Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 10, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | Duos Technologies Group, Inc. | |
Entity Central Index Key | 1,396,536 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 64,385,937 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Current Assets | ||
Cash | $ 14,488 | $ 85,435 |
Accounts receivable, net | 1,170,066 | 317,934 |
Costs and estimated earnings in excess of billings on uncompleted contracts | 318,150 | 218,309 |
Prepaid expenses and other current assets | 221,071 | 92,859 |
Total Current Assets | 1,723,775 | 714,536 |
Property and Equipment, net | 65,239 | 44,883 |
OTHER ASSETS: | ||
Patents and trademarks, net | 59,639 | 52,496 |
Total Other Assets | 59,639 | 52,496 |
TOTAL ASSETS | 1,848,653 | 811,915 |
Current Liabilities | ||
Accounts payable | 1,596,314 | 550,455 |
Accounts payable - related parties | 32,459 | 53,122 |
Commercial insurance/office equipment financing | 76,463 | 33,055 |
Note payable - related parties | 598,051 | 75,000 |
Note payable - net of discounts | 68,646 | |
Convertible notes payable, net of discounts, including premiums | 557,214 | $ 1,425,106 |
Line of credit | 40,214 | |
Payroll taxes payable | 315,006 | $ 600,181 |
Accrued expenses | 986,833 | 694,498 |
Billings in excess of costs and estimated earnings on uncompleted contracts | 531,688 | 153,783 |
Deferred revenue | 652,096 | 865,394 |
Contingent lawsuit payable | 1,411,650 | 1,411,650 |
Total Current Liabilities | 6,866,634 | 5,862,244 |
Total Liabilities | $ 6,866,634 | $ 5,862,244 |
Stockholders' Equity (Deficit) | ||
Preferred stock $0.001 par value, 10,000,000 authorized, none issued or outstanding | ||
Common stock: $0.001 par value; 500,000,000 shares authorized 63,318,512 and 57,738,209 shares issued and issuable, and outstanding at September 30, 2015 and December 31, 2014, respectively | $ 63,319 | $ 57,738 |
Additional paid in capital | 16,557,995 | 13,517,159 |
Accumulated deficit | (21,639,295) | (18,625,226) |
Total Stockholders' Equity (Deficit) | (5,017,981) | (5,050,329) |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ 1,848,653 | $ 811,915 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ .001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 63,318,512 | 57,738,209 |
Common stock, shares outstanding | 63,318,512 | 57,738,209 |
Condensed Statements of Operati
Condensed Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenue | ||||
Project revenue | $ 1,366,565 | $ 363,379 | $ 2,891,198 | $ 1,418,484 |
Maintenance and technical support | 665,670 | $ 601,141 | 1,852,001 | $ 1,755,958 |
IT asset management services | 209,965 | 209,965 | ||
Total Revenue | 2,242,200 | $ 964,520 | 4,953,164 | $ 3,174,442 |
Cost of Goods Sold | ||||
Project | 653,194 | 303,273 | 1,517,578 | 1,076,974 |
Maintenance and technical support | 255,920 | $ 200,429 | 693,709 | $ 588,477 |
IT asset management services | 94,747 | 94,747 | ||
Total Cost of Revenue | 1,003,861 | $ 503,702 | 2,306,034 | $ 1,665,450 |
Gross Profit | 1,238,339 | 460,818 | 2,647,130 | 1,508,992 |
Operating Expenses | ||||
Selling and marketing expenses | 64,219 | 81,391 | 208,283 | 214,751 |
Salaries, wages and contract labor | 686,081 | 597,751 | 1,907,934 | 1,667,289 |
Research and development | 65,831 | 44,347 | 157,328 | 142,605 |
Professional Fees | 108,421 | 44,472 | 233,553 | 45,077 |
General and administrative expenses | $ 249,363 | $ 118,200 | 738,531 | $ 326,663 |
Impairment loss | 1,578,816 | |||
Total Operating Expenses | $ 1,173,915 | $ 886,161 | 4,824,445 | $ 2,396,385 |
Income (Loss) from Operations | 64,424 | (425,343) | (2,177,315) | (887,393) |
Interest expense | $ (273,750) | $ (38,726) | (839,962) | $ (97,282) |
Gain on settlement of accounts payable | 3,200 | |||
Other income, net | $ 2 | $ 16 | 8 | $ 75 |
Total Other Income (Expense) | (273,748) | (38,710) | (836,754) | (97,207) |
Loss before income taxes | $ (209,324) | $ (464,053) | $ (3,014,069) | (984,600) |
Franchise tax | (860) | |||
Net Loss | $ (209,324) | $ (464,053) | $ (3,014,069) | (985,460) |
Preferred stock dividends | (134,094) | (402,282) | ||
Net loss applicable to common stock | $ (209,324) | $ (598,147) | $ (3,014,069) | $ (1,387,742) |
NET LOSS APPLICABLE TO COMMON STOCK PER COMMON SHARE: | ||||
Basic | $ 0 | $ (0.01) | $ (0.05) | $ (0.01) |
Diluted | $ 0 | $ (0.01) | $ (0.05) | $ (0.01) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||
Basic | 61,831,726 | 56,605,329 | 60,288,922 | 56,605,329 |
Diluted | 61,831,726 | 56,605,329 | 60,288,922 | 56,605,329 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | |
Cash Flows from Operating Activities | |||||
Net Loss | $ (209,324) | $ (464,053) | $ (3,014,069) | $ (985,460) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||
Depreciation and amortization | 91,372 | $ 42,219 | |||
Gain on settlement of accounts payable | 3,200 | ||||
Stock and warrants issued for services | 123,775 | ||||
Loss on settlement of debt | 197,123 | $ 3,082 | |||
Amortization of prepaid consulting fees | 17,854 | ||||
Impairment loss | 1,578,816 | ||||
Changes in operating assets and liabilities | |||||
Accounts receivable | (852,132) | $ 366,698 | |||
Costs and estimated earnings on projects | $ (99,841) | (75,987) | |||
Put premium | 9,630 | ||||
Prepaid expenses and other current assets | $ (133,231) | (35,116) | |||
Accounts payable | (123,693) | (383,006) | |||
Accounts payable-related party | (20,663) | (12,998) | |||
Payroll taxes payable | (285,175) | 171,598 | |||
Accrued expenses | 348,818 | (8,508) | |||
Billings in excess of costs and earnings on uncompleted contracts | 377,905 | 270,331 | |||
Deferred revenue | (213,298) | (61,643) | |||
Net Cash Used in Operating Activities | (2,003,239) | $ (702,242) | |||
Cash Flows from Investing Activities | |||||
Cash acquired in acquisition | 1,346 | ||||
Purchase of patents/trademarks | (11,470) | $ (1,500) | |||
Purchase of fixed assets | (107,401) | (23,841) | |||
Net Cash Used In Investing Activities | $ (117,525) | (25,341) | |||
Cash Flows from Financing Activities | |||||
Bank overdraft proceeds | $ (97,491) | ||||
Proceeds from bank line of credit | $ 40,214 | ||||
Proceeds from related party notes | 591,697 | ||||
Proceeds from borrowings under convertible notes and other debt | 1,374,498 | $ 1,138,740 | |||
Proceeds of insurance and equipment financing | 43,408 | 35,066 | |||
Net Cash Provided by Financing Activities | 2,049,817 | 1,076,315 | |||
Net increase (decrease) in cash | (70,947) | 348,732 | |||
Cash, beginning of period | 85,435 | 250 | |||
Cash, end of period | $ 14,488 | $ 348,982 | 14,488 | $ 14,488 | 348,982 |
Supplemental Disclosure of Cash Flow Information: | |||||
Interest paid | 33,211 | 37,380 | |||
Taxes paid | 800 | $ 4,243 | |||
Supplemental Non-Cash Investing and Financing Activities: | |||||
Common stock issued to settle notes payable and accrued interest | 2,215,959 | ||||
Common stock issued to settle accounts payable | 16,800 | ||||
Common stock issued for accrued salary | 56,482 | ||||
Reclassification of put premium liability on convertible notes to paid-in capital | 37,120 | ||||
Increase in debt discount and paid-in capital for warrants issued with debt | 30,722 | ||||
Liabilities assumed in share exchange | 1,186,234 | ||||
Less: assets acquired in share exchange | (1,347) | ||||
Net liabilities assumed | 1,184,887 | ||||
Fair value of shares exchanged | 393,929 | ||||
Increase in intangible assets | $ 1,578,816 |
NOTE 1 - NATURE OF OPERATIONS,
