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 March 31, 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 May 10, 2024, the registrant has one class of common equity, and the number of shares outstanding of such common equity is 7,531,986.

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	28

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36

Item 4.	Controls and Procedures	36

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults Upon Senior Securities	37

Item 4.	Mine Safety Disclosures	37

Item 5.	Other Information	37

Item 6.	Exhibits	38

SIGNATURES

PART I FINANCIAL INFORMATION

Item 1. Financial Statements.

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	March 31,			December 31,
	2024			2023
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	2,977,592		$	2,441,842
Accounts receivable, net		596,090			1,462,463
Contract assets		912,046			641,947
Inventory		1,502,337			1,526,165
Prepaid expenses and other current assets		398,856			184,478

Total Current Assets		6,386,921			6,256,895

Property and equipment, net		645,342			726,507
Operating lease right of use asset		4,289,807			4,373,155
Security deposit		550,000			550,000

OTHER ASSETS:
Note Receivable, net		155,625			153,750
Patents and trademarks, net		127,357			129,140
Software development costs, net		587,388			652,838
Total Other Assets		870,370			935,728

TOTAL ASSETS	$	12,742,440		$	12,842,285

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	179,916		$	595,634
Notes payable - financing agreements		183,763			41,976
Accrued expenses		240,483			164,113
Operating lease obligations-current portion		783,944			779,087
Contract liabilities		1,692,940			1,666,243

Total Current Liabilities		3,081,046			3,247,053

Operating lease obligations, less current portion		4,141,555			4,228,718

Total Liabilities		7,222,601			7,475,771

Commitments and Contingencies (Note 4)		—			—

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 issued and outstanding at March 31, 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 March 31, 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 March 31, 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; 1,919 and 1,299 issued and outstanding at March 31, 2024 and December 31, 2023, respectively, convertible into common stock at $3 per share		2			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 March 31, 2024 and December 31, 2023, respectively, convertible into common stock at $3 per share		14			12
Series F convertible preferred stock, $1,000 stated value per share, 5,000 shares designated; 0 and 0 issued and outstanding at March 31, 2024 and December 31, 2023, respectively, convertible into common stock at $6.20 share		—			—
Common stock: $0.001 par value; 500,000,000 shares authorized, 7,315,318 and 7,306,663 shares issued, 7,313,994 and 7,305,339 shares outstanding at March 31, 2024 and December 31, 2023, respectively		7,315			7,306
Additional paid-in-capital		72,025,821			69,120,199
Accumulated deficit		(66,355,861	)		(63,603,552	)
Sub-total		5,677,291			5,523,966
Less: Treasury stock (1,324 shares of common stock at March 31, 2024 and December 31, 2023)		(157,452	)		(157,452	)
Total Stockholders' Equity		5,519,839			5,366,514

Total Liabilities and Stockholders' Equity	$	12,742,440		$	12,842,285

See accompanying condensed notes to the unaudited consolidated financial statements.

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Three Months Ended March 31,
	2024			2023

REVENUES:
Technology systems	$	269,855		$	1,827,764
Services and consulting		800,825			816,524

Total Revenues		1,070,680			2,644,288

COST OF REVENUES:
Technology systems		583,437			1,767,209
Services and consulting		392,611			339,907

Total Cost of Revenues		976,048			2,107,116

GROSS MARGIN		94,632			537,172

OPERATING EXPENSES:
Sales and marketing		553,486			307,577
Research and development		382,142			404,885
General and Administration		1,920,050			1,971,508

Total Operating Expenses		2,855,678			2,683,970

LOSS FROM OPERATIONS		(2,761,046	)		(2,146,798	)

OTHER INCOME (EXPENSES):
Interest expense		(445	)		(1,180	)
Other income, net		9,182			4,295

Total Other Income (Expenses)		8,737			3,115

NET LOSS	$	(2,752,309	)	$	(2,143,683	)


Basic and Diluted Net Loss Per Share	$	(0.38	)	$	(0.30	)


Weighted Average Shares-Basic and Diluted		7,306,949			7,156,876

See accompanying condensed notes to the unaudited consolidated financial statements.

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Three Months Ended March 31, 2024 and 2023

(Unaudited)


	Preferred Stock D				Preferred Stock E				Preferred Stock F				Common Stock				Additional			Accumulated
	# of Shares		Amount		# of Shares		Amount		# of Shares		Amount		# of Shares		Amount		Paid-in-Capital			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

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

Net loss for the three months ended March 31, 2024		—		—		—		—		—		—		—		—		—			(2,752,309	)		—			(2,752,309	)

Balance March 31, 2024		1,919	$	2		13,625	$	14		—	$	—		7,315,318	$	7,315	$	72,025,821		$	(66,355,861	)	$	(157,452	)	$	5,519,839

See accompanying condensed notes to the unaudited consolidated financial statements.

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Three Months Ended
	March 31,
	2024			2023

Cash from operating activities:
Net loss	$	(2,752,309	)	$	(2,143,683	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		158,208			116,588
Stock based compensation		159,320			75,128
Stock issued for services		37,500			32,500
Amortization of operating lease right of use asset		83,348			77,101
Changes in assets and liabilities:
Accounts receivable		866,373			2,700,917
Note receivable		(1,875	)		—
Contract assets		(270,099	)		(1,000,590	)
Inventory		23,828			(101,167	)
Prepaid expenses and other current assets		57,944			228,941
Accounts payable		(415,718	)		(1,008,207	)
Accrued expenses		76,370			(85,371	)
Operating lease obligation		(82,306	)		(8,107	)
Contract liabilities		26,697			1,108,864

Net cash used in operating activities		(2,032,719	)		(7,086	)

