Duos Technologies Group Reports Third Quarter 2018 Results

November 14, 2018

Company Increases Full Year 2018 Revenue Guidance to $11.0 Million

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

Third Quarter 2018 and Recent Operational Highlights

  • Awarded contract in the aggregate of $1.0 million from a regional bank (the “Bank”) with a national footprint for the installation of Duos’ praesidium® and centraco® systems, which will provide comprehensive security solutions for 19 of the Bank’s sites in 14 locations across the United States
  • Awarded a software license and application model agreement from a leading North American Class-1 transportation and logistics company to develop enhanced inspection algorithms, which covers the development and licensing of 17 artificial intelligence-based detection algorithm models
  • Awarded a patent by the U.S. Patent and Trademark Office for the Company’s Linear Speed Measurement technology, which enables the “stitching” of images that are a single pixel wide into an accurate high-definition image of a train with up to 100 or more cars, significantly increasing the accuracy of the speed information compared to commercially available measurement devices
  • Completed integration and received certification under the Lenel Open Access Alliance Program (“OAAP”) for enhanced security offerings, which greatly expands the capabilities of the Physical Security Information Management (“PSIM”) component of the Duos centraco® 3.0 platform
  • Increased headcount to 50 staff during the quarter
  • Opened Operations Center of Excellence site, housing the company’s technical staff, research and development and testing facility

Third Quarter 2018 Financial Results

Total revenue increased 388% to a Company record $5.1 million, from $1.0 million in the same quarterly period last year. The significant increase in total revenue was driven by an increase in project revenue and maintenance and technical support, which was offset by a decrease in 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 501% to more than $2.3 million, from $387,000 in the same quarterly period last year. The significant increase in gross profit was due to the increase in project revenues as discussed above. In previous quarters, gross profit was impacted by certain accounting changes related to the implementation of Accounting Standards Codification (ASC) 606. The Company had anticipated these profits to be recorded later in the year and, therefore, the third quarter’s accounting is directly comparable with the equivalent quarter in 2017. Gross profit was slightly impacted by revenues related to construction on two projects that were essentially “pass-through” or low margin. Management anticipates gross profit to be close to historical norms for the full year.

Operating expenses increased 44% to $1.7 million from $1.2 million in the same quarterly period last year. The increase in operating expenses was mainly due to an increase in resources related to the significant increase in revenues for the period. Selling and marketing as well as research and development both increased in line with the Company’s investment in resources to grow the business. The increase in salaries, wages and contract labor was higher during the period due to an increase in number of employees and additional contract expenses related to the overall significant increase in revenues.

Net Income totaled $633,000, or $0.03 per share , an improvement from net loss of $125,000, or $(0.07) per share (basic), in the same quarter a year-ago. The improvement in net income was primarily attributable to the increase in project revenue mentioned above.

Financial Outlook
For the fiscal year ending December 31, 2018, the Company has increased its revenue outlook to $11.0 million from $10.1 million, which would represent an approximate 183% 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 contracts in backlog that are already performing and scheduled to be executed during, or which have been executed before, the fourth quarter of 2018. Management also anticipates receiving additional awards in the remainder of 2018. 

Management Commentary
“We delivered yet another record financial performance in the third quarter of this year and continued to make significant operational progress in our long-term growth plan,” said Duos Chairman and CEO Gianni Arcaini. “We expect our performance and growth to continue through the remainder of the year.  With our new engineering and operations facility up and running, as well as the addition of several key executives to our management team, we believe we have the tools and the talent to take our success to new heights.

“Looking ahead, we are in discussions with a number of multi-national organizations to partner on expanded technologies and distribution of our systems to the global markets.  Furthermore, we are in the process of consolidating our machine learning and artificial intelligence program in a new division which will operate under the brand ‘TrueVue360’.”

Conference Call
The Company’s management will host a conference call on Thursday, November 15, 2018 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: Thursday, November 15, 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: 92814227

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 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.