NOTE 1 - NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFCANT ACCTG POLICIES | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NOTE 1 - NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFCANT ACCTG POLICIES | NOTE 1 NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Duos Technologies Group, Inc. (formerly k/a Information Systems Associates, Inc (ISA), through its primary operating subsidiary Duos Technologies, Inc. (duostech or the Company) is primarily engaged in the design and deployment of state-of-the-art, artificial intelligence driven intelligent technologies systems. duostech converges traditional security measures with information technologies to create actionable intelligence. duostechs IP is built upon two of its core technology platforms (praes i t i t The Companys strategy includes expansion of its technology base through organic development efforts, strategic partnerships, and growth through strategic acquisitions. duostechs primary target industry sectors include transportation, with emphasis on freight and transit railroad owners/operators, petro-chemical, utilities and healthcare. As reported previously, Duos Technologies Group, Inc. is the result of the reverse merger between duostech and ISA, which became effective as of April 1, 2015. The merger was followed by the change of name to Duos Technologies Group, Inc., a symbol change from IOSA to DUOT and up-listing from OTC Pink to OTC QB. ISAs original business of IT Asset Management (ITAM) services for large data centers is now operated as a division of the Company that continues its sales efforts through large strategic partners. The Company developed a methodology for the efficient data collection of assets contained within large data centers and was awarded a patent in 2010 for specific methods to collect and audit data. Basis of Presentation The accompanying unaudited condensed 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 September 30, 2015 are not indicative of the results that may be expected for the year ending December 31, 2015 or for any other future period. These unaudited condensed consolidated financial statements and the unaudited notes thereto should be read in conjunction with the audited financial statements and notes thereto of Duos Technologies, Inc. for the years ended December 31, 2014 and 2013 included in our Current Report on Form 8-K/A filed with the Securities and Exchange Commission (the SEC) on June 17, 2015 (our 8-K/A). Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Duos Technologies, Inc., and TrueVue 360, Inc. All significant 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 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 financial statements include the allowance on accounts receivable, valuation of deferred tax assets, estimates of percentage completion on projects and related revenues, valuation of intangible assets and goodwill, valuation of stock-based compensation, valuation of warrants issued with debt, valuation of beneficial conversion features in convertible debt, valuation of stock-based awards and valuation of loss contingencies. 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 The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through September 30, 2015. There were no amounts on deposit in excess of federally insured limits at September 30, 2015. Significant Customers and Concentration of Credit Risk The Company, by policy, routinely assesses the financial strength of its customers. As a result, the Company believes that its accounts receivable credit risk exposure is limited and has not experienced any write-downs in its accounts receivable balances through September 30, 2015. A significant portion of revenues is derived from certain customer relationships. The following is a summary of customers that each represents greater than 10% of total revenues for the nine months ended September 30, 2015 and 2014, and total accounts receivable at September 30, 2015 and December 31, 2014, respectively: 2015 2014 Revenue Accounts Receivable Revenue Accounts Receivable Customer A 22 % Customer A 27% Customer A 47% Customer A 46% Customer B 21 % Customer B 26% Customer B 28% Customer B 24% Customer C 20 % Customer C 15 % Customer C 15% Customer D 14 % Fair Value of Financial Instruments and Fair Value Measurements We measure our financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, the carrying amounts approximate fair value due to their short maturities. Amounts recorded for notes payable, net of discount, and loans payable also approximate fair value because current interest rates available to us for debt with similar terms and maturities are substantially the same. We follow accounting guidance for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. The estimated fair value of certain financial instruments, including accounts receivable and accounts payable are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The cost basis of notes and convertible debentures approximates fair value due to the market interest rates carried for these instruments. Earnings (Loss) Per Share Basic earnings per share (EPS) are computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding for the period and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options, stock warrants, convertible debt instruments or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. At September 30, 2015, outstanding warrants to purchase an aggregate of 614,681 shares of common stock and 2,260,085 Segment Information The Company operates in one reportable segment. Recent Issued Accounting Standards Financial Accounting Standards Board, Accounting Standard Updates which are not effective until after December 31, 2015 are not expected to have a significant effect on the Companys consolidated financial position or results of operations. In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-15, Presentation of Financial Statements Going Concern (Topic 205-40), which requires management to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern for each annual and interim reporting period. If substantial doubt exists, additional disclosure is required. This new standard will be effective for the Company for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the implementation of this standard to have a material effect on its disclosures. On May 8, 2015, the FASB issued ASU 2015-08, Business Combinations (Topic 805) Pushdown Accounting In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs," |
NOTE 2 - GOING CONCERN
NOTE 2 - GOING CONCERN | 9 Months Ended |
Sep. 30, 2015 | |
Note 2 - Going Concern | |
NOTE 2 - GOING CONCERN | NOTE 2 GOING CONCERN As reflected in the accompanying unaudited consolidated financial statements, the Company had a net loss of $3,014,069 including an impairment loss of $1,578,816 and other non-cash charges to earnings related to the reverse merger with Information Systems Associates for the nine months ended September 30, 2015. During the same period, cash used in operations was $2,003,239. The working capital deficit, stockholders deficit and accumulated deficit as of September 30, 2015 was $5,142,859, $5,017,981 and $21,639,295, respectively. These matters raise substantial doubt about the Companys ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Companys ability to further implement its business plan, raise capital and become profitable. Our management embarked on a business growth strategy in 2014 to engage with private companies in or related to our market space with the intention of a merger or acquisition. In April 2015, the Company completed a previously announced reverse triangular merger whereby duostech became a wholly owned subsidiary of the Company. The two companies are now integrated and continue to operate in their respective markets. In addition, a complete and detailed plan of operations has been developed which contemplates seeking to raise capital and focus on growing revenue and profits from existing operations. On June 30, 2015, the Company retained a broker dealer to assist it in its capital raising efforts on a best efforts basis. At the present time, there are no commitments for any amounts. The Company has also shed expenses from existing operations as a result of the merger. Management believes that the actions presently being taken provide the opportunity for the Company not only to continue as a going concern but also grow substantially and thus achieve profitability in the near future. Ultimately however, the continuation of the Company as a going concern is dependent upon the ability of the Company to execute the plan described above, generate sufficient revenue and to attain profitable operations. These unaudited, consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. |
NOTE 3 - DEBT
NOTE 3 - DEBT | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
