disclosures 48
     
Item 5. Other Information 48
     
Item 6. Exhibits 49

 

SIGNATURES 50

 

i

 
 

 

PART I FINANCIAL INFORMATION

Item 1. Financial Statements.

 

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

         
   September 30,   December 31, 
   2024   2023 
   (Unaudited)     
ASSETS        
 CURRENT ASSETS:          
 Cash  $613,594   $2,441,842 
 Restricted cash   32,519     
 Accounts receivable, net   1,601,152    1,462,463 
 Contract assets   609,008    641,947 
 Inventory   1,028,387    1,526,165 
 Prepaid expenses and other current assets   310,869    184,478 
 Note Receivable, net   159,375     
           
 Total Current Assets   4,354,904    6,256,895 
           
 Property and equipment, net   2,318,233    726,507 
 Operating lease right of use asset   4,117,471    4,373,155 
 Security deposit   500,000    550,000 
           
 OTHER ASSETS:          
 Intangible Asset, net   10,140,238     
 Note Receivable, net       153,750 
 Patents and trademarks, net   128,793    129,140 
 Software development costs, net   465,228    652,838 
 Total Other Assets   10,734,259    935,728 
           
 Total Assets  $22,024,867   $12,842,285 
           
 LIABILITIES AND STOCKHOLDERS' EQUITY          
           
 CURRENT LIABILITIES:          
 Accounts payable  $1,727,190   $595,634 
 Notes payable - financing agreements   128,404    41,976 
 Accrued expenses   323,593    164,113 
 Operating lease obligations-current portion   793,658    779,087 
 Contract liabilities, current   2,982,213    1,666,243 
           
 Total Current Liabilities   5,955,058    3,247,053 
           
 Contract liabilities, less current portion   7,947,755     
 Notes payable   1,647,995     
 Operating lease obligations, less current portion   3,961,590    4,228,718 
           
 Total Liabilities   19,512,398    7,475,771 
           
 Commitments and Contingencies (Note 5)          
           
 STOCKHOLDERS' EQUITY:          
Preferred stock: $0.001 par value, 10,000,000 shares authorized, 9,441,000 shares available to be designated           
Series A redeemable convertible preferred stock, $10 stated value per share, 500,000 shares designated; 0 and 0 issued and outstanding at September 30, 2024 and December 31, 2023, respectively, convertible into common stock at $6.30 per share          
Series B convertible preferred stock, $1,000 stated value per share, 15,000 shares designated; 0 and 0 issued and outstanding at September 30, 2024 and December 31, 2023, respectively, convertible into common stock at $7 per share          
Series C convertible preferred stock, $1,000 stated value per share, 5,000 shares designated; 0 and 0 issued and outstanding at September 30, 2024 and December 31, 2023, respectively, convertible into common stock at $5.50 per share        
Series D convertible preferred stock, $1,000 stated value per share, 4,000 shares designated; 1,399 and 1,299 issued and outstanding at September 30, 2024 and December 31, 2023, respectively, convertible into common stock at $3.00 per share   1    1 
Series E convertible preferred stock, $1,000 stated value per share, 30,000 shares designated; 13,625 and 11,500 issued and outstanding at September 30, 2024 and December 31, 2023, respectively, convertible into common stock at $2.61 and $3.00 per share, respectively   14    12 
Series F convertible preferred stock, $1,000 stated value per share, 5,000 shares designated; 0 and 0 issued and outstanding at September 30, 2024 and December 31, 2023, respectively, convertible into common stock at $6.20 per share          
Common stock: $0.001 par value; 500,000,000 shares authorized, 8,051,189 and 7,306,663 shares issued, 8,049,865 and 7,305,339 shares outstanding at September 30, 2024 and December 31, 2023, respectively   8,049    7,306 
 Additional paid-in-capital   73,623,552    69,120,199 
 Accumulated deficit   (70,961,695)   (63,603,552)
 Sub-total   2,669,921    5,523,966 
 Less:  Treasury stock (1,324 shares of common stock at September 30, 2024 and December 31, 2023)  
 
 
 
 
(157,452
 
)
 
 
 
 
 
(157,452
 
)
 Total Stockholders' Equity   2,512,469    5,366,514 
           
 Total Liabilities and Stockholders' Equity  $22,024,867   $12,842,285 

  

 See accompanying condensed notes to the unaudited consolidated financial statements.

  

 

1 
 

 

 

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

                 
 
 
 
 
For the Three Months Ended
September 30,
 
 
 
 
For the Three Months Ended
September 30,
 
 
 
 
For the Nine Months Ended
September 30,
 
 
 
 
For the Nine Months Ended
September 30,
 
 
   2024   2023   2024   2023 
                 
REVENUES:                
 Technology systems  $1,686,456   $705,849   $2,221,310   $3,404,107 
 Services and consulting   1,552,454    825,074    3,598,776    2,541,163 
                     
 Total Revenues   3,238,910    1,530,923    5,820,086    5,945,270 
                     
 COST OF REVENUES:                    
 Technology systems   947,563    883,836    2,311,912    3,723,151 
 Services and consulting   1,372,248    420,499    2,709,007    1,217,022 
                     
