Duos Technologies Group Reports Third Quarter and Nine Month 2021 Results

JACKSONVILLE, FL / ACCESSWIRE / November 15, 2021 / Duos Technologies Group, Inc. ("Duos" or the "Company") (Nasdaq:DUOT), a provider of vision based analytical technology solutions, reported financial results for the third quarter and nine months ended September 30, 2021.

Third Quarter 2021 and Recent Operational Highlights

Third Quarter 2021 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 for the third quarter increased 36% to $1.74 million compared to $1.28 million in the same period last year. This was the aggregate of about $1.15 million for technology systems and $587,000 in recurring services and consulting revenue. The increase in total revenue was the result of progress in new installations in the technology systems portion of the business, following the receipt of an anticipated "notice to proceed" on a significant upgrade to two key installations. Some of that revenue was recognized during the quarter resulting in a 58% increase in technology systems revenues in comparison to the equivalent quarter a year ago. However, certain installations may produce revenues towards the end of the year, some of which may ultimately be recorded in 2022 as a result of supply chain delays.

Cost of revenues increased 83% to $2.80 million compared to $1.53 million in the same period last year. Cost of revenues on technology systems increased during the period, compared to the equivalent period in 2020, by a greater amount than the increase in revenues. The increase is primarily due to the additional work required to resolve previously identified quality issues, most of which are now resolved, as well as an increase in cost related to the deployment of an undercarriage technology. The Company expects costs to be lower going forward as a percentage of the overall system price. Cost of revenues decreased for services and consulting, which comprises equipment, labor and overhead necessary to support the implementation of new systems for support and maintenance of existing systems. The decrease was due to lower costs in servicing clients as well as the elimination of certain costs related to the IT Asset Management business that were recorded in the equivalent period.

 
 

Gross margin totaled $(1.06) million compared to $(247,000) in the same period last year. The decrease in gross margin was driven by higher costs as the result of additional work being necessary on certain of the Company's installations to resolve newly identified quality issues which are now mostly resolved as well as higher costs of materials due to supply chain disruptions. There was also a significant increase in cost related to the new deployment of an undercarriage technology. These higher costs are anticipated to be offset in the fourth quarter and beyond by higher revenues with the net result being a move to a positive gross margin as the business expands. The Company anticipates an improvement in the overall gross margin for the full year reporting in 2021, with much of the improvement coming in the fourth quarter.

Operating expenses decreased 44% to $1.38 million from $2.46 million in the same period last year. The decrease in operating expenses was primarily driven by a substantial decrease in overall administration costs, offset by increases in sales and marketing as well as research and development.

Net loss totaled $2.45 million compared to net loss of $2.71 million in the same period last year. The improvement in net loss was primarily attributable to the increase in revenue noted previously.

Cash and cash equivalents at quarter-end totaled $2.26 million, compared to $3.97 million at December 31, 2020.

Nine Month 2021 Financial Results

Total revenue increased 7% to $4.54 million from $4.26 million in the same period last year. This was the aggregate of about $2.74 million for technology systems and $1.8 million in recurring services revenue. The increase in total revenue was driven by new revenues being recorded after delays in receiving "notices to proceed" for anticipated new contracts earlier in the year pushed delivery dates into the second half of this year. There was a slight decrease in revenue from technology systems which was more than offset by the increase in services and consulting revenue. The Company is focusing on increasing its business from recurring revenue services and the increase is as the result of new contracts for existing and new systems. This trend is expected to continue into 2022.

Cost of revenues increased 55% to $7.72 million from $4.97 million in the same period last year. The increase was driven by increased costs of deployment related to certain installations where new technologies were being deployed for the first time. Costs for services and consulting increased at a proportionate, albeit slightly slower rate, than the increase in revenues, and this trend is expected to continue as certain economies of scale become evident late in the year and continue into 2022. Overhead more than doubled for the period reflecting higher costs for staffing current and anticipated projects although this rate of increase is expected to flatten in the fourth quarter of 2021 and beyond.

Gross margin decreased to $(3.18) million from $(715,000) in the same period last year. The decrease in gross margin was the result higher costs and certain delays related to supply chain issues. In addition, there were costs involving the Company's revamping of its operations to support an anticipated increase in the number of new systems going forward. The Company anticipates an improvement in the overall gross margin for the full year reporting in 2021, with much of those improvements expected in the fourth quarter.

Operating expenses decreased 27% to $4.04 million from $5.51 million in the same period last year. The decrease in operating expenses can be attributed to decreases in administration costs, offset by an increase in sales and marketing and research and development.

Net loss totaled $5.81 million compared to a net loss of $6.32 million in the same period last year. The improvement in net loss was primarily attributable to the impact of the Cares Act PPP loan forgiveness and the effect of lower operating expenses during the 2021 nine-month period compared to the prior year.