NOTE 3 - DEBT | NOTE 3 DEBT Notes Payable-Related Parties The Companys notes payable to related parties classified as current liabilities consist of the following as of September 30, 2015 and December 31, 2014: September 30, 2015 December 31, 2014 Notes Payable Principal Interest* Principal Interest* Shareholder $ 65,000 .75 % $ 65,000 .75 % Related party 15,000 1.5 % Related party 28,040 Related party 36,500 .67 % 10,000 .67 % Related Party 25,670 Related Party 10,000 2.5 % Shareholder 100,000 1.0 % CFO 7,841 Shareholder 310,000 .50 % Total $ 598,051 $ 75,000 * effective interest rate per month including default penalties On May 28, 2008, a shareholder who is indirectly invested in the Company with the Chief Executive Officer (CEO) through another entity, loaned the Company the sum of $65,000 at an annual percentage rate of 9%. There was an accrued interest balance of $41,918 and $37,531 as of September 30, 2015 and December 31, 2014, respectively. The note was repayable on or before September 15, 2008 although no demand for repayment has been received from the holder. There is no formal written agreement and the terms are documented on a letter from a former Chief Financial Officer (CFO) of the Company. The terms contain no default clauses and as of the time of this report, no demand for repayment has been made or expected. The Company intends to either negotiate a conversion to common stock or to repay the loan when sufficient working capital permits such action. Upon the consummation of the merger on April 1, 2015, the Company assumed an Original Issue Discount (OID) promissory note with a remaining principal balance of $15,000 accruing interest at 1.5% per month. On September 30, 2015 there was an outstanding principal balance of $15,000 and an accrued interest balance of $2,132. The note is currently due and the note holder has not made any demand for payment at this time. Upon the consummation of the merger on April 1, 2015, the Company assumed two promissory notes from an entity which had previously extended credit on a revolving basis for working capital. The total principal balance was $212,693 at the time of the merger and carried total interest and extension fees of 2.5% per month. On September 30, 2015, the note and accrued interest for a total of $275,660 was exchanged for 1,002,401 common shares. The same lender had extended further credit to the Companys TrueVue360 subsidiary which on September 30, 2015 had a principal balance of $28,040 and accrued interest balance of $9,777 totaling $37,817. The note can be extended each time for a further 30 days on payment of a 1% extension fee in addition to the 1.5% interest cost which can be accrued. The Company agreed to convert this note to an 18-month term loan with 0% interest and monthly payments of $2,100 starting November 1, 2015. The Company also issued 501,201 5-year warrants with a strike price of $0.28 as consideration for the conversion of the larger note and the zero interest feature of the extended payment plan. On December 12, 2013, the wife of the CEO loaned the Company the sum of $10,000 at an annual percentage rate of 8%. On January 29, 2015 and March 3, 2015, the wife of the CEO loaned the Company an additional $12,000 and $5,000, respectively. On September 30, 2015 an additional $9,500 was loaned to the Company. The total principal due at September 30, 2015 and December 31 2014 was $36,500 and $10,000, respectively. There was accrued interest balance of $2,326 and $842 as of September 30, 2015 and December 31, 2014, respectively. The note is repayable on demand of the holder. As of the time of this report, no such demand has been made. Upon the consummation of the merger on April 1, 2015, the Company assumed a promissory note with a remaining principal balance of $30,378 from the former CEO of ISA. These amounts are non-interest bearing and are due on demand. The Company pays these loans as sufficient funds become available. At September 30, 2015, the loan had an outstanding balance of $25,670. Upon the consummation of the merger on April 1, 2015, the Company assumed an OID promissory note with a remaining principal and accrued interest balance of $10,593. During the third quarter 2015, interest payments of $1,500 were paid. At September 30, 2015 the principal balance of the note was $10,000, and an accrued interest balance of $629 at a rate of 2.5% per month including interest and extension fees. On March 10, 2015, the Company received a $100,000 loan from a related party principal shareholder. The note accrues interest at the rate of 12% per annum and is repayable on or before December 15, 2015. There was accrued interest balance of $6,690 as of September 30, 2015. (As described in more detail under Note 10 Subsequent Events, the Company and shareholder have agreed to convert the principal amount and accrued interest to common stock effective October 28, 2015.) Upon the consummation of the merger on April 1, 2015, the Company assumed two promissory notes with a total principal balance of $8,783 due to the Companys CFO. During the second quarter 2015, the CFO loaned the Company an additional $365 and the Company made payments to the CFO during the same period in the amount of $1,307. These advances do not incur any interest and will be paid by the Company when sufficient funds are available. At September 30, 2015, the CFO had an outstanding loan balance of $7,841. Upon the consummation of the merger on April 1, 2015, the Company assumed a promissory note with a principal balance of $857 due to a former Board member. These advances do not incur any interest and will be paid by the Company when sufficient funds are available. On September 11, 2015 the note was paid in full. On March 3, 2015, the Vice President of Accounting of the Company loaned the Company the sum of $1,500 at an annual percentage rate of 8%. There was accrued interest balance of $9 as of June 30, 2015. The note is repayable on demand of the holder in the event of a significant accounts receivable payment to the Company. The company repaid the loan in full on April 15, 2015. On April 8, 2015, the Company received a $310,000 loan from a related party principal shareholder. The note accrues interest at the rate of 6% per annum and is repayable on or before October 31, 2015. There was accrued interest balance of $8,616 as of September 30, 2015 (As described in more detail under Note 10 Subsequent Events), the Company and shareholder have agreed to replace the note with a new note in the amount of $320,166, which includes principal and accrued interest through October 31, 2015. Repayment shall occur in eleven monthly payments of $27,750 plus one final payment of $27,006.63 (including interest of 6%) beginning on or before December 31, 2015 . Notes Payable-Net of Discounts September 30, 2015 Notes Payable Principal Interest Shareholder $ 9,600 Shareholder-debt discount (954 ) Vendor 60,000 Total $ 68,646 Upon the consummation of the merger on April 1, 2015, the Company assumed a non-interest bearing OID promissory note with a remaining principal balance of $33,600 ($26,923 net of OID discounts) pursuant to a 1 year funding which began in August 2014, secured by future receivables up to $62,400 (which was the original principal balance of the note). The Company is amortizing the original issue discount over the term of debt. The unamortized discount at September 30, 2015 was $954. The Company is making a monthly payment of $4,800 and has 2 remaining payments. The principal balance due at September 30, 2015 was $9,600. Upon the consummation of the merger on April 1, 2015, the Company assumed a promissory note with a principal balance of $50,000. On July 1, 2015, the principal balance of $50,000 was converted to 150,000 common shares, with an accrued interest balance of $13,750 payable in the fourth quarter 2015. On August 10, 2015, the Company entered into an agreement with FacilityTeam of Ontario, Canada to settle a dispute that had arisen concerning payments for software development services. The Company strongly believed that FacilityTeam did not deliver the products promised and felt that we would prevail in an upcoming arbitration called for by the contract between the parties. Ultimately, the Company opted to settle the matter for the cost of the litigation which was estimated be at least $60,000; rather than spend further resources on defending the claim and pursuing the counterclaim against FacilityTeam. The Company agreed to pay to FacilityTeam $2,500 per month starting October 1, 2015 for 24 months and taking a charge in third quarter of 2015 of the settlement amount of $60,000. Convertible Notes Payable-Net of Discounts, Including Premiums September 30, 2015 December 31, 2014 Notes Payable Principal Discount Premium Principal, net of Discount Including Premium Principal Premium Principal, Including Premium Investor $ 19,108 $ $ $ 19,108 $ $ $ Vendor 50,000 50,000 100,000 Shareholder 125,000 125,000 Investor Group 115,000 61,923 176,923 1,398,370 26,736 1,425,106 Shareholder 46,975 23,488 70,463 Shareholder 40,000 (26,587 ) 21,538 34,951 Shareholder 20,000 10,769 30,769 Total $ 416,083 $ (26,587 ) $ 167,718 $ 557,214 $ 1,398,370 $ 26,736 $ 1,425,106 Upon the consummation of the merger on April 1, 2015, the Company assumed a convertible promissory note with a remaining principal balance of $19,108 due to an Investor and Shareholder of the Company. The $19,108 convertible note is convertible into 5,720 common shares at $3.34 per share and is non-interest bearing and is currently due, although the note holder has not made any demand for payment at this time. Upon the consummation of the merger on April 1, 2015, the Company assumed a convertible promissory note of $50,000 due to a vendor of the Company which included