Duos Technologies (DUOT) 8-K/A Completion of Acquisition or Disposition of Assets

EXHIBIT 99.2

Duos Technologies,Inc.

Financial Statements

December 31, 2014 and 2013

CONTENTS

	Page(s)
Report of Independent Registered Public AccountingFirm	2
Balance Sheets at December 31, 2014 and2013	3
Statements of Operations for the years ended December 31, 2014 and2013	4
Statements of Changes in Stockholders’ Equity (Deficit) for the yearsended December 31, 2014 and2013	5
Statements of Cash Flows for the years ended December 31, 2014 and2013	6
Notes to the FinancialStatements	7

(1)

Report of Independent Registered Public AccountingFirm

To the Board of Directors and Stockholdersof: Duos Technologies,Inc.

We haveauditedtheaccompanyingbalancesheetsofDuosTechnologies,Inc.asof December 31, 2014 and 2013 and the related statements of operations, changes instockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31,2014. These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on ouraudits.

We conductedourauditsinaccordancewiththestandardsofthePublicCompanyAccounting Oversight Board (United States). Those standards require that we plan and perform the auditsto obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement.Anaudit includesexamining,onatestbasis,evidencesupportingtheamounts anddisclosuresinthefinancialstatements.Anauditalsoincludesassessingtheaccounting principles used and significant estimates made by management, as well as evaluating theoverallfinancialstatementpresentation.Webelievethatourauditsprovideareasonablebasisforour opinion.

In ouropinion,thefinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects, thefinancial positionofDuosTechnologies,Inc.asofDecember31,2014and2013,andthe results of its operations and its cash flows for each of the two years in the periodended December31,2014,inconformitywithaccountingprinciplesgenerallyacceptedintheUnited States ofAmerica.

The accompanying financial statements have been prepared assuming the Companywill continue asagoingconcern.AsdiscussedinNote2tothefinancialstatements,theCompany reported anetlossandcashusedinoperationsof$2,107,015and$985,650, respectively,fortheyearended December31,2014andasofDecember31,2014,hasaworking capital deficit, stockholders’deficitandaccumulated deficit of $5,147,708, $5,050,329 and $18,625,226, respectively. These matters raise substantial doubtabout theCompany’sabilitytocontinueasagoingconcern.Management’splansastothesematters are also described in Note 2. The financial statements do not include any adjustments thatmight result from the outcome of thisuncertainty.

/s/ Salberg & Company,P.A.

SALBERG & COMPANY,P.A.

Boca Raton,Florida

June 17, 2015

2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL33431-7328Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561)995-1920

www.salbergco.com •info@salbergco.com

Member National Association of Certified Valuation Analysts • Registered with thePCAOB MemberCPAConnectwithAffiliatedOfficesWorldwide•MemberAICPACenterforAuditQuality

(2)

DUOS TECHNOLOGIES, INC.
BALANCE SHEETS
	December 31,			December 31,
	2014			2013
ASSETS
CURRENT ASSETS:
Cash	$	85,435		$	250
Accounts receivable, net		317,934			655,623
Cost and estimated earnings in excess of billings on uncompleted contracts		218,309			195,098
Prepaid expenses and other current assets		92,859			87,395
Total Current Assets		714,536			938,366
Property and equipment, net		44,883			69,323
OTHER ASSETS:
Patents and trademarks, net		52,496			52,871
Total Other Assets		52,496			52,871
TOTAL ASSETS	$	811,915		$	1,060,560
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Bank overdraft	$	—		$	97,491
Commercial insurance/office equipment financing		33,055			32,753
Notes payable-related party		75,000			75,000
Convertible notes payable, net		1,425,106			200,847
Accounts payable		550,455			916,002
Accounts payable - related party		53,122			60,711
Payroll taxes payable		600,181			456,955
Accrued expenses		694,498			731,147
Billings in excess of costs and estimated earnings on uncompleted contracts		153,783			9,517
Deferred revenue		865,394			802,074
Contingent lawsuit payable		1,411,650			1,002,324
Total Current Liabilities		5,862,244			4,384,821
Total Liabilities		5,862,244			4,384,821
Commitments and Contingencies (Note 11)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock:  $0.001 par value; 500,000,000 shares authorized 57,738,209 and 56,605,329 shares issued and outstanding at December 31, 2014 and 2013, respectively		57,738			56,605
Additional paid-in capital		13,517,159			12,600,969
Accumulated deficit		(18,625,226	)		(15,981,835	)
Total Stockholders' Equity (Deficit)		(5,050,329	)		(3,324,261	)
Total Liabilities and Stockholders' Equity (Deficit)	$	811,915		$	1,060,560
See accompanying notes to financial statements.

(3)

DUOS TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
	For the Years Ended
	December 31,
	2014			2013
REVENUES:
Project revenue	$	1,802,930		$	3,375,323
Maintenance and technical support		2,399,527			2,114,318
Total Revenues		4,202,457			5,489,641
COST OF REVENUES:
Project revenue		1,034,012			1,871,239
Maintenance and technical support		493,142			519,148
Total Cost of Revenues		1,527,155			2,390,387
GROSS PROFIT		2,675,302			3,099,255
OPERATING EXPENSES:
Selling and marketing expenses		283,440			314,946
Salaries, wages and contract labor		2,619,673			2,786,257
Research and development		191,662			259,255
Professional fees		83,538			60,499
General and administrative expenses		1,084,683			1,034,629
Total Operating Expenses		4,262,994			4,455,586
LOSS FROM OPERATIONS		(1,587,692	)		(1,356,331	)
OTHER INCOME (EXPENSES):
Interest income		45			—
Interest expense		(515,539	)		(212,696	)
Other income, net		31			111
Total Other Income (Expense)		(515,463	)		(212,585	)
Loss before income taxes		(2,103,155	)		(1,568,916	)
Franchise Tax		(3,860	)		(4,243	)
NET LOSS		(2,107,015	)		(1,573,159	)
Preferred stock dividends (Note 13)		(536,376	)		(536,376	)
Net loss applicable to common stock	$	(2,643,391	)	$	(2,109,535	)
NET LOSS APPLICABLE TO COMMON STOCK PER COMMON SHARE:
Basic	$	(0.05	)	$	(0.04	)
Diluted	$	(0.05	)	$	(0.04	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		56,611,537			56,605,329
Diluted		56,611,537			56,605,329
See accompanying notes to financial statements.

(4)

DUOS TECHNOLOGIES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Years Ended December 31, 2014 and 2013
	Common Stock				Additional
	Shares		Amount		Paid-in Capital		Accumulated Deficit			Total
Balance December 31, 2012		56,605,329	$	56,605	$	12,064,593	$	(13,872,300	)	$	(1,751,102	)
Cumulative dividends (Note 13)						536,376		(536,376	)		—
Net Loss 2013								(1,573,159	)		(1,573,159	)
Balance December 31, 2013		56,605,329	$	56,605	$	12,600,969	$	(15,981,835	)	$	(3,324,261	)
Common stock issued for inducement		1,132,880		1,133		379,814					380,947
Cumulative dividends (Note 13)						536,376		(536,376	)		—
Net Loss 2014								(2,107,015	)		(2,107,015	)
Balance December 31, 2014		57,738,209	$	57,738	$	13,517,159	$	(18,625,226	)	$	(5,050,329	)
See accompanying notes to financial statements.