Financial Outlook

For the fiscal year ending December 31, 2021, the Company expects total revenue of approximately $8.0 million to $9.0 million. The Company's guidance is based on contracts in backlog and near-term pending orders that are already performing or were scheduled to be executed by the fourth quarter of 2021. Management also expects its operations to achieve close to breakeven for the last quarter of 2021 with an expected improved cash liquidity position by year end based on anticipated orders. Although uncertainties continue in the macro-economic climate, management believes that 2022 will yield a much stronger financial performance for revenue and be profitable for the fiscal year.

 
 

Management Commentary

"This quarter's return to growth was an encouraging step in the right direction while we position ourselves to meet an increasing pipeline of large contract opportunities in the coming months," said Duos Chief Executive Officer Chuck Ferry. "During the third quarter, we continued to improve our internal processes, strengthen our current solutions and invest in our technology capabilities, all of which have our company in its strongest-ever position operationally. More specifically, we've made meaningful improvements to how we execute our manufacturing, including instituting more rigorous quality controls and in-house testing prior to equipment being shipped. We've also upgraded our overall product portfolio and devoted additional resources to our artificial intelligence division, including the hiring of additional internal staff and subject matter experts. To reliably execute on the increasing order flow, we will be deploying more working capital toward pre-procuring inventory to mitigate potential supply shortages. While our vision for a self-sustaining, recurring revenue-first business has yet to materialize, we remain confident in our ability to meet our near-term financial targets. Longer term, we believe the initial progress we're seeing today supports our approach and underlies a greater opportunity ahead."

Conference Call

The Company's management will host a conference call today, Monday, November 15, 2021, at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results, followed by a question and answer period.

Date: Monday, November 15, 2021

Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)

U.S. dial-in: 877-407-3088

International dial-in: 201-389-0927

Confirmation: 13724722

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., designs, develops, deploys and operates intelligent vision based technology solutions supporting rail, logistics, intermodal and Government customers that streamline operations, improve safety and reduce costs. The Company provides cutting edge solutions that automate the mechanical and security inspection of fast moving trains, trucks and automobiles through a broad range of proprietary hardware, software, information technology and artificial intelligence. 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, as amended, 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. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law. 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

Fei Kwong

Duos Technologies Group, Inc. (Nasdaq: DUOT)

904-652-1625

[email protected]

Investor Relations

Matt Glover or Tom Colton

Gateway Investor Relations

949-574-3860

[email protected]

 
 

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, 
   2021   2020   2021   2020 
                 
REVENUES:                    
Technology systems  $1,153,150   $729,231   $2,743,849   $2,840,538 
Services and consulting   587,307    552,718    1,800,030    1,414,498 
                     
Total Revenues   1,740,457    1,281,949    4,543,879    4,255,036 
                     
COST OF REVENUES:                    
Technology systems   1,869,812    976,121    4,979,667    3,390,211 
Services and consulting   277,054    319,334    986,757    827,532 
Overhead   657,907    233,597    1,754,731    752,421 
                     
Total Cost of Revenues   2,804,773    1,529,052    7,721,155    4,970,164 
                     
GROSS MARGIN   (1,064,316)   (247,103)   (3,177,276)   (715,128)
                     
OPERATING EXPENSES:                    
Sales & marketing   361,820    173,197    1,024,872    435,522 
Research & development   57,000    21,583    197,164    77,179 
Administration   963,357    2,264,960    2,817,949    4,993,985 
                     
Total Operating Expenses   1,382,177    2,459,740    4,039,985    5,506,686 
                     
LOSS FROM OPERATIONS   (2,446,493)   (2,706,843)   (7,217,261)   (6,221,814)
                     
OTHER INCOME (EXPENSES):                    
Interest expense   (4,819)   (6,260)   (16,580)   (133,435)
Other income, net   875    4,524    1,424,501    33,732 
                     
Total Other Income (Expenses)   (3,944)   (1,736)   1,407,921    (99,703)
                     
NET LOSS  $(2,450,437)  $(2,708,579)  $(5,809,340)  $(6,321,517)
                     
                     
Basic & Diluted Net Loss Per Share  $(0.68)  $(0.77)  $(1.63)  $(1.95)
                     
                     
Weighted Average Shares-Basic & Diluted   3,588,381    3,528,128    3,559,340    3,247,954 
 
 

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 (Unaudited)

           
   September 30,   December 31, 
   2021   2020 
   (Unaudited)     
ASSETS          
CURRENT ASSETS:          
Cash  $2,257,971   $3,969,100 
Accounts receivable, net   384,654    1,244,876 
Contract assets   249,870    102,458 
Prepaid expenses and other current assets   644,878    486,626 
           
Total Current Assets   3,537,373    5,803,060 
           
Property and equipment, net   368,327    342,180 
Operating lease right of use asset, net   22,930    196,144 
Security deposit   600,000     
           