a premium of $50,000 relating to its treatment as stock settled debt under ASC 480. The $50,000 convertible note accrues interest at 1% per month and is convertible into the Companys common stock at a 50% discount to the average closing bid prices for the 5 days immediately prior to the conversion date. The net note balance at September 30, 2015 is $50,000 and $3,246 in accrued interest. Upon the consummation of the merger on April 1, 2015, the Company assumed a non-interest bearing OID promissory note due to an unrelated party stockholder, subject to a forbearance agreement and due July 14, 2015. A 25% penalty is due if the balance is not paid by the due date. Furthermore, 5% of all factor payments to the Company are to be used to pay down the note. The note is secured by certain of the Companys intellectual property. Additionally, until the loan is paid, if there is a trigger notice (loan is due or is called), the factor will pay to the stockholder all factor holdback amounts after collection of the related accounts receivable, less any factor fees. On September 21, 2015, the shareholder agreed to new terms to convert $81,250 of the $165,000 outstanding note to 506,421 common shares, and the addition of the 25% penalty as stated above in the amount of $41,250, with a new note balance of $125,000, 15-month term and 8% interest. At September 30, 2015, the accrued interest was $2,082. Pursuant to a financing agreement with one investor group (the holder), dated September 23, 2013, duostech issued a $10,000 debenture in 2015 and there were $1,398,370 of unsecured convertible debentures outstanding at December 31, 2014. The debentures bear interest at 6% annually and each debenture principal is due in three years from the debenture issuance date. The interest is due monthly in arrears. The principal balance at March 30, 2015 and December 31, 2014 was $1,408,370 and $1,398,370, respectively. The Company has been making its monthly interest payments and accordingly, accrued interest was $0 and $7,126 at September 30, 2015 and December 31, 2014. There is no default provision for the non-payment of interest when due. The maturity dates range from October 27, 2016 through November 30, 2017. The financing agreement states that these debentures will take highest priority over all other existing debt of the Company in the case of bankruptcy or other liquidation event. If any debenture is outstanding as of the maturity date then the Company shall pay a 3% premium on the principal in addition to repayment of the principal and any accrued interest. This 3% premium is being accrued as additional interest expense over the debentures terms. If the Company merges with a public entity then the holder has the right to (i) convert the remaining principal of one or more debentures into the combined Companys 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 debentures as due and payable within six (6) months of the call date with regard to each debenture 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 debentures remain in effect according to the original terms, however, if the Company completes a merger with a public entity the Company has the right to pay-off 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 settled debt under ASC 480 due to the variable conversion fixed rate, no premium on the debt or related interest expense has been recorded at the debt issuance dates since the conversion option is contingent on a future event. On March 31, 2015, there was $1,415,546 of convertible debt which included $7,176 accrued interest that was converted into 2,211,791 shares of common stock as a result of closing of a reverse merger with Information Systems Associate, Inc. (ISA). The conversion was priced at a 20% discount from the Companys closing price on June 30, 2015 of $0.80 for a net conversion price of $0.64 per share in accordance with the original terms of the 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 to additional paid-in capital and a $352,093 interest expense was recognized and recorded as a debt premium on March 31, 2015 pursuant to the resolution of the contingency under ASC 480 and then reclassified to additional paid-in capital. In June 2015, the Company issued three Convertible Promissory Notes in the aggregate amount of $115,000 to the same investor group for a 2-year term, 8% coupon and convertible into the Company's common stock at a 35% discount from the 5-trading days average closing price immediately preceding conversion. On June 10, 2015 the investor made the first investment of $50,000, with subsequent further investments of $50,000 on June 16, 2015 and $15,000 on June 24, 2015. Based on the fixed conversion ratio, these notes are treated as stock settled debt under ASC 480 and accordingly, a premium of $61,923 was recorded and charged to interest expense. At September 30, 2015 the accrued interest was $2,711. Upon the consummation of the merger on April 1, 2015, the Company assumed a promissory with a remaining principal balance of $44,325 bearing interest at 1.5% per month. The note holder gave 30 day notice to the Company on May 1, 2015 for the note to be repaid in full plus any interest due. On June 30, 2015 an Addendum to Promissory Note was executed and agreed that the payment of $46,975, $44,325 plus accrued interest of $2,650 in connection with the Debt Purchase Agreement represents the total settlement of the Note. Also, on June 30, 2015 a current shareholder and services provider agreed to assume the new $46,975 note with the existing terms and conditions and an addendum was signed for the assumption and making the note convertible into the Companys common stock at a 50% discount to the average price for the previous 5 trading days and the new Note is non-interest bearing. The addendum was treated as a debt extinguishment. The Company recorded a premium of $23,488 since the note was convertible at a fixed rate to a fixed monetary amount equal to $70,463 pursuant to ASC 480. On September 30, 2015 the balance on the note was $70,463 which includes the $23,488 premium and there was accrued interest of $2,131. On June 24, 2015, a current shareholder agreed to loan to the Company $40,000 evidenced by a two year convertible note with an 8% coupon. The note is convertible into the Companys common stock at a 35% discount to the average closing price of the previous 5 trading days. The note holder was also issued 55,944 five year warrants with a $0.40 strike price and cashless exercise feature. The Company recorded a stock settled debt premium of $21,538 in accordance with ASC 480 and a warrant discount of $30,427 which is being amortized over the debt term. At September 30, the balance net of discounts and premium was $34,951. At September 30, 2015 the accrued interest was $869. On July 8, 2015 the Company received $10,000 and on July 17, 2015 the Company received an additional $10,000 from a shareholder in the form of a $20,000 Convertible Note. The terms of the note are 2 years, convertible into the Companys stock at a 35% discount from the average of the previous 5 trading days closing prices prior to notice of conversion. The Company will record a note premium in the amount of $10,769 based on this note qualifying as stock settled debt under ASC 480 and a prepaid assets balance of $12,185 $12,185 relating to warrants issued to the shareholder/vendor that will be amortized over 24 months. At September 30, 2015 the balance net of premium was $30,769 and accrued interest was $353. |
NOTE 4 - LINE OF CREDIT
NOTE 4 - LINE OF CREDIT | 9 Months Ended |
Sep. 30, 2015 | |
Note 4 - Line Of Credit | |
NOTE 4 - LINE OF CREDIT | NOTE 4 LINE OF CREDIT The Company assumed a line of credit with Wells Fargo Bank upon merger with ISA on April 1, 2015. The line of credit provided for borrowings up to $40,000. The balance as of September 30, 2015 was $40,214 including accrued interest. This line of credit has no maturity date. The annual interest rate is the Prime Rate plus 8%. The former CEO of ISA is the personal guarantor. |
NOTE 5 - NOTES PAYABLE - OTHER
NOTE 5 - NOTES PAYABLE - OTHER FINANCING AGREEMENTS | 9 Months Ended |
Sep. 30, 2015 | |
Debt Instruments [Abstract] | |