 Total Cost of Revenues   2,319,811    1,304,335    5,020,919    4,940,173 
                     
 GROSS MARGIN   919,099    226,588    799,167    1,005,097 
                     
 OPERATING EXPENSES:                    
 Sales and marketing   471,411    353,386    1,737,353    962,040 
 Research and development   396,610    450,006    1,168,752    1,392,692 
 General and administration   1,971,358    2,394,173    5,790,804    6,916,390 
                     
 Total Operating Expenses   2,839,379    3,197,565    8,696,909    9,271,122 
                     
 LOSS FROM OPERATIONS   (1,920,280)   (2,970,977)   (7,897,742)   (8,266,025)
                     
 OTHER INCOME (EXPENSES):                    
    Interest expense   (116,396)   (1,406)   (117,991)   (5,816)
    Change in fair value of warrant liabilities   245,980        245,980     
    Gain on extinguishment of warrant liabilities   379,626        379,626     
    Other income, net   9,407    24,647    31,984    191,022 
                     
 Total Other Income (Expenses), net   518,617    23,241    539,599    185,206 
                     
 NET LOSS  $(1,401,663)  $(2,947,736)  $(7,358,143)  $(8,080,819)
                     
 Basic and Diluted Net Loss Per Share  $(0.18)  $(0.41)  $(0.98)  $(1.12)
                     
                     
 Weighted Average Shares-Basic and Diluted   7,724,170    7,240,632    7,494,772    7,189,256 

 

See accompanying condensed notes to the unaudited consolidated financial statements.

 

 

2 
 

 

  

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Three and Nine Months Ended September 30, 2024 and 2023

(Unaudited)

                                                                 
   Preferred Stock
B
   Preferred Stock
C
   Preferred Stock
D
   Preferred Stock
E
   Preferred Stock
F
   Common Stock   Additional            
   # of Shares   Amount   # of Shares   Amount   # of Shares   Amount   # of Shares   Amount   # of Shares   Amount   # of Shares   Amount  

Paid-in-
Capital

   Accumulated Deficit   Treasury Stock   Total 
                                                                 
Balance December 31, 2022      $       $    1,299   $1       $       $    7,156,876   $7,156   $56,562,600   $(52,361,834)  $(157,452)  $4,050,471 
                                                                                 
Series E preferred stock issued                           4,000    4                    3,999,996            4,000,000 
                                                                                 
Stock options compensation                                                   75,128            75,128 
                                                                                 
Stock issuance cost                                                   (299,145)           (299,145)
                                                                                 
Stock issued for services                                           12,463    12    32,488            32,500 
                                                                                 
Net loss for the three months ended March 31, 2023                                                       (2,143,683)       (2,143,683)
                                                                                 
Balance March 31, 2023      $       $    1,299   $1    4,000   $4       $    7,169,339   $7,168   $60,371,067   $(54,505,517)  $(157,452)  $5,715,271 
                                                                                 
Stock options compensation      $       $       $       $       $       $   $161,399   $   $   $161,399 
                                                                                 
Stock issuance cost                                                   281,500            281,500 
                                                                                 
Stock issued for services                                           5,645    6    32,494            32,500 
                                                                                 
Stock issued under the Employee Stock Purchase Plan ("ESPP") for cash and compensation                                           65,561    66    183,199            183,265 
                                                                                 
Net loss for the three months ended June 30, 2023                                                       (2,989,400)       (2,989,400)
                                                                                 
Balance June 30, 2023      $       $    1,299   $1    4,000   $4       $    7,240,545   $7,240   $61,029,659   $(57,494,917)  $(157,452)  $3,384,535 
                                                                                 
Series F preferred stock issued      $       $       $       $    5,000   $5       $   $4,999,995   $   $   $5,000,000 
                                                                                 
Stock options compensation                                                   164,118            164,118 
                                                                                 
Stock issued for services                                           7,910    8    40,557            40,565 
                                                                                 
Stock Compensation under ESPP                                                   32,728            32,728 
                                                                                 
Net loss for the three months ended September 30, 2023                                                       (2,947,736)       (2,947,736)
                                                                                 
Balance September 30, 2023      $       $    1,299   $1    4,000   $4    5,000   $5    7,248,455   $7,248   $66,267,057   $(60,442,653)  $(157,452)  $5,674,210 

 

 

 

See accompanying condensed notes to the unaudited consolidated financial statements.

 

 

3 
 

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Three and Nine Months Ended September 30, 2024 and 2023 (Continued)

(Unaudited)

                                                                 
   Preferred Stock
B
   Preferred Stock
C
   Preferred Stock
D
   Preferred Stock
E
   Preferred Stock
F
   Common Stock   Additional            
   # of Shares   Amount   # of Shares   Amount   # of Shares   Amount   # of Shares   Amount   # of Shares   Amount   # of Shares   Amount  

Paid-in-
Capital

   Accumulated Deficit   Treasury Stock   Total 
                                                                 
Balance December 31, 2023      $       $    1,299   $1    11,500   $12       $    7,306,663   $7,306   $69,120,199   $(63,603,552)  $(157,452)  $5,366,514 
                                                                                 
Series D preferred stock issued                   620    1                            619,999            620,000 
                                                                                 
Series E preferred stock issued                           2,125    2                    2,125,000            2,125,002 
                                                                                 
Stock options compensation                                                   141,204            141,204 
                                                                                 
Stock issuance cost                                                   (36,188)           (36,188)
                                                                                 
Stock issued for services                                           8,655    9    37,491            37,500 
                                                                                 
Stock Compensation under ESPP                                                   18,116            18,116