(5)

DUOS TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
	For the Year Ended
	December 31,
	2014			2013
Cash from operating activities:
Net loss	$	(2,107,015	)	$	(1,573,159	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation & amortization		55,162			70,510
Bad debt expense		—			77,510
Common stock issued for inducement		380,947			—
Changes in assets and liabilities:
Accounts receivable		337,689			1,226
Accounts receivable-related party		—			(11,309	)
Costs & estimated earnings in excess of billings on uncompleted contracts		(23,211	)		195,520
Prepaid expenses and other current assets		(5,463	)		(11,382	)
Accounts payable		(365,547	)		337,833
Accounts payable-related party		(7,589	)		52,161
Interest from premium accretion on convertible notes		25,889			847
Payroll taxes payable		143,226			276,588
Accrued expenses		(36,650	)		196,881
Billings in excess of costs & estimated earnings on uncompleted contracts		144,266			(550,683	)
Deferred revenue		63,320			223,819
Contingent lawsuit payable		409,326			176,235
Net cash used in operating activities		(985,650	)		(537,403	)
Cash flows from investing activities:
Purchase of patents/trademarks		(5,500	)		(3,290	)
Purchase of fixed assets		(24,846	)		(14,343	)
Net cash used in investing activities		(30,346	)		(17,633	)
Cash flows from financing activities:
Bank overdraft proceeds		(97,491	)		97,491
Proceeds from related party notes		—			11,030
Proceeds from convetible notes/debt		1,198,370			200,000
Proceeds (repayment) of insurance and equipment financing		302			(13,769	)
Repayment of note related to contingent lawsuit		—			(22,006	)
Net cash provided by financing activities		1,101,181			272,746
Net increase (decrease) in cash		85,185			(282,290	)
Cash, beginning of year		250			282,540
Cash, end of year	$	85,435		$	250
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	52,062		$	9,702
Taxes paid	$	4,243		$	1,337
Supplemental Non-Cash Investing and Financing Activities:
Preferred stock dividends (Note 13)	$	536,376		$	536,376
See accompanying notes to financial statements.

(6)

Duos Technologies, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES

Nature ofOperations

Duos Techologies, Inc. (the Company, we, our or Duos) is a Florida corporation organized on November 30, 1990 as a subsidiary of its then parent company Enviromental Capital Holdings, Inc. (ECH). In 2002 Duos spun off from ECH and became an independent entity. The Company is headquartered in Jacksonville, Florida.

Duos is primarily engaged in the design and deployment of state-of-the-art, artificial intelligence driven intelligent technologies systems, with a focus on homeland security applications. Duos converges traditional security measures with information technologies to create “actionable intelligence.” Duos’ IP is built upon two of its core technology platforms (praesidium®andcentraco™),both distributed as licensed software suites, and natively embedded within engineered turnkey systems (see detailed description of the Company’s products at its website www.duostech.com).praesidum® is a modular suite of analytics applications which process and simultaneously analyze data streams from a virtually unlimited number of conventional sensors and/or data points. Native algorithms compare analyzed data against user-defined criteria and rules in real time and automatically report any exceptions, deviations and/or anomalies. This application suite also includes a broad range of conventional operational system components and subsystems, including an embedded feature-rich video management engine and a proprietary Alarm Management Service (“AMS”).This unique service provides continuous monitoring of all connected devices, processes, equipment and sub-systems, and automatically communicates to the front end-user interface, if and when an issue, event or performance anomalies are detected.centraco™is a comprehensive user interface that includes the functionalities of a Physical Security Information Management (PSIM) system as well as those of an Enterprise Information System (EIS) . This multi-layered interface can be securely installed as a stand-alone application suite inside a local area network or pushed outside a wide area network using the same browser-based interface. It leverages industry standards for data security, access, and encryption as appropriate. The platform also operates as a cloud-hosted solution.

The Company’s primary clients are railroad owner/operators, petro-chemical plants, utilities and hospitals that are protentially vulnerable to attack, and in the case of the railroads, illegal ridership and border security issues.

Use ofEstimates

The preparationoffinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnited StatesofAmericarequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsof assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements andthe reportedamountsofrevenuesandexpensesduringthereportingperiod.Actualresultsmaydifferfromthese estimates.The mostsignificant estimatesin the accompanyingfinancialstatementsinclude the allowance onaccounts receivable, valuation of deferred tax assets, estimates of percentage completion on projects and related revenues, valuationof stock-basedcompensationandvaluationoflosscontingencies. We baseourestimates onhistorical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which formthe 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 theseestimates.

Cash and CashEquivalents

For purposesofthestatementofcashflows,theCompanyconsidersallhighlyliquidinvestmentswithanoriginal maturityofthreemonthsorlesswhenpurchasedtobecashequivalents.TherewerenocashequivalentsatDecember 31, 2014 or December 31,2013.

Concentrations

Cash Concentrations

The Company maintains its cash in bank and financial institution deposits that at times may exceed federallyinsured limits. The Company has not experienced any losses in such accounts through December 31, 2014. There wereno amountsondepositinexcessoffederallyinsuredlimitsatDecember31,2014and2013.

Significant Customers and Concentration of CreditRisk

The Company,bypolicy,routinelyassessesthefinancialstrengthofitscustomers.Asaresult,theCompany believes that its accounts receivable credit risk exposure is limited and has not experienced significantwrite-downs initsaccountsreceivablebalancesthroughDecember31,2014.Asignificantportionofrevenuesisderivedfrom certaincustomerrelationships.Thefollowingisasummaryofcustomersthateachrepresentsgreaterthan10%of totalrevenuesin2014and2013,andtotalaccountsreceivableatDecember31,2014and2013,respectively.

2014						2013
Revenue			Accounts Receivable			Revenue			Accounts Receivable
Customer A	48	%	Customer A	52	%	Customer A	35	%	Customer A	34	%
Customer B	26	%	Customer B	18	%	Customer B	33	%	Customer B	31	%
			Customer C	12	%				Customer C	13	%

Fair Value Measurements and Fair Value of FinancialInstruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) inthe principal or most advantageous market for the asset or liability in an orderly transaction betweenmarket participants. The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect marketdata obtainedfromindependentsources,whileunobservableinputs(lowestlevel)reflectinternallydevelopedmarketassumptions. The fair value measurements are classified under the following hierarchy:

· Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets andliabilities in active markets;

· Level 2—Observable inputs, other than quoted market prices, that are either directly orindirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets thatare notactive,orotherinputsthatareobservableorcanbecorroboratedbyobservablemarketdatafor substantially the full term of the assets and liabilities;and

· Level 3—Unobservable inputs that are supported by little or no market activity that is significant to thefair value of assets or liabilities.

The estimatedfairvalueofcertainfinancialinstruments,includingaccountsreceivableandaccountspayableare carriedathistoricalcostbasis,whichapproximatestheirfairvaluesbecauseoftheshort-termnatureofthese instruments.Thecostbasisofnotesandconvertibledebenturesapproximates fairvalueduetothemarketinterest rates carried for theseinstruments.

(7)

Duos Technologies, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

 Accounts Receivable

Accounts receivable are stated at estimated net realizable value. Accounts receivable are comprised of balancesdue fromcustomersnetofestimatedallowancesforuncollectibleaccounts.Indeterminingthecollectionsonthe account, historical trends are evaluated and specific customer issues are reviewed to arrive atappropriate allowances.

Property andEquipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is computed bythe straight-line method over the estimated useful lives of the assets. The depreciable lives average five years forofficefurniture and three years for office equipment. Maintenance and repairs are charged to expense as incurred.Gains and losses on dispositions are included in currentoperations.