NOTE 5 - NOTES PAYABLE - OTHER FINANCING AGREEMENTS | NOTE 5 - NOTES PAYABLE - OTHER FINANCING AGREEMENTS The Companys notes payable relating to financing agreements classified as current liabilities consist of the following as of September 30, 2015 and December 31, 2014: September 30, 2015 December 31, 2014 Notes Payable Principal Interest Principal Interest Third Party - Insurance Note 1 $ 923 9.95 % $ 8,892 9.95 % Third Party - Insurance Note 2 18,823 9.75 % 20,376 9.25 % Third Party - Equipment Financing 3,787 13.48 % Third Party - Insurance Note 3 28,478 8.66 % Third Party - Insurance Note 4 28,239 8.99 % __ __ Total $ 76,463 $ 33,055 The Company entered into an agreement on December 13, 2014 with its insurance provider by executing an $8,892 note payable (Insurance Note 1) issued to purchase an insurance policy, secured by that policy with an annual interest rate of 9.95% payable in monthly installments of principal and interest totaling $930 through October 13, 2015. The Company entered into an agreement on September 15, 2015 with its insurance provider by executing an $18,823 note payable (Insurance Note 2) issued to purchase an insurance policy, secured by that policy with an annual interest rate of 9.75% payable in monthly installments of principal and interest totaling $1,678 through July 15, 2016. The Company entered into an agreement on February 3, 2015 with its insurance provider by executing an $111,548 note payable (Insurance Note 3) issued to purchase an insurance policy, secured by that policy with an annual interest rate of 8.66% payable in monthly installments of principal and interest totaling $9,803 through December 3, 2015. The Company entered into an agreement on April 1, 2015 with its insurance provider by executing a $65,000 note payable (Insurance Note 4) issued to purchase an insurance policy, secured by that policy with an annual interest rate of 8.99% payable in monthly installments of principal and interest totaling $5,775 through February 1, 2016. |
NOTE 6 - COMMITMENTS AND CONTIN
NOTE 6 - COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2015 | |
Note 6 - Commitments And Contingencies | |
NOTE 6 - COMMITMENTS AND CONTINGENCIES | NOTE 6 COMMITMENTS AND CONTINGENCIES Stock Purchase Agreement and Amendment Prior to the consummation of the merger, on September 19, 2014, duostech entered into a definitive material agreement for the Purchase of Uni-Data and Communications, Inc., (UDC) a division of Unity International Group Inc (UIG), based in New York City. The agreement called for UIG to sell UDC to duostech, as a wholly owned and operating entity. The companies executed a Stock Purchase Agreement (SPA) which called for the sale of 100% of the shares of UDC for the payment of $10 million. As reported previously, on June 26, 2015, the parties agreed to terminate the Agreement in accordance with its terms. Placement Agency Agreement On February 18, 2015, duostech engaged an exclusive placement agent in connection with the possible acquisition of UDC and required private placement of equity, equity-linked or debt securities (the Agreement). On June 29, 2015, the Company and the placement agent terminated the agreement; no success fee amounts were due. On July 1, 2015, duostech entered into a limited exclusive placement agent agreement in connection with the proposed offer and placement of up to $5,000,000 of securities, convertible instruments, private notes or loans (excluding a registered public offering) of the Company. The Agreement is for an initial term of 120 days. duostech paid an initial fee of $15,000 in connection with this engagement with a further $5,000 due upon the acceptance by duostech of a valid term sheet. In the event of a transaction being concluded, the agent will be paid 5% of senior debt that is not convertible and 8% cash plus 8% warrants of any equity based transaction. As of this report, no acceptable term sheet has yet been presented and the Company continues to engage with the agent. The agreement remains in force until either party cancels. Litigation As previously reported, on or about December 22, 2014, Corky Wells Electric (CW Electric) filed suit in the Circuit Court of Boyd County, Kentucky, against duostech demanding relief related to a promissory note issued by duostech to CW Electric on December 10, 2008 in the amount of $741,329. The suit was subsequently removed to the United States District Court for the Eastern District of Kentucky, Ashland Division. Previously, duostech entered into a Stipulation for Settlement on September 30, 2009 wherein CW Electric agreed to dismiss a previous lawsuit and duostech agreed to resume payments on the promissory note. In its suit, CW Electric contended that duostech breached the terms of that Stipulation for Settlement by not making the required number of payments at the times stipulated therein. CW Electric further contended that due to the breach of payment terms, under the terms of the promissory note, the outstanding amount continued to accrue interest at the rate of 18% per annum, which compounded monthly for a total of $1,411,650 due through the future final payment date. Effective October 28, 2015, duostech and CW Electric entered into a Settlement and Release Agreement (the Settlement Agreement) pursuant to which the parties have agreed to settle the suit upon the payment by duostech to CW Electric of $550,000 (the Settlement Amount) by February 15, 2016. An agreed judgment, evidencing the Companys agreement to pay the Settlement Amount, was signed by the parties (the Agreed Judgment) and such document deposited into escrow with CW Electrics counsel. At the time of the payment of the Settlement Amount, the Agreed Judgment is to be returned to the Company for destruction. Under the terms of the Settlement Agreement, duostech is required to provide on or before November 27, 2015, a letter of intent or other reasonably sufficient documentation from a credible bank or financial institution of such banks or institutions commitment to extend financing to the Company for the payment of the settlement amount (the Security). Upon provision of the Security, duostech will have until February 15, 2016 to pay the Settlement Amount and, if such amount is not paid by such date, then the Agreed Judgment is to be filed with the court and executed upon, with interest due at 12% per annum beginning February 15, 2016. If the Security is not provided by November 27, 2015, then the Agreed Judgment, plus interest at the rate of 12% per annum, is to be then filed with the court action but execution is to be stayed until February 15, 2016. Upon payment of the Settlement Amount, CW will release the Company, duostech and affiliates from any action that could have been brought in the suit. Subject to the year-end management review and independent audit, the Company anticipates that this development will result in a non-cash gain for the quarter ended December 31, 2015 in the approximate amount of $861,650. Amounts of $1,411,650 and $1,411,650 were previously accrued as a contingent lawsuit payable at September 30, 2015 and December 31, 2014, respectively, in the Companys consolidated financial statements for these periods. Delinquent Payroll Taxes Payable The Company has a delinquent payroll tax payable at September 30, 2015 and December 31, 2014 in the amount of $283,411 and $600,181, respectively. The delinquent portion is included in the payroll taxes payable balance of $315,006 and $600,181, respectively, as shown on the Companys consolidated balance sheet. Currently, the Company continues to make monthly payments to the IRS in the amount of $25,000 for the remaining balance due. The Company has requested an installment plan. Operating Lease The lease of the Companys offices prior to the merger with duostech was terminated due to the relocation of our office to Jacksonville, FL as a result of the completion of reverse triangular merger. We lease approximately 8,308 square feet at our Jacksonville, FL location. |
NOTE 7 - RELATED PARTIES
NOTE 7 - RELATED PARTIES | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
NOTE 7 - RELATED PARTIES | NOTE 7 RELATED PARTIES As of September 30, 2015 and December 31, 2014 there were various notes and loans payable to related parties (see Note 3). The Company also has accounts payable-related parties due to an officer for expense reimbursement and due to an affiliate for services in the total amount of $32,459 at September 30, 2015. |
NOTE 8 - STOCKHOLDERS' DEFICIT
NOTE 8 - STOCKHOLDERS' DEFICIT | 9 Months Ended |
Sep. 30, 2015 | |
Note 8 - Stockholders Deficit | |