About Duos Technologies Group, Inc.
Duos Technologies Group, Inc. (OTCQB: DUOT), based in Jacksonville, Florida, through its wholly owned subsidiary, Duos Technologies, Inc., provides advanced intelligent security and 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 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,” or similar expressions or the negative of these terms and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which 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 Nine Months Ended 
         September 30,     September 30, 
          2018       2017       2018       2017  
                     
 REVENUES:                   
   Project    $   4,731,106     $   561,022     $   8,516,812     $   1,512,628  
   Maintenance and technical support        371,110         288,137         881,004         914,438  
   IT asset management services        -         196,576         92,386         816,903  
                     
   Total Revenues        5,102,216         1,045,735         9,490,202         3,243,969  
                     
 COST OF REVENUES:                 
   Project        2,684,785         458,337         5,079,455         1,180,193  
   Maintenance and technical support        89,077         131,363         300,593         366,357  
   IT asset management services        -          68,691         47,989         328,730  
                     
   Total Cost of Revenues        2,773,862         658,391         5,428,037         1,875,280  
                     
 GROSS PROFIT        2,328,354         387,344         4,062,165         1,368,689  
                     
 OPERATING EXPENSES:                 
   Selling and marketing expenses        73,468         27,104         189,092         146,031  
   Salaries, wages and contract labor        1,072,029         784,012         3,153,138         2,359,899  
   Research and development        122,755         65,984         401,116         225,982  
   Professional fees        63,878         87,366         187,679         292,099  
   General and administrative expenses        359,991         210,398         864,969         768,606  
                     
   Total Operating Expenses        1,692,121         1,174,864         4,795,994         3,792,617  
                     
 INCOME (LOSS) FROM OPERATIONS      636,233       (787,520 )       (733,829 )     (2,423,928 )
                     
 OTHER INCOME (EXPENSES):                 
  Interest Expense      (4,589 )     (1,525,894 )     (14,755 )       (3,279,898 )
  Gain on settlement of debt        -         -         -         64,647  
  Warrant derivative gain        -         2,188,546         -         1,901,219  
  Other income, net        981         -       3,742         1  
                     
   Total Other Income (Expense)      (3,608 )     662,652       (11,013 )     (1,314,031 )
                     
 NET INCOME (LOSS)        632,625         (124,868 )     (744,842 )       (3,737,959 )
                     
 Series A preferred stock dividends        -         (5,920 )       -         (17,760 )
                     
 Net income (loss) applicable to common stock    $   632,625     $   (130,788 )   $   (744,842 )   $   (3,755,719 )
                     
                     
 Basic Net Income (Loss) Per Share    $   0.03     $   (0.07 )   $   (0.04 )   $   (1.98 )
 Diluted Net Income(Loss) Per Share    $   0.02     $   (0.07 )   $   (0.04 )   $   (1.98 )
                     
 Weighted Average Shares-Basic        20,752,450         1,899,716         20,724,153         1,896,578  
 Weighted Average Shares-Diluted        26,412,450         1,899,716         20,724,153         1,896,578  
                     


 DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES 
  CONSOLIDATED BALANCE SHEETS 
     
                 
             September 30,     December 31, 
               2018         2017   
             (Unaudited)     
 ASSETS         
 CURRENT ASSETS:           
   Cash        $   1,572,051     $   1,941,818  
   Accounts receivable, net        1,391,447         298,304  
   Contract assets          347,565         423,793  
   Prepaid expenses and other current assets        249,162         90,923  
                 
   Total Current Assets        3,560,225         2,754,838  
                 
   Property and equipment, net        170,899         65,362  
                 
 OTHER ASSETS:           
   Software Development Costs, net        45,000         -  
   Patents and trademarks, net        47,428         45,978  
   Total Other Assets          92,428         45,978  
                 