Software DevelopmentCosts

The Company accounts for costs incurred to develop or purchase computer software for internal use inaccordance with FASB ASC 350-40 “Internal-Use Software” or ASC 350-50 “Website Costs”. Costs incurred duringthepreliminary project stage along with post-implementation stages of internal use computer software are expensedas incurred. Costs incurred to maintain existing product offerings are expensed asincurred.

Patents andTrademarks

Patents and trademarks which are stated at amortized cost, relate to the development of intelligent technologies and are being amortized over 17years.

Long-Lived Assets

The Company evaluates the recoverability of its property, equipment, and other long-lived assets in accordancewith FASB ASC 360 “Property, Plant and Equipment”, which requires recognition of impairment of long-lived assets in the event the net book value of such assets exceed the estimated future undiscounted cash flows attributable tosuch assetsorthebusinesstowhichsuchintangibleassetsrelate.Thisguidancerequiresthatlong-livedassetsand certainidentifiable intangiblesbereviewedforimpairmentwhenevereventsorchangesincircumstancesindicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and usedis measuredbyacomparisonofthecarryingamountofanassettofutureundiscountednetcashflowsexpectedtobe generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measuredby the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposedof arereported at thelower ofthe carrying amount orfair valuelesscoststo sell.

Accrual of Legal Costs Associated with LossContingencies

The Companyexpenses,asincurred,legalcostsassociatedwithlosscontingencies.

Product Warranties

The Company has a 90 day warranty period for materials and labor after final acceptance of all projects. If anyparts are defective they are replaced under our vendor warranty which is usually 12-36 months. Final acceptanceterms varybycustomer.MostcustomershaveacureperiodforanymaterialdeviationandiftheCompanyfailsoris unabletocorrectanydeviations,afullrefundofallpaymentsmadebythecustomerwillbearrangedbythe Company.AsofDecember31,2014and2013managementconsidersallfinalacceptancetermshavebeenmet; therefore no accrual of warranty reserves has beenmade.

Sales Returns

Our systems are sold as integrated systems and there are no sales returnsallowed.

Revenue Recognition

Multiple Elements

Arrangements with customers may involve multiple elements including project revenue andmaintenance services. Maintenance will occur after the systems integration project is completed and may be provided onanextended-term basis or on an as-needed basis. Revenue recognition for multiple element arrangement is asfollows:

Each elementisaccountedforseparatelywheneachelementhasvaluetothecustomeronastandalonebasisand thereisCompanyspecificobjectiveevidenceofsellingpriceofeachdeliverable.Forrevenuearrangementswith multiple deliverables,theCompanyallocatesthetotalcustomerarrangementtotheseparateunitsofaccounting basedontheirrelativesellingpricesasdeterminedbythepriceoftheitemswhensoldseparately.Oncetheselling price is allocated, the revenue for each element is recognized using the applicable criteria under GAAP asdiscussed belowforelementssoldinnon-multipleelementarrangements.Adelivereditemoritems thatdonotqualifyasa separate unit of accounting within the arrangement are combined with the other applicable undelivered itemswithin the arrangement. The allocation of arrangement consideration and the recognition of revenue is then determinedfor thosecombineddeliverablesasa single unit ofaccounting.The Company sellsitsservices based onestablished rates which it believes is Company specific objective evidence of selling price. The Company only sells maintenance services or spare parts based on its established rates after it has completed a system integration project for acustomer.The customer isnotrequired topurchasemaintenanceservices.Allelements in multiple element arrangements with Company customers qualify as separate units of account for revenue recognition purposes.

(8)

Duos Technologies, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

Project Revenue

The Companyconstructs intelligent technology systems consistingof materials and labor undercustomercontracts. Revenues andrelated costsonproject revenuearerecognizedusingthe“percentageofcompletion method”of accounting in accordance with ASC 605-35, “Construction-Type and Production-Type Contracts”. Underthis method,contractrevenuesarerecognizedovertheperformanceperiodofthecontractindirectproportiontothe costs incurred as a percentage of total estimated costs for the entirety of the contract. Costs include directmaterial, directlabor,subcontract laborandotherallocableindirectcosts.Allun-allocableindirectcostsandcorporate general and administrative costs are also charged to the periods as incurred. Any recognized revenues that have not been billedto acustomerarerecordedas anasset in“costsand estimated earnings inexcess of billings on uncompleted contracts”. Any billings of customers in excess of recognized revenues are recorded as a liability in “billings in excess of costs and estimated earnings on uncompleted contracts”. However, in the event a loss on a contract is foreseen, the Company will recognize the loss when such loss is determined.

A contract is considered complete when all costs except insignificant items have been incurred and the installationis operatingaccordingtospecificationsorhasbeenacceptedbythecustomer.

The Companyhascontractsinvariousstagesofcompletion.Suchcontractsrequireestimatestodeterminethe appropriate cost and revenue recognition. Costs estimates are reviewed periodically on a contract-by-contractbasis throughout the life of the contract such that adjustments to the profit resulting from revisions are made cumulative to the date of the revision. Significant management judgments and estimates, including the estimated costs tocomplete projects,mustbemadeandusedinconnectionwiththerevenuerecognizedintheaccountingperiod.Currentestimates may be revised as additional information becomesavailable.

Maintenance and TechnicalSupport

Maintenance and technicalsupport servicesareprovidedonbothanas-neededandextended-termbasisandmayincludeproviding bothpartsandlabor.Maintenanceand technical supportprovidedoutsideofamaintenancecontractareonanas-requested basis, and revenue is recognized as the services are provided. Revenue for maintenance and technical support provided onan extended-termbasisisrecognizedratablyoverthetermofthecontract.

Deferred Revenue

Deferred revenues represent billings or cash received in excess of revenue recognizable on service agreementsthatare not accounted for under the percentage of completionmethod.

Advertising

The Company expenses the cost ofadvertising.

Stock-based compensation

Stock-based compensation is accounted for in accordance with the Share-Based Payment Topic of ASC 718which requiresrecognitioninthefinancialstatementsofthecostofemployeeanddirectorservicesreceivedinexchange for an award of equity instruments over the shorter of the period the employee or director is required to performthe services in exchange for the award or the vesting period. The ASC also requires measurement of the costof employeeanddirectorservicesreceivedinexchangeforanawardbasedonthegrant-datefairvalueoftheaward.

Pursuant toASCTopic505-50,forshare-basedpaymentstoconsultantsandotherthird-parties,compensation expense is determined at the “measurement date”. The expense is recognized over the service period of theaward. Until the measurement date is reached, the total amount of compensation expense remains uncertain. TheCompany initiallyrecordscompensationexpensebasedonthefairvalueoftheawardatthereportingdate.

(9)

Duos Technologies, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

Income Taxes

The CompanyaccountsforincometaxesinaccordancewiththeFinancialAccountingStandards Board(“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, which requires the recognition of deferredincome taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes.The deferred tax assets and liabilities represent the future tax return consequences of those differences, which willeither be taxable or deductible when the assets and liabilities are recovered or settled. Valuation allowancesare establishedwhennecessary toreducedeferredtaxassetstotheamountexpectedtoberealized.

The CompanyevaluatesallsignificanttaxpositionsasrequiredbyASC740.AsofDecember31,2014,the Companydoesnotbelievethatithastakenanypositionsthatwouldrequiretherecordingofanyadditionaltax liabilitynordoesitbelievethatthereareanyunrealizedtaxbenefitsthatwouldeitherincreaseordecreasewithinthe nextyear.