OTHER ASSETS:          
Patents and trademarks, net   67,824    64,415 
Total Other Assets   67,824    64,415 
           
TOTAL ASSETS  $4,596,454   $6,405,799 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
CURRENT LIABILITIES:          
Accounts payable  $978,170   $599,317 
Accounts payable - related parties       7,700 
Notes payable - financing agreements   54,953    42,942 
Payroll taxes payable       3,146 
Accrued expenses   1,191,567    1,038,092 
Current portion - equipment financing agreements   92,700    89,620 
Current portion - operating lease obligations   23,333    202,797 
Current portion - PPP loan       627,465 
Contract liabilities   449,496    709,553 
Deferred revenue   907,154    315,370 
           
Total Current Liabilities   3,697,373    3,636,002 
           
Equipment financing payable, less current portion   33,860    103,184 
PPP loan, less current portion       782,805 
           
Total Liabilities   3,731,233    4,521,991 
           
Commitments and Contingencies (Note 5)          
           
STOCKHOLDERS' EQUITY:          
Preferred stock:  $0.001 par value, 10,000,000 authorized, 9,480,000 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 September 30, 2021 and December 31, 2020, convertible into common stock at $6.30 per share        
Series B convertible preferred stock, $1,000 stated value per share, 15,000 shares designated; 1,705 and 1,705 issued and outstanding at September 30, 2021 and December 31, 2020, convertible into common stock at $7 per share   1,705,000    1,705,000 
Series C convertible preferred stock, $1,000 stated value per share, 5,000 shares designated; 4,500 issued and outstanding at September 30, 2021 and 0 issued and outstanding at December 31, 2020, convertible into common stock at $5.50 per share   4,500,000     
Common stock:  $0.001 par value; 500,000,000 shares authorized, 3,612,125 and 3,535,339 shares issued, 3,610,801 and 3,534,015 shares outstanding at September 30, 2021 and December 31, 2020, respectively   3,612    3,536 
Additional paid-in-capital   40,111,551    39,820,874 
Total stock & paid-in-capital   46,320,163    41,529,410 
Accumulated deficit   (45,297,490)   (39,488,150)
Sub-total   1,022,673    2,041,260 
Less:  Treasury stock (1,324 shares of common stock at September 30, 2021 and December 31, 2020)   (157,452)   (157,452)
Total Stockholders' Equity   865,221    1,883,808 
           
Total Liabilities and Stockholders' Equity  $4,596,454   $6,405,799 
 
 

DUOS TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

           
   For the Nine Months Ended 
   September 30, 
   2021   2020 
         
Cash from operating activities:          
Net loss  $(5,809,340)  $(6,321,517)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   281,220    159,121 
Stock based compensation   215,753    261,761 
Stock issued for services   75,000     
Modification of employee stock options       102,800 
PPP loan forgiveness including accrued interest   (1,421,577)    
Interest expense related to debt discounts       94,627 
Bad debt expense   76,046     
Changes in assets and liabilities:          
Accounts receivable   631,948    1,271,822 
Contract assets   (147,412)   1,191,685 
Prepaid expenses and other current assets   264,878    331,456 
Operating lease right of use asset   173,214    172,778 
Security deposit   (600,000)    
Accounts payable   378,853    (1,938,824)
Accounts payable-related party   (7,700)   (4,841)
Payroll taxes payable   (3,146)   (111,965)
Accrued expenses   164,782    648,625 
Operating lease obligation   (179,464)   (176,345)
Contract liabilities   (207,507)   324,090 
Deferred revenue   591,784    (229,184)
           
Net cash used in operating activities   (5,522,668)   (4,223,911)
           
Cash flows from investing activities:          
Purchase of patents/trademarks   (7,435)   (8,185)
Purchase of fixed assets   (303,341)   (216,401)
           
Net cash used in investing activities   (310,776)   (224,586)
           
Cash flows from financing activities:          
Repayments of line of credit       (27,615)
Repayments of insurance and equipment financing   (311,442)   (204,659)
Repayment of finance lease   (66,243)   (42,046)
Repayment of notes payable       (1,000,000)
Proceeds from PPP loan       1,410,270 
Proceeds from equipment financing       121,637 
Proceeds from common stock issued       9,253,128 
Issuance cost       (1,001,885)
Proceeds from preferred stock issued   4,500,000     
           
Net cash provided by financing activities   4,122,315    8,508,830 
           
Net (decrease) increase in cash   (1,711,129)   4,060,333 
Cash, beginning of period   3,969,100    56,249 
Cash, end of period  $2,257,971   $4,116,582 
           
Supplemental Disclosure of Cash Flow Information:          
Interest paid  $25,678   $32,768 
           
Supplemental Non-Cash Investing and Financing Activities:          
Common stock issued for accrued BOD fees  $   $52,500 
Lease right of use asset and liability  $   $644,245 
Notes issued for financing of insurance premiums  $323,452   $233,350