Cash flows from investing activities:
Purchase of patents/trademarks		(980	)		(7,339	)
Purchase of software development		—			(212,067	)
Purchase of fixed assets		(8,830	)		(41,738	)

Net cash used in investing activities		(9,810	)		(261,144	)

Cash flows from financing activities:
Repayments on financing agreements		(130,535	)		(201,485	)
Repayment of finance lease		—			(11,285	)
Stock issuance cost		(36,188	)		(299,145	)
Proceeds from preferred stock issued		2,745,002			4,000,000

Net cash provided by financing activities		2,578,279			3,488,085

Net increase in cash		535,750			3,219,855
Cash, beginning of period		2,441,842			1,121,092
Cash, end of period	$	2,977,592		$	4,340,947

Supplemental Disclosure of Cash Flow Information:
Interest paid	$	—		$	1,180
Taxes paid	$	—		$	—

Supplemental Non-Cash Investing and Financing Activities:
Notes issued for financing of insurance premiums	$	272,322		$	320,004

See accompanying condensed notes to the unaudited consolidated financial statements.

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

(Unaudited)

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Duos Technologies Group, Inc. (the “Company”), through its operating subsidiary, Duos Technologies, Inc. (“Duos”) (collectively the “Company”), is a company that specializes in machine vision and artificial intelligence to analyze fast moving objects such as trains, trucks, automobiles, and aircraft. This technology can help improve safety, maintenance, and operating metrics.

The Company is the inventor of the Railcar Inspection Portal (RIP) and is currently the rail industry leader for machine vision/camera wayside detection systems that include the use of Artificial Intelligence at speeds up to 125 mph. The RIP inspects a train at full speed from the top, sides, and bottom looking at FRA/AAR mandated safety inspection points. The system also detects illegal riders, which can assist law enforcement agencies. Each rail car is scanned with machine vision cameras and other sensors from the top, sides, and bottom, where images are produced within seconds of the railcar passing. These images can then be used by the customer to help prevent derailments, improve maintenance operations, and assist with security. The Company self-performs all aspects of hardware, software, Information Technology (“IT”), and Artificial Intelligence development and engineering. The Company maintains significant intellectual property and continues to be awarded additional patents for both the technology and methodologies used. The Company also has a proprietary portfolio of approximately 50 Artificial Intelligence “Use Cases” that automatically flag defects. The Company has deployed this system with several Class 1 railroads and one major passenger carrier and anticipates an increased demand in the future from railcar operators, owners, shippers, transit railroads as well as law enforcement agencies.

The Company has also developed the Automated Logistics Information System (“ALIS”) which automates gatehouse operations where trucks enter and exit large logistics and intermodal facilities. This solution also incorporates sensors and data points as necessary for each operation and directly interconnects with backend logistics databases and processes to streamline and significantly improve operations and security and, importantly, dramatically improve throughput on each lane on which the technology is deployed. The Company is not currently actively pursuing further customers for ALIS but will continue to analyze the potential market and expects to deploy an upgraded Truck Inspection Portal (TIP) which uses the same technology and lessons learned from the ALIS and RIP systems at some point in the future.

The Company’s strategy for the rail industry is to expand beyond our existing customer base in the Class 1 and major passenger transit market and we expect to add additional users in the short line and regional transit markets in North America. In addition, we plan to expand our subscription offering to car owners and shippers and expand operations to meet the demand from international customers. The Company is prepared to respond and scale, if necessary, to react to increased demand from potential regulations that may be imposed around wayside detection technology. In the future the Company may put more emphasis on the trucking and intermodal sector with an updated Truck Inspection Portal solution. The Company continues to focus on operational and technical excellence, customer satisfaction, and maintaining a highly skilled and performance-based work force. The Company is also further investigating market opportunities for subsets of its technology including deployment and management of Edge Data Centers, a fundamental component of the distributed, rapid response data analysis used in the RIP.

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

(Unaudited)

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (all of which are of a normal recurring nature) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other future period. These unaudited consolidated financial statements and the unaudited condensed notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2024.

Principles of Consolidation

The unaudited consolidated financial statements include Duos Technologies Group, Inc. and its wholly owned subsidiary, Duos Technologies, Inc. All inter-company transactions and balances are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. The most significant estimates in the accompanying unaudited consolidated financial statements include the allowance on accounts receivable and notes receivable, valuation of common stock warrants received in exchange for an asset sale, valuation of deferred tax assets, valuation of intangible and other long-lived assets, estimates of net contract revenues and the total estimated costs to determine progress towards contract completion, valuation of inventory, estimates of the valuation of right of use assets and corresponding lease liabilities, valuation of warrants issued with debt and valuation of stock-based awards. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Concentrations

Cash Concentrations

Cash is maintained at financial institutions and at times, balances may exceed federally insured limits. We have not experienced any losses related to these balances. As of March 31, 2024, the balance in one financial institution exceeded federally insured limits by approximately $2,485,140. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s consolidated financial condition, results of operation and cash flows.

Significant Customers and Concentration of Credit Risk

The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:

For the three months ended March 31, 2024, three customers accounted for 31%, 30% and 26% of revenues. For the three months ended March 31, 2023, two customers accounted for 70%, and 20% of revenues. In all cases, there are no minimum contract values stated. Each contract covers an agreement to deliver a Railcar Inspection Portal which, once accepted, must be paid in full, with 30% or more being due and payable prior to delivery. The balances of the contracts are for service and maintenance which is may be paid annually in advance with revenues recorded ratably over the contract period.

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

(Unaudited)

At March 31, 2024, three customers accounted for 49%, 38%, and 13% of accounts receivable. At December 31, 2023, two customers accounted for 83%, and

SEC Form 10-Q filed by Duos Technologies Group Inc.