Penalties andinterestassessedbyincometaxingauthoritiesareincludedinoperatingexpenses.

The federalandstateincometaxreturnsoftheCompanyaresubjecttoexaminationbytheIRSandstatetaxing authorities, generally for three years after they were filed.

Earnings perShare

Basic netlosspershareiscomputedbydividingthenetlossbytheweightedaveragenumberofcommonshares outstandingduringtheperiod.Dilutednetlosspercommonshareiscomputedbydividingthenetlossbythe weightedaveragenumberofcommonsharesoutstandingfortheperiodand,ifdilutive,potentialcommonshares outstandingduringtheperiod.Potentialcommonsharesconsistoftheincrementalcommonsharesissuableupon theexerciseof stockoptions, stock warrants, convertibledebtinstrumentsorother common stockequivalents. Potentiallydilutivesecuritiesareexcluded fromthecomputation if their effectis anti-dilutive.Asof December 31, 2014 and2013 there was$1,398,370 and $200,000of convertible debtthatwas convertibleinto 2,184,953 and 312,500, respectively, shares of common stock that was not included in a computation of diluted earnings per share since the effect was anti-dilutive. Such shares may dilute future earnings per share. (See Subsequent Events Note 15)

Segment Information

The Company operates in one reportablesegment.

Recent Issued AccountingStandards

Financial AccountingStandardsBoard,AccountingStandardUpdateswhicharenoteffectiveuntilafter December31,2014arenotexpectedtohaveasignificanteffectontheCompany’sfinancialposition orresultsof operations. In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements –Going Concern(Topic205-40)”,whichrequiresmanagementtoevaluatewhetherthereissubstantialdoubtaboutan entity’sabilitytocontinueasagoingconcernforeachannualandinterimreportingperiod.Ifsubstantialdoubt exists, additional disclosure is required. This new standard will be effective for the Company for annual andinterim periodsbeginningafter December15, 2016. Early adoption ispermitted. The Company doesnot expect the implementation of this standard to have a material effect onits disclosures.

(10)

Duos Technologies, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

NOTE 2 – GOINGCONCERN

As reflected in the accompanying financial statements for the years ended December 31, 2014 and 2013,the Companyhadnetlossesof$2,107,015and$1,573,159,respectively,andcashusedinoperationsof$985,650and $537,403, respectively. Additionally, at December 31, 2014, the Company had a working capital deficitof $5,147,708, stockholders’ deficit of $5,050,329, and accumulated deficit of $18,625,226. These factorsraise substantial doubt about the Company’s ability to continue as a goingconcern.

The abilityoftheCompanytocontinueasagoingconcernisdependentontheCompany’sabilitytofurther implement its business plan and raise capital. The Company needs to raise additional funds and/orgenerate sufficientrevenuetocontinuetomeetitsliquidityneedsandrealizeitsbusinessplanandmaintainoperations. Management of the Company is continuing its efforts to secure funds through equity and/or debt instruments forits operations. At the present time, the Company has no financing commitments from any person, and there can beno assurance that additional capital will be available to the Company on commercially acceptable terms or at all.The Company has reduced expenses from existingoperations.

The financial statements do not include any adjustments relating to the recoverability and classification ofrecorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company beunable to continue as a goingconcern.

NOTE 3 – TRADE ACCOUNTS AND OTHERRECEIVABLES

Trade AccountsReceivable

Accounts receivable were as follows at December 31, 2014 and2013:

	2014		2013
Accounts Receivable	$	317,934	$	655,623
Allowance for doubtful accounts		—		—
	$	317,934	$	655,623

There wasnobaddebtexpenserelatedtotradeaccountsreceivablein2014and2013.

Receivable due from Affiliate and Related BadDebt

The Companyhadareceivablefrom theformerparent,thatwasprimarily comprisedoftheinter-company balancethatexisted atthetimeoftheCompany’sspin-offfromthe former parentinayearpriorto2013.Thereceivablewas non-interest bearing.The Companyhadarepaymentagreementwiththe former parentwherethereceivablewasbeingpaid downwithroyaltiesduetothe former parent fromthirdparties. InMay2014theCompanydeterminedthattherewouldbeno moreroyaltiestofurtherpaydownthereceivableandthatthe former parentnolongerhadtheabilitytopaythereceivable. Thereforethe Company chargedthe remaining$77,510 balance of the receivableto baddebt expenseeffective December 31, 2013.

NOTE 4 – PROPERTY ANDEQUIPMENT

The majorclassesofpropertyandequipmentareasfollowatDecember31,2014and2013:

	2014			2013
Furniture, fixtures and equipment	$	976,598		$	951,752
Less: Accumulated depreciation		(931,715	)		(882,429	)
	$	44,883		$	69,323

Total depreciationin2014and2013was$49,286and$64,666,respectively.

NOTE 5 - PATENTS ANDTRADEMARKS

	2014		2013
Patents and trademarks	$	256,715	$	251,215

Less: Accumulated amortization		(204,219	)		(198,344	)
	$	52,496		$	52,871

Total amortization of patents in 2014 and 2013 was $5,876 and $5,844,respectively.

NOTE 6 – NOTES PAYABLE - RELATEDPARTIES

	2014					2013
Notes Payable	Principal		Interest			Principal		Interest
Shareholder	$	65,000		9	%	$	65,000		9	%
Related Party		10,000		8	%		10,000		8	%
Total	$	75,000				$	75,000

On May28,2008,ashareholderwhoisindirectlyinvestedintheCompanywiththeCEOthroughanotherentity, loaned the Company the sum of $65,000 at an annual percentage rate of 9%. There was an accrued interestbalanceof$37,531and$31,681asofDecember31,2014and2013,respectively.Thenotewasrepayableonorbefore September15,2008althoughnodemandforrepaymenthasbeenreceivedfromtheholder.Thereisnoformal written agreement and the terms are documented on a letter from a former CFO of the Company. The termscontain nodefaultclausesandasofthetimeofthisreport,nodemandforrepaymenthasbeenmadeorexpected.The Companyintendstorepaythe loanwhensufficientworkingcapitalpermitssuchaction.

On December12,2013,thewifeoftheCEOloanedtheCompanythesumof$10,000atanannualpercentagerate of 8%. There was accrued interest balance of $842 and $42 as of December 31, 2014 and 2013, respectively.The note is repayable on demand of the holder in the event of a significant accounts receivable payment to theCompany. As of the time of this report, no such demand has beenmade.