NOTE 8 - STOCKHOLDERS' DEFICIT | NOTE 8 STOCKHOLDERS DEFICIT Conversion of Debt On March 31, 2015, Duos Ventures LLC converted $1,415,546 of convertible debentures which included $7,176 accrued interest into 2,211,791 shares of common stock as a result of the closing of a reverse merger with Information Systems Associate, Inc. (ISA). The conversion was priced at a 20% discount from the ISA closing price on March 31, 2015 of $0.80 for a net conversion price of $0.64 per share in accordance with the original terms of the convertible debentures. As a result of this conversion, $37,120 of accrued debt premium relating to the 3% provision (see Note 3) was reclassified to equity and a $352,093 interest expense was recognized and recorded as a debt premium on March 31, 2015 pursuant to the resolution of the contingency under ASC 480 and reclassified to equity. Reverse Merger On April 1, 2015, the Company completed a reverse triangular merger, pursuant to an Agreement and Plan of Merger (the Merger Agreement) among the Company (Duos), Information Systems Associates, Inc. (ISA), a publicly traded company, and Duos Acquisition Corporation, a Florida corporation and wholly owned subsidiary of ISA (Merger Sub). Under the terms of the Merger Agreement, Merger Sub merged with and into Duos, with Duos remaining as the surviving corporation and a wholly-owned subsidiary of ISA (the Merger). The Merger was effective as of April 1, 2015, upon the filing of a copy of the Merger Agreement and articles of merger with the Secretary of State of the State of Florida (the Effective Time). As part of the merger agreement, ISA confirmed to Duos executives that its stockholders would receive 60,000,000 common shares of ISA. The Company intends to carry on Duos business as a line of business following the Merger. The Company also intends to continue ISA'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. The Merger was accounted for as a reverse merger using the acquisition method under ASC 805-40 with the Company (then named Information Systems Associates, Inc.) deemed to be the acquired company for accounting purposes. This determination is based on then duostech shareholders obtaining an approximate 98% voting control as well as management and Board control of the combined entity. Accordingly, the assets and liabilities and historical operations that are reflected in the consolidated financial statements after the merger are those of duostech stated at historical cost and the assets and liabilities of the Company were recorded at their fair values at the merger date. The results of operations of the Company are only consolidated with the results of operations starting on the merger date. An analysis of duostech established a total enterprise valuation of $19,350,000 using a relative values approach. At the time of the merger, it was estimated that the Company shareholders would own approximately 2% of the outstanding stock after issuance of 60,000,000 shares to duostech shareholders in connection with the Merger. This resulted in a purchase price of $393,929. The difference between the recorded historical value of assets acquired and liabilities assumed totaling $1,578,816 was allocated $165,000 for trade name and technology and a further $250,000 for existing customer relationships, both of which will be amortized over 2 years. These trade name and technology amounts are based on the value of a secured loan against the patent and software and the customer relationships is calculated based on the estimated gross margin for the next two years for certain customer relationships. 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. For accounting purposes, the Company is deemed to have issued 1,246,870 shares of common stock to the ISA shareholders for a purchase price of $393,929. In connection with the merger, the Company incurred acquisition costs of $36,718 in 2014 of which $16,425 is included in professional fees, $10,000 is included in salaries, wages and contract labor and $10,293 is included in general and administrative expenses on the December 31, 2014 statements of operations. In addition, the Company incurred $75,489 in 2015 of which $31,812 is included in professional fees, $35,000 is included in salaries, wages and contract labor and $8,677 is included in general and administrative expenses as of March 31, 2015. The fair value of the assets acquired and liabilities assumed in the merger are as follows: Assets acquired: Cash $ 1,347 Trade name 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 Accrued salary 184,263 Deferred revenue 1,809 Total liabilities 1,186,234 Purchase price $ 393,929 The estimates of fair values and the purchase price allocation is subject to change pending the finalization of the valuation of assets acquired and liabilities assumed. The following unaudited pro forma consolidated results of operations have been prepared as if the merger occurred on January 1, 2014: Three Months Ended March 31, 2015 Year Ended December 31, 2014 Net Revenues $ 1,107,166 $ 4,603,768 Net Loss $ (1,338,399 ) $ (3,049,378 ) Net Loss per Share $ (.02 ) $ (.05 ) Pro forma data does not purport to be indicative of the results that would have been obtained had these events actually occurred at the beginning of the periods presented and is not intended to be a projection of future results. All share and per share data in the accompanying financial statements and footnotes have been retroactively reflected for the exchange. On June 30, 2015, the Company assessed the valuation of its intangible assets and goodwill acquired in the April 1, 2015 merger and determined to charge $1,578,816 to operations as a loss on impairment. Common stock issued for services and settlements On March 31, 2015, the Company issued 50,000 shares of common stock to a software engineering vendor for a $20,000 partial settlement of an outstanding payable. The shares were valued at $0.336 per share, or $16,800, based on contemporaneous conversions of the Company's Preferred Stock Series A & B to Common Stock. The Company recorded a $3,200 gain on the settlement of this payable which is included in Other Income in the statement of operations. On May 20, 2015, the Company entered into a one year agreement with a third party for consulting services. The prepaid vested 100,000 shares of common stock were issued in June 2015 and valued on that day at the closing price of the stock on the previous day of $0.65 per share for a total of $65,000. The $65,000 was recorded as a prepaid asset which is being amortized to expense over the agreement term. On May 27, 2015 the Company settled a $33,000 payable to an investor relations firm with 41,250 shares of common stock. There was no gain or loss. In conjunction with and subsequent to the merger agreement, ISA Warrant Holders were granted 19,387 shares of common stock in exchange for 33,750 existing warrants. The difference between the fair value of the warrants surrendered and the shares issued resulted in a loss on a settlement of $3,082 charged to operations. On June 30, 2015, the Companys CFO agreed to exchange $56,482 of accrued salary for restricted shares of the Company. The Company issued 141,205 shares of common stock based on a closing trading price of $0.40 per share. The shares were further divided and allocated by the CFO to three other parties including two charitable organizations and the son of the CFO with the CFO retaining 45,000 shares. There was no gain or loss on the settlement. On July 1, 2015, the principal balance of a promissory note of $50,000 was converted to 150,000 shares of common stock with a per share conversion price of $0.33. The shares were valued at their quoted trading price of $0.51 per share on the conversion date or $76,500 resulting in a loss on settlement of $26,500 included in interest expense. On August 27, 2015, the Company issued 50,000 shares of common stock in connection with a consulting agreement for $100 with a per share price of $0.002. The shares were valued at $10,775 based on the quoted trading price of $0.2155 per share resulting in a consulting expense of $10,675. During the third quarter of 2015, the Company issued 46,015 shares of common stock valued at the quoted trading price on the respective grant dates resulting in an expense of $15,000. In the third quarter of 2015, Warrant Holders were granted 14,963 shares of common stock in exchange for existing 20,250 warrants. The difference between the fair value of the warrants surrendered and the shares issued resulted in a gain on the settlements and therefore no charges were made to operations. On September 21, 2015, the Company issued 506,421 shares of common stock in exchange for an $81,250 portion of an outstanding convertible note. The shares were valued at $0.27 per share or $136,734 resulting in a loss settlement of $55,484 recorded as interest expense. On September 30 2015, the Company issued 1,002,401 shares of common stock in exchange for a promissory note and accrued interest totaling $275,660 with a related party. In addition, the Company issued 501,201 five year warrants in exchange for an extension of a note that was due in the amount of $37,817. The shares were valued at $260,624 or $0.26 per share and the warrants were valued at $130,175 using a Black-Scholes option pricing model, resulting in a total value of $390,799 and a loss settlement of $115,139 which was recorded as interest expense. |