 TOTAL ASSETS      $   3,823,552     $   2,866,178  
                 
 LIABILITIES AND STOCKHOLDERS' EQUITY         
                 
 CURRENT LIABILITIES:           
   Accounts payable    $   981,310     $   812,618  
   Accounts payable - related parties        13,473         12,598  
   Notes payable - financing agreements        69,038         49,657  
   Notes payable - related parties        -         9,078  
   Line of credit          31,516         34,513  
   Payroll taxes payable        200,119         149,448  
   Accrued expenses          441,091         497,277  
   Contract liabilities          1,258,159         200,410  
   Deferred revenue          279,375         438,907  
                 
   Total Current Liabilities        3,274,081         2,204,506  
                 
   Notes payable - related party        -         39,137  
                 
   Total Liabilities          3,274,081         2,243,643  
                 
 Commitments and Contingencies (Note 6)         
                 
 STOCKHOLDERS' EQUITY:           
   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 September 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 September 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,      
       21,010,437 and 20,657,850 shares issued, 21,007,157 and 20,654,570 shares            21,010         20,658  
       outstanding at September 30, 2018 and December 31, 2017, respectively         
   Additional paid-in capital        27,280,249         26,608,823  
   Total stock & paid-in-capital       30,131,259         29,459,481  
   Accumulated deficit        (29,433,788 )       (28,688,946 )
   Sub-total         697,471         770,535  
   Less:  Treasury stock (3,280 shares of common stock)       (148,000 )       (148,000 )
 Total Stockholders' Equity        549,471         622,535  
                 
 Total Liabilities and Stockholders' Equity    $   3,823,552     $   2,866,178  
                 


 DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES 
  CONSOLIDATED STATEMENTS OF CASH FLOWS 
 (Unaudited) 
  For the Nine Months Ended
  September 30,
    2018       2017  
       
Cash from operating activities:      
Net loss $   (744,842 )   $   (3,737,959 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization     71,318         36,519  
Gain on settlement of debt     -         (64,647 )
Stock based compensation     403,070         -  
Stock issued for services     -         40,000  
Interest expense related to debt discounts of notes payable     -         3,064,086  
Warrant derivative gain     -         (1,901,219 )
Changes in assets and liabilities:      
  Accounts receivable     (1,093,143 )       (326,160 )
  Contract assets     76,228         131,587  
  Prepaid expenses and other current assets     58,934         207,936  
  Accounts payable     168,692         622,946  
  Accounts payable-related party     875         1,238  
  Payroll taxes payable     50,671         734,190  
  Accrued expenses     17,523         455,780  
  Contract liabilities     1,057,747         23,221  
  Deferred revenue     (159,532 )       (333,626 )
       
Net cash used in operating activities     (92,459 )       (1,046,108 )
       
Cash flows from investing activities:      
  Software development costs     (60,000 )       -  
  Purchase of patents/trademarks     (5,500 )       -  
  Purchase of fixed assets     (157,804 )       (22,549 )
       
Net cash used in investing activities     (223,304 )       (22,549 )
       
Cash flows from financing activities:      
  Bank overdraft         688  
  Repayments of line of credit     (2,997 )       -  
  Repayments of related party notes     (48,215 )       (19,911 )
  Repayments of insurance and equipment financing     (197,792 )       (153,496 )
  Repayments of notes payable     -         (172,500 )
  Proceeds from warrants exercised     195,000         -  
  Proceeds of notes payable, net of 185,250 cash fees     -         1,239,750  
       
Net cash (used in) provided by financing activities     (54,004 )       894,531  
       
Net decrease in cash     (369,767 )       (174,126 )
Cash, beginning of period     1,941,818         174,376  
Cash, end of period     1,572,051         250  
       
Supplemental Disclosure of Cash Flow Information:      
Interest paid $   7,411     $   110,919  
       
Supplemental Non-Cash Investing and Financing Activities:      
Common stock issued for accrued BOD fees $   73,708     $   -  
Accrued interest forgiven related to note payable settlement  $   -     $   20,697  
Debt discount related to notes payable $   -     $   1,571,250  
Note issued for financing of insurance premiums $   217,173     $   208,201  
       

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Source: Duos Technologies Group, Inc.