(11)

Duos Technologies, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

NOTE 7 - CONVERTIBLE DEBENTURESPAYABLE

	2014					2013
Notes Payable	Principal		Interest			Principal		Interest
Convertible Debentures	$	1,398,370		6	%	$	200,000		6	%
Premium		26,736					847
Debentures Payable, net	$	1,425,106				$	200,847

Pursuant to a financing agreement with one investor group (the “holder”), dated September 23, 2013, theCompany issued $1,198,370 and $200,000 of unsecured convertible debentures in 2014 and 2013, respectively.The debentures bear interest at 6% annually and each debenture principal is due in three years from thedebenture issuance date. The interest is due monthly in arrears. The principal balance at December 31, 2014 and 2013was $1,398,370 and $200,000, respectively. The Company has been making its monthly interest paymentsand accordingly, accrued interest was $7,126 and $1,151 at December 31, 2014 and 2013. There is no defaultprovision forthenon-paymentofinterestwhendue.ThematuritydatesrangefromOctober27,2016through November 30, 2017. The financing agreement states that these debentures will take highest priority over allother existing debt of the Company in the case of bankruptcy or other liquidation event. If any debenture is outstanding as ofthematuritydatethentheCompanyshallpaya3%premiumontheprincipalinadditiontorepaymentofthe principalandanyaccruedinterest.This3% premium isbeingaccruedasadditionalinterestexpenseoverthe debenturesterms. IftheCompanymergeswithapublicentitythentheholderhastherightto(i)convertthe remaining principal of one or more debentures into the combined Company’s stock at a 20% discount to the negotiated value of such stock according to the terms of the merger; or (ii) to call in one or more or even all of the debenturesasdue andpayable withinsix(6)monthsofthe “call” datewith regardtoeachdebenture and such obligation of the Company to pay shall include a 3% premium on the principal balance or (iii) let one or more of the debenturesremainineffectaccordingtotheoriginalterms,however,iftheCompanycompletesamergerwitha public entity the Company has the right to payoff the debentures remaining principal balance and with a required 3% premium and any accrued interest. Although these convertible debentures appear to meet the requirements of stock settleddebtunder ASC480duetothevariableconversionfixedrate,nopremium onthedebtorrelatedinterest expense has been recorded since the conversion option is contingent on a future event. (See subsequent events Note 15)

NOTE 8 – NOTES PAYABLE – OTHER FINANCINGAGREEMENTS

The Company’s notes payable relating to financing agreements classified as current liabilities consist ofthe following as of December 31, 2014 and2013:

	2014					2013
Notes Payable	Principal		Interest			Principal		Interest
Third Party - Insurance Note 1	$	8,892		9.95	%	$	8,976		9.95	%
Third Party - Insurance Note 2		20,376		9.25	%		20,144		9.25	%
Third Party - Equipment Financing		3,787		13.48	%		3,633		13.48	%
Total	$	33,055				$	32,753

The Company entered into an agreement on December 13, 2014 with its insurance provider by executing a$10,591 notepayable(InsuranceNote1)issuedtopurchaseaninsurancepolicy,securedbythatpolicywithanannual interestrateof9.95%payableinmonthlyinstallmentsofprincipalandinteresttotaling$930throughOctober13, 2015. The Company also entered into an agreement on September 15, 2014 with its insurance provider byexecuting a$28,779notepayable(InsuranceNote2)issuedtopurchaseaninsurancepolicy,securedbythatpolicywithan annual interest rate of 9.25% payable in monthly installments of principal and interest totaling $3,001 throughJuly 15,2015.

The Company entered into an agreement on December 13, 2013 with its insurance provider by executing a$10,560notepayable(InsuranceNote1)issuedtopurchaseaninsurancepolicy,securedbythatpolicywithanannual interestrateof9.95%payableinmonthlyinstallmentsofprincipalandinteresttotaling$939throughOctober13, 2014. The Company also entered into an agreement on October 10, 2013 with its insurance provider by executinga $28,705 notepayable(InsuranceNote2)issuedtopurchaseaninsurancepolicy,securedbythatpolicywithan annual interest rate of 9.25% payable in monthly installments of principal and interest totaling $2,994 throughJuly 15,2014.

The Companyissueda$40,729notepayableonAugust12,2011toavendortofinancecomputerequipment, securedby thatequipmentwithaninterestrateof13.48%perannumpayableinmonthlyinstallmentsofprincipal and interest totaling $1,917 through March 12, 2014. The equipment was accounted for as a capital lease. (see Note 11) In May 2014, the Company executed a buy-out option for $11,364 to purchase this computer equipment,and agreed to make 12 monthly installments of $947 through April 1,2015.

(12)

Duos Technologies, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

NOTE 9 - CONTRACTACCOUNTING

Costs and Estimated Earnings in Excess of Billings on UncompletedContracts

Costs and estimated earnings in excess of billings on uncompleted contracts represents costs and estimatedearnings in excess of billings and/or cash received on uncompleted contracts accounted for under the percentageof completion contract method.

At December 31, 2014 and 2013, costs and estimated earnings in excess of billingson uncompleted contracts consisted of thefollowing:

	2014			2013
Costs and estimated earnings recognized	$	990,799		$	2,242,060
Less: Billings or cash received		(772,490	)		(2,046,962	)
Costs and estimated earnings in excess of billings on uncompleted contracts	$	218,309		$	195,098

Billings in Excess of Costs and Estimated Earnings on UncompletedContracts

Billings in excess of costs and estimated earnings on uncompleted contracts represents billings and/or cashreceived thatexceedaccumulated revenuesrecognizedonuncompletedcontractsaccounted forunderthepercentageof completion contractmethod.

At December31,2014,and2013,billingsinexcessofcostsandestimatedearningsonuncompletedcontracts consisted of thefollowing:

	2014			2013
Billings and/or cash receipts on uncompleted contracts	$	394,517		$	238,960
Less: Costs and estimated earnings recognized		(240,734	)		(229,443	)
Billings in excess of costs and estimated earnings on uncompleted contracts	$	153,783		$	9,517

NOTE 10 - DEFERREDCOMPENSATION

The Companyenteredintoseveralinformaldeferredcompensationagreementsin2009witheightemployees, primarily officers and top level executives. The deferred compensation agreements include salary and commission deferrals.

The Company accrued 50% of the CEO’s salary beginning in 2009 and 25% of other executives, some of whichare nolongerwiththeCompany.TheCompanyintendstofullyrepay100%ofthedeferredamountsincluding employees that have subsequentlyleft.

As ofDecember31,2014and2013,theCompanyhasaccrued$552,582and$580,271,respectively,ofdeferred compensationrelatingto theindividualagreements,whichareincludedintheaccompanyingbalancesheetin accrued expenses. The above referenced deferred compensation agreements areunfunded.

(13)

Duos Technologies, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

NOTE 11 – COMMITMENTS ANDCONTINGENCIES

Capital Lease

Equipment leased in August 2011 under a capital lease consists of computer equipment with a combinedcapitalized cost of $52,653. Accumulated depreciation was $52,653 and $49,108, respectively, relating to the leasedequipment as of December 31, 2014 and 2013. Depreciation expense was $3,545 and $21,273 in 2014 and 2013,respectively, for the equipment under capital lease. The leased equipment was purchased by the Company in May 2014 under a purchase option at the equipment's fair market value. (see Note8)

Operating Leases

The Companyhasseveralnon-cancelableoperatingleases, primarilyforequipment,thatexpireoverthenext3 years.Minimumrentpaymentsunderoperatingleasesarerecognizedonastraight-linebasisoverthetermofthe lease. Rental expense for operating leases during 2014 and 2013 was $17,838 and $14,620,respectively.

	Year Ended December 31,
	2014		2013
Purchase Power	$	710	$	802
Coffee Perks/A. Antique Coffee Services		325		338
Canon		12,567		11,761
Great American Leasing		—		1,719
NFS Leasing		4,236		—
Total Operating Leases rent expense	$	17,838	$	14,620

The Companyhasanoperatingleaseagreement,througharelatedparty,forofficespace,thatexpiresasofApril 2016. Minimum rent payments under this lease is recognized on a straight-line basis over the term of the lease.The currentmonthlyleasepaymentis$13,251.RentalexpensefortheleaseduringDecember31,2014and2013was $142,091 and $142,091, respectively.