NOTE 9 - COMMON STOCK PURCHASE
NOTE 9 - COMMON STOCK PURCHASE WARRANTS | 9 Months Ended |
Sep. 30, 2015 | |
Other Liabilities Disclosure [Abstract] | |
NOTE 9 - COMMON STOCK PURCHASE WARRANTS | NOTE 9 COMMON STOCK PURCHASE WARRANTS Warrants The following is a summary of activity for warrants to purchase common stock for the three months ending September 30, 2015: September 30, 2015 Shares Weighted Avg. Exercise Price Assumed in merger on April 1, 2015 82,966 $ 4.00 Warrants issued with debt or debt modifications 585,715 $ .36 Warrants exchanged for common stock (54,000 ) $ 5.59 Outstanding at end of period 614,681 $ 3.32 Exercisable at end of period 614,681 $ 3.32 During 2015, warrants for 501,201 common shares were issued for debt extension, warrants for 28,571 common shares were issued with debt and warrants for 55,943 common shares were issued with debt. In 2015 through September 30, 2015, 54,000 warrants were exchanged for 34,350 common shares resulting in a loss on settlement of $3,082 charged to operations. |
NOTE 10 - SUBSEQUENT EVENTS
NOTE 10 - SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
NOTE 10 - SUBSEQUENT EVENTS | NOTE 10 SUBSEQUENT EVENTS On October 1, 2015, the Company entered into an agreement with a financial consultant to introduce the Company to potential equity funding sources. duostech paid a $9,500 fee for them to perform due diligence in preparation for funding discussions with one or more of their funding partners with the objective of receiving a term sheet. As of the date of this report, a draft term sheet has been received and the Company is in discussions with regard to the terms. On October 26, 2015 the Company agreed terms with a shareholder for the conversion of an existing note of $20,000. The note was current and not due until July 2017. The shareholder agreed to convert the original principal of $20,000 plus $467 in accrued interest into 68,223 shares of the Companys common stock. The shares were valued at $0.40 per share based on the quoted trading price for a total of $27,289 resulting in a loss on settlement of debt of $6,822. On October 26, 2015 the Company agreed terms with a shareholder for the conversion of an existing note of $40,000. The note was current and not due until June 2017. The shareholder agreed to convert the original principal of $40,000 plus $1,096 in accrued interest into 136,986 shares of the Companys common stock. The shares were valued at $0.40 per share based on the quoted trading price for a total of $54,794 resulting in a loss on settlement of debt of $13,698. On October 27, 2015 the Company agreed terms with a shareholder for the conversion of four existing notes of $146,250. The notes were current and not due until earliest of June 2017. The shareholder agreed to convert the original total principal of $146,250 plus $3,542 in accrued interest into 499,308 shares of the Companys common stock. The shares were valued at $0.40 per share based on the quoted trading price for a total of $199,723 resulting in a loss on settlement of debt of $49,931. On October 28, 2015 the Company agreed terms with a shareholder for the conversion an existing note in the amount of $100,000. The notes were current and due December 15, 2015. The shareholder agreed to convert the original total principal of $100,000 plus $7,627 in accrued interest into 358,758 shares of the Companys common stock. The shares were valued at $0.40 per share based on the quoted trading price for a total of $143,503 resulting in a loss on settlement of debt of $35,876. Effective November 1, 2015 the Company agreed with a shareholder and greater than 10% stockholder for a new one-year amortizing note replacing the existing note due on October 31, 2015 (Replacement Note). The Replacement Note is in the amount of $320,166, which includes principal of $310,000 and accrued interest as of October 31 2015, and is payable in eleven monthly payments of $27,750 plus one final payment of $27,006.63 (including interest of 6%) beginning on or before December 31, 2015. |
NOTE 1 - NATURE OF OPERATIONS16
NOTE 1 - NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFCANT ACCTG POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operartions | Nature of Operations Duos Technologies Group, Inc. (formerly k/a Information Systems Associates, Inc (ISA), through its primary operating subsidiary Duos Technologies, Inc. (duostech or the Company) is primarily engaged in the design and deployment of state-of-the-art, artificial intelligence driven intelligent technologies systems. duostech converges traditional security measures with information technologies to create actionable intelligence. duostechs IP is built upon two of its core technology platforms (praes i t i t The Companys strategy includes expansion of its technology base through organic development efforts, strategic partnerships, and growth through strategic acquisitions. duostechs primary target industry sectors include transportation, with emphasis on freight and transit railroad owners/operators, petro-chemical, utilities and healthcare. As reported previously, Duos Technologies Group, Inc. is the result of the reverse merger between duostech and ISA, which became effective as of April 1, 2015. The merger was followed by the change of name to Duos Technologies Group, Inc., a symbol change from IOSA to DUOT and up-listing from OTC Pink to OTC QB. ISAs original business of IT Asset Management (ITAM) services for large data centers is now operated as a division of the Company that continues its sales efforts through large strategic partners. The Company developed a methodology for the efficient data collection of assets contained within large data centers and was awarded a patent in 2010 for specific methods to collect and audit data. |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed 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 September 30, 2015 are not indicative of the results that may be expected for the year ending December 31, 2015 or for any other future period. These unaudited condensed consolidated financial statements and the unaudited notes thereto should be read in conjunction with the audited financial statements and notes thereto of Duos Technologies, Inc. for the years ended December 31, 2014 and 2013 included in our Current Report on Form 8-K/A filed with the Securities and Exchange Commission (the SEC) on June 17, 2015 (our 8-K/A). |
Principled of Consolidation | Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Duos Technologies, Inc., and TrueVue 360, Inc. All significant inter-company transactions and balances are eliminated in consolidation. |
Use of Estimates | 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 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 financial statements include the allowance on accounts receivable, valuation of deferred tax assets, estimates of percentage completion on projects and related revenues, valuation of intangible assets and goodwill, valuation of stock-based compensation, valuation of warrants issued with debt, valuation of beneficial conversion features in convertible debt, valuation of stock-based awards and valuation of loss contingencies. 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 | Concentrations Cash Concentrations The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through September 30, 2015. There were no amounts on deposit in excess of federally insured limits at September 30, 2015. Significant Customers and Concentration of Credit Risk The Company, by policy, routinely assesses the financial strength of its customers. As a result, the Company believes that its accounts receivable credit risk exposure is limited and has not experienced any write-downs in its accounts receivable balances through September 30, 2015. A significant portion of revenues is derived from certain customer relationships. The following is a summary of customers that each represents greater than 10% of total revenues for the nine months ended September 30, 2015 and 2014, and total accounts receivable at September 30, 2015 and December 31, 2014, respectively: 2015 2014 Revenue Accounts Receivable Revenue Accounts Receivable Customer A 22 % Customer A 27% Customer A 47% Customer A 46% Customer B 21 % Customer B 26% Customer B 28% Customer B 24% Customer C 20 % Customer C 15 % Customer C 15% Customer D 14 % |