The followingisascheduleoffutureminimumleasepaymentsfornon-cancelableoperatingleasesareasfollows:

2015	$	159,015
2016		79,508
Total	$	238,523

Stock PurchaseAgreement

On September 19, 2014, UDC entered into a definitive material agreement for the Purchase of Uni-Dataand Communications, Inc., (UDC) a division of Unity International Group Inc (UIG), based in New York City.The agreementcallsforUIGtosellUDCtoDuos,asawhollyownedandoperatingentity.Thecompaniesexecuteda StockPurchaseAgreement(SPA)whichcalledforthesaleof100%ofthesharesofUDCforthepaymentof$10 million.

The agreement is subject to Duos becoming a public entity and raising $12M in capital to render the purchaseprice and have sufficient working capital to operate UDC successfully. The final purchase price will be determinedafterthe allowance of certain pre-defined closing adjustments related to the Working Capital of UDC, anestimated balance sheet as of the Closing the and the difference between the Estimated Working Capital and theTargetWorking Capital Amount and the Debt Amount of UDC The Estimated Schedule of Adjustments and theEstimated WorkingCapitalaretobecalculatedinaccordancewithGAAP.Priortotheclosing,theUIGwoulduseanycash available to pay the debts of UDC with any remaining cash being disbursed to the UIG. “Working Capital”means (a) the current assets of UDC, minus (b) the sum of (i) all reserves and allowances applicable to such currentassets and (ii)thecurrentliabilitiesofUDC,determinedinaccordancewithGAAP.IndeterminingWorkingCapital,all Cash and Cash Equivalents held by UDC, Related Party Receivables, the equity of Unity Data & ElectricalServices, LLC and all deferred Tax assets of UDC will beexcluded.

For accountingpurposes,DuoswillgiveUIGaschedulewithacomputationoftheWorkingCapitalasoftheend of the day immediately preceding the Closing Date, the Debt Amount and the difference between the ClosingDate WorkingCapitalandtheEstimatedWorkingCapital,andthedifferencebetweentheClosingDateDebtAmount and the Estimated Debt Amount.Based on the Closing Date Working Capital and the Closing DateDebt Amount, each as finally determined by UIGs computations, if the Final Working Capital is greater thanthe EstimatedWorkingCapital,thenUIGshallpaytoDuostheamountofsuchexcess.IftheFinalWorkingCapital is less than the Estimated Working Capital, then, Duos shall promptly pay to UIG the amount of such deficiency. If the Final Debt Amount is less than the Estimated Debt Amount, then UIG shall pay to Duos theamount of such deficiency, or if the Final Debt Amount is greater than the Estimated Debt Amount, then, at UIGs option, Duos shall pay the amount of such excess.

With respect to taxes, UIG and Duos have the option to make an election under Section 338(h)(10), concerningthe transactionscontemplatedby thisAgreement.IfUIGexercisesitsoptiontomakeanelectionunderSection 338(h)(10)oftheIRSCode,UIGagreestoperformaninitialvaluationofassetsofUDCandtheSubsidiaryand allocation of the Closing Payment for purposes of this election. The valuations and allocations determinedpursuant to this agreement will be used for purposes of all relevant Tax Returns, reports and filings. Any Taxes withrespect totheincome,propertyoroperationsofUDCthatrelatetotheoverlappingreportingperiodsshallbeapportioned between UIG and Duos as determined from the books and records of UDC during the portion of such period ending on the Closing Date and the portion of such period beginning on the day following the Closing Date, and based onaccounting methods, elections and conventions that do not have the effect of distorting income or expenses. Any Taxes with respect tothe income, property or operations of UDC that relate toany overlapping periods shall be apportioned betweenUIGandDuosas determinedfrom thebooksandrecordsofUDCduringtheportionofsuch period ending on the Closing Date and the portion of such period beginning on the day following the Closing Date. Theseadjustmentswillbebasedonaccountingmethods, electionsand conventionsthatdonothavetheeffectof distorting income or expenses.

The agreementcanbeterminatedbasedonanumberofconditionsincludingDuosinabilitytoraisetherequired funding and/or become a public entity. In addition, the agreement automatically terminates on January 31,2015 unlessextendedbythepaymentofanextensionfeeof$150,000.Thepaymentofthefee,willextendthe agreementforafurthersixtydayswithcertaincreditsbacktoDuosofthatfeeifclosingoccursearlierthanthe extendeddeadline.Attheendofthereportingperiod,Duoshadnotconsummatedthestockpurchaseagreement butwas in negotiation with UIG for a modification of certain terms of the agreement including thepurchase price and closing date. (See Note 15 for amendment)

Consulting Agreement

On October30,2014,DuosTechnologiesenteredintoaletteragreementwithagreed financial advisor pursuant to which the advisor is to provide corporate finance and strategic advice including broker dealer servicesas necessary. The advisor was retained to lead the Company’s working capital financing efforts (seeNote 15) andtheduediligenceonareversemergerwithapublicentity.Theletteragreement coversthematerial aspects of the relationship pending a more formal agreement once a suitable public entity had been identified.The agreementisconstructedwiththeintentforthe advisortobeexclusiveproviderbutwithprovisionsforcooperation with other banks either as a “lead” or “co-lead”. The Company agreed to pay a non-refundable monthly retainerfeeof$5,000permonthwhenitisinactivepursuitofapre-definedlistofpotentialmergercandidates. In additionto the monthly retainer, 2% of the transaction amount was to be paid to Academy on the closing of the transaction previously identified by Academy and listed as a part of the agreement. At the time of this report, a transaction with Information SystemsAssociateshad beenconcludedbutthe advisorwasnoteligibleforatransactionfeesinceISA had not been identified as one of the merger candidates by the agreement for which the fee is payable. (See Note 15 for subsequent placement agency agreement).

Litigation

On oraboutDecember22,2014,CorkyWellsElectric(“CWElectric”)filedsuitintheCircuitCourtofBoyd County,Kentucky,demandingreliefrelatedtoapromissorynoteissuedbyDuostoCWElectricon December 10, 2008 in the amount of $741,329. Duos further entered into a “Stipulation for Settlement”on September 30, 2009 wherein CW Electric agreed to dismiss its lawsuit and Duos agreed to resume payments.CW ElectricisclaimingthatDuosbreachedthetermsofthatStipulationforSettlementbynotmakingtherequired number of payments. The plaintiff contends that due to the breach of payment terms, under the terms of the Promissory Note, theoutstanding amountcontinuestoaccrueinterestattherateofeighteenpercent(18%)perannum,compoundedmonthlyfora total of $1,411,650 due through the future final payment date.Amounts of $1,411,650 and $1,002,324 have been accrued as a contingent lawsuit payable at December 31, 2014 and 2013, respectively.

The Company disputes Plaintiff’s computation and hasretainedcounsel whohasinitiallyfiledamotiontomovethelawsuitintoFederalcourt,whichwas successfulandobtainedanextensionoftimetorespondtoC.W.Electric’sComplaint. The Company believes that is has meritorious defenses to Plaintiff’s allegations.

Delinquent Payroll TaxesPayable

The Company has a delinquent payroll tax payable for the years ended December 31, 2014 and 2013 in theamount of$600,181and$456,955,respectively.Currently, theCompanyhassatisfiedthetotalamountoftheTrustFund Taxesof$353,859andwillcontinuetomakemonthlypaymentstotheIRSintheamountof$25,000forthe remaining balance. The Company has requested an installmentplan.

(14)

Duos Technologies, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

NOTE 12- INCOMETAXES

The Company maintains deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred tax assets at December 31, 2014 and 2013 consist of net operating loss carryforwards and differences in the book basis and tax basis of intangible assets.

The blended Federal and State tax rate of 37.6% applies to loss before taxes. The items accounting for the difference between income taxes at the effective statutory rate and the provision for income taxes for the years ended December 31, 2014 and 2013 were as follows:

	Years ended December 31,
	2014			2013
Income tax benefit at U.S. statutory rate of 34%	$	(716,385	)	$	(534,874	)
State income taxes		(75,853	)		(56,634	)
Non-deductible expenses		148,876			10,239
Change in valuation allowance		643,362			581,269
Total provision for income tax	$	—		$	—

The Company’s approximate net deferred tax assets as of December 31, 2014 and 2013 was as follows:

Deferred Tax Assets:	December 31, 2014			December 31, 2013
Net operating loss carryforward	$	4,413,962		$	3,737,841
Intangible assets		250,869			283,628
		4,664,831			4,021,469
Valuation allowance		(4,664,831	)		(4,021,469	)
Net deferred tax assets	$	—		$	—

The net operating loss carryforward was approximately $11,739,000 and $9,941,000 at December 31, 2014 and 2013, respectively. The Company provided a valuation allowance equal to the deferred income tax assets for the years ended December 31, 2014 and 2013 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward and other deferred tax assets. The increase in the valuation allowance was $643,362 in 2014.

The potential tax benefit arising from the loss carryforward will expire in years through 2034. Additionally, the future utilization of the net operating loss carryforward to offset future taxable income may be subject to an annual limitation as a result of ownership changes that could occur in the future in accordance with Section 382 of the Internal Revenue Code. If necessary, the deferred tax assets will be reduced by any carryforward that expires prior to utilization as a result of such limitations, with a corresponding reduction of the valuation allowance. The Company believes its tax positions are all highly certain of being upheld upon examination. The Company’s 2014, 2013 and 2012 Corporate Income Tax Returns are subject to Internal Revenue Service examination.

The Company does not have any uncertain tax positions or events leading to uncertainty in a tax position.

NOTE 13 - STOCKHOLDERS’EQUITY

Series A Convertible PreferredStock

On December 29, 2014 the Company agreed with the majority of the then Series A redeemable convertiblepreferred shareholderstoexchange allSeriesAConvertiblepreferredstockintotheCompany’scommonstockatan8% premiumintermsofthequantityofsharestotheoriginalconversionratewhichoriginalconversionratewas approximately $0.54 per share. Accordingly, approximately 13,454,989 common shares were issued whichincludes the approximately 996,666 additional 8% premium common shares issued as an inducement to convert.The Company valued these additional premium shares based upon a contemporaneous business valuation ofthe Companyresultinginapersharevalueofapproximately$0.336pershareoranaggregateapproximate$335,143which was charged to operations.Since the preferred stock had been redeemable at stated value plus undeclared dividends, the Company recognized $536,376 of dividends in each of 2014 and 2013.Furthermore, since as discussed below under “Common Stock”, the Company has retroactively applied the effects of a subsequent merger, no Series A preferred stock transactions are reflected in the accompanying statement of changes in stockholders’ equity and the dividends are charged to retained earnings with a credit to additional paid-in capital.

Series B Convertible PreferredStock

On December 29, 2014 the Company agreed with the majority of the then Series B convertiblepreferred shareholderstoexchangeallSeriesBConvertiblepreferredstockintotheCompany’scommonstockatan8% premiumintermsofthequantityofsharestotheoriginalconversionratewhichoriginalconversionratewas approximately $0.66 per share. Accordingly approximately 1,838,885 common shares were issued whichincludes the approximately 136,214 additional 8% premium common shares issued as an inducement to convert.The Company valued these additional premium shares based upon a contemporaneous business valuation ofthe Companyresultinginapersharevalueofapproximately$0.336pershareoranaggregateapproximate$45,804 which was charged to operations. Furthermore, since as discussed below under “Common Stock”, the Companyhas retroactively applied the effects of a subsequent merger, no Series B preferred stock transactions are reflected inthe accompanying statement of changes in stockholders’ equity and the dividends are charged to retained earningswith a credit to additional paid-incapital.

Common Stock

Effective April1,2015,alloutstandingcommonsharesoftheCompanywereexchangedforatotal60,000,000 common shares of Information Systems Associates, Inc. as a result of the merger described in the subsequent events footnote 15. Subsequent to year end the Company issued 2,211,791 common shares related todebenture conversions and 50,000 common shares related to an accounts payable settlement (see Note 15). All share andper share data in the accompanying financial statements and footnotes have been retroactively reflected forthe exchange.

Warrants for CommonStock

All warrantsgrantedrelatedtopriorcapitalstockofferingshaveexpiredasofDecember31,2013.

(15)

Duos Technologies, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

NOTE 14 - RELATED PARTYTRANSACTIONS

Administrative ServicesAgreement

On December 1, 2002, the Company and the former parent entered intoan Administrative Services Agreement whereby the former parent agreed to provide administrative and support servicesincluding but not limited to, (a) rent and general infrastructure, (b) human resource management services, and (c)accounting andfinancialservices andothermiscellaneousservices.Themonthlyfeeissubjecttoadjustmentsinaccordancewith the actual services rendered. The Company paid the former parent fees of $0 and $214,052 for the years endingDecember 31,2014and2013,respectively.AtDecember31,2014and2013,$19,897and$48,297,respectively,wasdueto the former parentunderthisagreementand isincludedinAccountspayable-relatedparties.

Due to RelatedParties

The due to related parties consists of two loans payable to shareholders for $65,000 and $10,000. The interestrates are nine percent (9%) and eight percent (8%) and all notes are payable on demand. The accrued interest payableontheseloansasofDecember31,2014and2013was$38,373and$31,723,respectively.(seeNote6)

Write-off of Receivable Due fromAffiliate

In 2013theCompanywroteoffasbaddebtexpensea$77,510receivablefromitsformerparent.(Seenote3)

NOTE 15 - SUBSEQUENTEVENTS

Financings

On February11,2015,theCompanyissueda$10,000convertibledebentureinexchangefor$10,000fromDuos Ventures LLC, the holder of the existing convertibledebentures.

On March10,2015,theCompanyreceiveda$100,000loanfromrelatedpartyprincipalshareholder.Thenote accruesinterestattherateof12%perannumandisrepayableonorbeforeDecember15,2015.

On April8,2015theCompanyreceiveda$310,000loanfromarelatedpartyprincipalshareholder.Thenote accruesinterestattherateof6%perannumandisrepayableonorbeforeOctober31,2015.