Fair Value Financial Instruments and Fair Value Measurements | Fair Value of Financial Instruments and Fair Value Measurements We measure our financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, the carrying amounts approximate fair value due to their short maturities. Amounts recorded for notes payable, net of discount, and loans payable also approximate fair value because current interest rates available to us for debt with similar terms and maturities are substantially the same. We follow accounting guidance for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. The estimated fair value of certain financial instruments, including accounts receivable and accounts payable are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The cost basis of notes and convertible debentures approximates fair value due to the market interest rates carried for these instruments. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic earnings per share (EPS) are computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding for the period and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options, stock warrants, convertible debt instruments or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. At September 30, 2015, outstanding warrants to purchase an aggregate of 614,681 shares of common stock and 2,260,085 shares of common stock issuable upon conversion of convertible debt were excluded from the computation of dilutive earnings per share because the inclusion would have been anti-dilutive. |
Segment Information | Segment Information The Company operates in one reportable segment. |
Recent Issued Accounting Standards | Recent Issued Accounting Standards Financial Accounting Standards Board, Accounting Standard Updates which are not effective until after December 31, 2015 are not expected to have a significant effect on the Companys consolidated financial position or results of operations. In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-15, Presentation of Financial Statements Going Concern (Topic 205-40), which requires management to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern for each annual and interim reporting period. If substantial doubt exists, additional disclosure is required. This new standard will be effective for the Company for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the implementation of this standard to have a material effect on its disclosures. On May 8, 2015, the FASB issued ASU 2015-08, Business Combinations (Topic 805) Pushdown Accounting In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs," |
NOTE 1 _ NATURE OF OPERATIONS,
NOTE 1 – NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Note 6 - Commitments And Contingencies | |
Concentration | 2015 2014 Revenue Accounts Receivable Revenue Accounts Receivable Customer A 22 % Customer A 27% Customer A 47% Customer A 46% Customer B 21 % Customer B 26% Customer B 28% Customer B 24% Customer C 20 % Customer C 15 % Customer C 15% Customer D 14 % |
NOTE 3 - DEBT (Tables)
NOTE 3 - DEBT (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Notes Payable - Related Parties | Notes Payable-Related Parties September 30, 2015 December 31, 2014 Notes Payable Principal Interest* Principal Interest* Shareholder $ 65,000 .75 % $ 65,000 .75 % Related party 15,000 1.5 % Related party 28,040 Related party 36,500 .67 % 10,000 .67 % Related Party 25,670 Related Party 10,000 2.5 % Shareholder 100,000 1.0 % CFO 7,841 Shareholder 310,000 .50 % Total $ 598,051 $ 75,000 |
Notes Payable - Net of Discounts | Notes Payable-Net of Discounts September 30, 2015 Notes Payable Principal Interest Shareholder $ 9,600 Shareholder-debt discount (954 ) Vendor 60,000 Total $ 68,646 |
Convertible Notes Payable-Net of Discounts, Including Premiums | Convertible Notes Payable-Net of Discounts, Including Premiums September 30, 2015 December 31, 2014 Notes Payable Principal Discount Premium Principal, net of Discount Including Premium Principal Premium Principal, Including Premium Investor $ 19,108 $ $ $ 19,108 $ $ $ Vendor 50,000 50,000 100,000 Shareholder 125,000 125,000 Investor Group 115,000 61,923 176,923 1,398,370 26,736 1,425,106 Shareholder 46,975 23,488 70,463 Shareholder 40,000 (26,587 ) 21,538 34,951 Shareholder 20,000 10,769 30,769 Total $ 416,083 $ (26,587 ) $ 167,718 $ 557,214 $ 1,398,370 $ 26,736 $ 1,425,106 |
NOTE 5 - NOTES PAYABLE - OTHE19
NOTE 5 - NOTES PAYABLE - OTHER FINANCING AGREEMENTS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Note Payable - Third Parties | September 30, 2015 December 31, 2014 Notes Payable Principal Interest Principal Interest Third Party - Insurance Note 1 $ 923 9.95 % $ 8,892 9.95 % Third Party - Insurance Note 2 18,823 9.75 % 20,376 9.25 % Third Party - Equipment Financing 3,787 13.48 % Third Party - Insurance Note 3 28,478 8.66 % Third Party - Insurance Note 4 28,239 8.99 % __ __ Total $ 76,463 $ 33,055 |
NOTE 8 _ STOCKHOLDERS_ DEFICIT
NOTE 8 – STOCKHOLDERS’ DEFICIT (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Fair Value of Merger | Assets acquired: Cash $ 1,347 Trade name 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 Accrued salary 184,263 Deferred revenue 1,809 Total liabilities 1,186,234 Purchase price $ 393,929 |
Pro Forma Results of Operation | Three Months Ended March 31, 2015 Year Ended December 31, 2014 Net Revenues $ 1,107,166 $ 4,603,768 Net Loss $ (1,338,399 ) $ (3,049,378 ) Net Loss per Share $ (.02 ) $ (.05 ) |
NOTE 9 _ COMMON STOCK PURCHASE
NOTE 9 – COMMON STOCK PURCHASE WARRANTS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Warrants | Warrants September 30, 2015 Shares Weighted Avg. Exercise Price Assumed in merger on April 1, 2015 82,966 $ 4.00 Warrants issued with debt 585,715 $ .36 Conversions (54,000 ) $ 5.59 Outstanding at end of period 614,681 $ 3.32 Exercisable at end of period 614,681 $ 3.32 |
NOTE 1 - NATURE OF OPERATIONS22
NOTE 1 - NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFCANT ACCTG POLICIES (Details Narratives) | Sep. 30, 2015shares |
Note 1 - Nature Of Operations Basis Of Presentation And Summary Of Signifcant Acctg Policies Details Narratives | |
Number of Warrants Outstanding | 614,681 |
Number of Shares upon Conversion | 2,260,085 |
NOTE 2 - GOING CONCERN (Details
NOTE 2 - GOING CONCERN (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Note 2 - Going Concern Details Narrative | ||
Net (loss) income | $ 3,014,069 | |
Impairment loss | 1,578,816 | |
Net cash used in operations | (2,003,239) | $ (702,242) |
Working capital deficit | 5,142,859 | |
Stockholders' deficit | 5,017,981 | |
Accumulated deficit | $ 21,639,295 |
NOTE 4 - LINE OF CREDIT (Detail
NOTE 4 - LINE OF CREDIT (Detail Narrative) - USD ($) | Sep. 30, 2015 | Apr. 02, 2015 | Dec. 31, 2014 |
Note 4 - Line Of Credit | |||
Line of Credit - Wells Fargo Bank | $ 40,214 | $ 40,000 | |
Interest Rate | 8.00% | ||
Balance including accrued interest | $ 40,214 |
NOTE 5 - NOTES PAYABLE - OTHE25
NOTE 5 - NOTES PAYABLE - OTHER FINANCING AGREEMENTS (Detail Narrative) - USD ($) | Sep. 15, 2015 | Apr. 02, 2015 | Feb. 03, 2015 | Dec. 13, 2014 |
Note 5 - Notes Payable - Other Financing Agreements Detail Narrative | ||||
Note payable - insurance | $ 18,823 | $ 65,000 | $ 111,548 | $ 8,892 |
Annual interest rate | 9.75% | 8.99% | 8.66% | 9.50% |
Monthly installments of principal and interest | $ 1,678 | $ 5,775 | $ 9,803 | $ 930 |
NOTE 6 - COMMITMENTS AND CONT26
NOTE 6 - COMMITMENTS AND CONTINGENCIES (Detail Narrative) | Jul. 02, 2015USD ($)d |
Notes to Financial Statements | |
Agent agreement | $ 5,000,000 |
Agreement Term | d | 120 |
Fee paid(deposit) | $ 15,000 |
Acceptance of agreement | $ 5,000 |
Non convertible interest | 5.00% |
Percentage (cash) | 0.08 |
Equity based transaction | 0.08 |
NOTE 7 - RELATED PARTIES (Detai
NOTE 7 - RELATED PARTIES (Details Narrative) | Sep. 30, 2015USD ($) |
Note 7 - Related Parties Details Narrative | |
Expense reimbursement | $ 32,459 |
NOTE 8 - STOCKHOLDERS' DEFICIT
NOTE 8 - STOCKHOLDERS' DEFICIT (Detail Narrative) - USD ($) | Apr. 02, 2015 | Dec. 31, 2014 |
Commitments and Contingencies Disclosure [Abstract] | ||
Subsidiary shares | 60,000,000 | |
Enterprise valuation | $ 19,350,000 | |
Percent owned by shareholders | 2.00% | |
Purchase price | $ 393,929 | |
Value of assets and liabilities acquired | 1,578,816 | |
Allocated for trade name and technology | 165,000 | |
Allocated for exsisting customer relationship | 250,000 | |
Allocated for Goodwill | $ 1,163,816 | |
Issued shares to subsidiary sharholders | 1,246,870 | |
Incurred acquisition costs | $ 36,718 |
NOTE 9 - COMMON STOCK PURCHAS29
NOTE 9 - COMMON STOCK PURCHASE WARRANTS (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | |
Note 9 - Common Stock Purchase Warrants Details | |||
Warrantes issued for debt extension | 501,201 | ||
Warrants issued with debt 2 | 28,571 | ||
Warrants issued with debt 1 | 55,943 | ||
Warrants exchanged | 54,000 | ||
Common shares issued | 34,350 | ||
Loss on settlements | $ 3,082 | $ 197,123 |