Amendment to Stock PurchaseAgreement

On February 12, 2015, the Company executed an amendment to the Stock Purchase Agreement (see Note 11) withUnity International Group (UIG). The original agreement was due to expire on January 31, 2015 without the payment of a $150,000 extension fee by Duos to UIG. The amendment calls for certain changes in terms and conditions relatedto theoriginalstockpurchaseagreementincludinganadjustmentofthepurchasepricefrom$10Mto$7Mofwhich $6.75Mwillbepaidincashandthebalanceof$250KpaidinISAstockbasedonthefactthatDuoshad successfully agreed to a reverse merger with Information Systems Associates (ISA) although that transaction wasnot consummated at the time of this amendment. Certain other conditions were also amended including an extensionof theclosingdate,withoutpaymentofanextensionfeetoMarch31,2015andafurtheroptionalextensionperiodto May 31, 2015 with the payment of an extension fee of $150,000 with certain credits of this fee against thepurchase priceifthe dealwas closed byApril30,2015.OnApril 1,2015,Duos closed its reverse mergerwithISA as a condition precedent to closing the UDC transaction and on April 5, 2015, remitted $150,000 in payment of the extension fee to UIG thereby extending the agreement to May 31, 2015. As of this report, the merged entity had not closed the requisite financing envisioned by the original stock purchase agreement and therefore didnot consummate the acquisition of UDC. The Company and UIG have had further communication relating to the extension of the closing date but, as of the date of this report, there has been no express consent by UIG to extend the closing date.

Placement AgencyAgreement

On February 18, 2015, Duos agreed to engage an exclusive placement agent in connection with the possible private placement of equity, equity-linked or debt securities (the “Agreement”). The Agreement is for an initial term of 180 days and calls for a transaction fee equal to 9% of amounts raised in the offering by the agent from qualified investors, payable in cash upon closing, and warrants for 9% of the aggregate amount of all equity and equity-linked securities actually placed in the offering by the agent. Additionally, Duos undertook to pay costs and expenses of the placement agent associated with the offering, which were not to exceed $40,000. As of the date of this report, the Company and agent are in the process of terminating the placement agency agreement; no success fee amounts are due under this agreement. Previously, on October 30, 2014, such entity was engaged as an exclusive financial advisor and pursuant to such agreement was paid a total of $15,000 in respect of the merger with ISA.

Conversion ofDebt

On March31,2015,DuosVenturesLLCconverted$1,415,546ofconvertibledebentureswhichincluded$7,176accrued interest into 2,211,791 shares of Common stock as a result of the closing of a reverse mergerwith Information Systems Associate, Inc. (ISA) The conversion was priced at a 20% discount from the ISA closingprice onMarch31,2015of$0.80foranetconversionpriceof$0.64pershareinaccordancewiththeoriginaltermsofthe convertible debentures. As a result of this conversion, $37,120 of accrued debt premium relating to the 3% provision noted above, which is not required to be paid to debenture holders, was reclassified toadditional paid-in capital and a $352,093 interest expense was recognized and recorded as a debt premium on March 31, 2015 pursuanttothe resolution of the contingency under ASC480 and then reclassified to additional paid-in capital.

Stock Issued for Partial Settlement of AccountsPayable

On March31,2015,theCompanyissued50,000ofcommonstocktoasoftwareengineeringvendorfora$20,000 partialsettlementofanoutstandingpayable.Theshareswerevaluedat$0.336pershare,or$16,800,basedon contemporaneousconversions oftheCompany'sPreferredStockSeriesA&BtoCommonStock.TheCompany recordeda$3,200gainonthesettlementofthispayablewhichisincludedinOtherIncomeinthestatementof operations.

Reverse Merger

On April 1, 2015, the Company completed a reverse triangular merger, pursuant to an Agreement and Plan ofMerger (the “Merger Agreement”) among the Company (“Duos”), Information Systems Associates, Inc. (ISA) , apublicly tradedcompanyandDuosAcquisitionCorporation,aFloridacorporationandwhollyownedsubsidiaryofISA (“MergerSub”).Under thetermsoftheMergerAgreement,MergerSubmergedwithandintoDuos,withDuosremaining as the surviving corporation and a wholly-owned subsidiary of ISA (the “Merger”). The Mergerwas effectiveasofApril1,2015,uponthefilingofacopyoftheMergerAgreementandarticlesofmergerwiththe Secretary of State of the State of Florida (the “Effective Time”). As part of the merger agreement ISA confirmedto Duosexecutivesthatitsstockholders would receive 60,000,000commonshares of ISA.The Company intendsto carryon Duos’businessasa lineofbusinessfollowingtheMerger.TheCompanyalsointendstocontinueISA's existing operations through its existing wholly owned subsidiary, TrueVue 360, Inc. Duos made the decision to become a public company to give it broader access to the public financial markets to support its growth goals. The objective was to streamline the merger process by finding a clean, operating entity with no “toxic” debt and that was not and had never been a shell company, which Duos believes it has achieved with the merger with ISA.

The mergerisbeingaccountedforasareversemergerusingtheacquisitionmethodunderASC805-40withISAdeemedtobetheacquiredcompanyforaccountingpurposes.ThisdeterminationisbasedonDuosshareholders obtaininganapproximate 98%votingcontrolaswellasmanagementandBoardcontrolofthecombinedentity. Accordingly,the assetsandliabilitiesandhistoricaloperationsthatarereflectedintheconsolidatedfinancial statementsafterthe mergerarethoseofDuosstatedathistoricalcostandtheassetsandliabilitiesofISAwere recordedat theirfairvaluesatthemergerdate.TheresultsofoperationsofISAareonlyconsolidatedwiththe resultsofoperationsstartingonthemergerdate.AnanalysisofDuosTechnologiesestablishedatotalenterprise valuation of $19,350,000 usinga relative values approach. At the time ofthe merger,it was estimatedthat ISA shareholderswould ownapproximately2%oftheoutstandingstockafterissuanceof60,000,000sharestoDuos shareholders. This resulted in a purchase price of $393,929. The difference between the recorded historical valueof assetsacquired andliabilitiesassumed totaling $1,578,816 wasallocated $165,000 fortradenameand technology and a further $250,000 for existing customer relationships both of which will be amortized over 2 years. These tradename and technologyamountsarebasedonthevalueofasecuredloanagainstthepatentandsoftwareandthe customer relationships is calculated based on the estimated gross margin for the next two years for certain customerrelationships. The remaining $1,163,816 is allocated to Goodwill which is the expected synergies that will benefit the combined entity. Goodwill is not expected to be deductible for income tax purposes.

In connection with the merger, the Company incurred acquisition costs of $36,718 in 2014 of which $16,425is includedinprofessionalfees,$10,000isincludedinsalaries,wagesandcontractlaborand$10,293isincludedin generalandadministrativeexpensesontheaccompanyingstatementsofoperations.InadditiontheCompany incurred $75,489 in2015.

The fairvalueoftheassetsacquiredandliabilitiesassumedinthemergerareasfollows:

Assets acquired:
Cash	$	1,347
Tradename and technology		165,000
Customer relationships		250,000
Goodwill		1,163,816
Total assets		1,580,163
Liabilities assumed:
Accounts payable		216,461
Loans payable		748,426
Accrued expenses		35,275
Deferred revenue		1,809
Total liabilities		1,186,234
Purchase price	$	393,929

The estimatesoffairvaluesandthepurchasepriceallocationissubjecttochangependingthefinalizationofthe valuation of assets acquired and liabilitiesassumed.

The following unaudited pro forma consolidated results of operations have been prepared as if the mergeroccurredon January 1,2014:

	Three MonthsEnded March 31,2015			Year EndedDecember 31, 2014
Net Revenues	$	1,107,166		$	4,603,768
Net Loss	$	(1,338,400	)	$	(3,049,740	)
Net Loss per share applicable to common stock	$	(.02	)	$	(.06	)

Pro formadatadoesnotpurporttobeindicativeoftheresultsthatwouldhavebeenobtainedhadtheseevents actuallyoccurredatthebeginningoftheperiodspresentedandisnotintendedtobeaprojectionoffutureresults.