Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 13, 2018 | |
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, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 21,007,157 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
CURRENT ASSETS: | ||
Cash | $ 1,572,051 | $ 1,941,818 |
Accounts receivable, net | 1,391,447 | 298,304 |
Contract assets | 347,565 | 423,793 |
Prepaid expenses and other current assets | 249,162 | 90,923 |
Total Current Assets | 3,560,225 | 2,754,838 |
Property and equipment, net | 170,899 | 65,362 |
OTHER ASSETS: | ||
Software Development Costs, net | 45,000 | |
Patents and trademarks, net | 47,428 | 45,978 |
Total Other Assets | 92,428 | 45,978 |
TOTAL ASSETS | 3,823,552 | 2,866,178 |
CURRENT LIABILITIES: | ||
Accounts payable | 981,310 | 812,618 |
Accounts payable - related parties | 13,473 | 12,598 |
Notes payable - financing agreements | 69,038 | 49,657 |
Notes payable - related parties | 9,078 | |
Line of credit | 31,516 | 34,513 |
Payroll taxes payable | 200,119 | 149,448 |
Accrued expenses | 441,091 | 497,277 |
Contract liabilities | 1,258,159 | 200,410 |
Deferred revenue | 279,375 | 438,907 |
Total Current Liabilities | 3,274,081 | 2,204,506 |
Notes payable - related party | 39,137 | |
Total Liabilities | 3,274,081 | 2,243,643 |
Commitments and Contingencies (Note 6) | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock | 2,830,000 | 2,830,000 |
Common stock: $0.001 par value; 500,000,000 shares authorized, 21,010,437 and 20,657,850 shares issued, 21,007,157 and 20,654,570 shares outstanding at September 30, 2018 and December 31, 2017, respectively | 21,010 | 20,658 |
Additional paid-in capital | 27,280,249 | 26,608,823 |
Total stock & paid-in-capital | 30,131,259 | 29,459,481 |
Accumulated deficit | (29,433,788) | (28,688,946) |
Sub-total | 697,471 | 770,535 |
Less: Treasury stock (3,280 shares of common stock) | (148,000) | (148,000) |
Total Stockholders' Equity | 549,471 | 622,535 |
Total Liabilities and Stockholders' Equity | 3,823,552 | 2,866,178 |
Series A Convertible Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock | ||
Series B Convertible Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock | $ 2,830,000 | $ 2,830,000 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares available to be designated | 9,485,000 | 9,485,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 21,010,437 | 20,657,850 |
Common stock, shares outstanding | 21,007,157 | 20,654,570 |
Treasury stock shares | 3,280 | 3,280 |
Series A Convertible Preferred Stock [Member] | ||
Preferred stock, par value | $ 10 | $ 10 |
Preferred stock, shares available to be designated | 500,000 | 500,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Preferred stock, conversion price per share | $ 6.30 | $ 6.30 |
Series B Convertible Preferred Stock [Member] | ||
Preferred stock, par value | $ 1,000 | $ 1,000 |
Preferred stock, shares available to be designated | 15,000 | 15,000 |
Preferred stock, shares issued | 2,830 | 2,830 |
Preferred stock, shares outstanding | 2,830 | 2,830 |
Preferred stock, conversion price per share | $ 0.50 | $ 0.50 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
REVENUES: | ||||
Total Revenues | $ 5,102,216 | $ 1,045,735 | $ 9,490,202 | $ 3,243,969 |
COST OF REVENUES: | ||||
Total Cost of Revenues | 2,773,862 | 658,391 | 5,428,037 | 1,875,280 |
GROSS PROFIT | 2,328,354 | 387,344 | 4,062,165 | 1,368,689 |
OPERATING EXPENSES: | ||||
Selling and marketing expenses | 73,468 | 27,104 | 189,092 | 146,031 |
Salaries, wages and contract labor | 1,072,029 | 784,012 | 3,153,138 | 2,359,899 |
Research and development | 122,755 | 65,984 | 401,116 | 225,982 |
Professional fees | 63,878 | 87,366 | 187,679 | 292,099 |
General and administrative expenses | 359,991 | 210,398 | 864,969 | 768,606 |
Total Operating Expenses | 1,692,121 | 1,174,864 | 4,795,994 | 3,792,617 |
INCOME (LOSS) FROM OPERATIONS | 636,233 | (787,520) | (733,829) | (2,423,928) |
OTHER INCOME (EXPENSES): | ||||
Interest expense | (4,589) | (1,525,894) | (14,755) | (3,279,898) |
Gain on settlement of debt | 64,647 | |||
Warrant derivative gain | 2,188,546 | 1,901,219 | ||
Other income, net | 981 | 3,742 | 1 | |
Total Other Income (Expense) | (3,608) | 662,652 | (11,013) | (1,314,031) |
NET INCOME (LOSS) | 632,625 | (124,868) | (744,842) | (3,737,959) |
Series A preferred stock dividends | (5,920) | (17,760) | ||
Net income (loss) applicable to common stock | $ 632,625 | $ (130,788) | $ (744,842) | $ (3,755,719) |
Basic Net Income (Loss) Per Share | $ 0.03 | $ (0.07) | $ (0.04) | $ (1.98) |
Diluted Net Income (Loss) Per Share | $ 0.02 | $ (0.07) | $ (0.04) | $ (1.98) |
Weighted Average Shares-Basic | 20,752,450 | 1,899,716 | 20,724,153 | 1,896,578 |
Weighted Average Shares-Diluted | 26,412,450 | 1,899,716 | 20,724,153 | 1,896,578 |
Project Revenues [Member] | ||||
REVENUES: | ||||
Total Revenues | $ 4,731,106 | $ 561,022 | $ 8,516,812 | $ 1,512,628 |
COST OF REVENUES: | ||||
Total Cost of Revenues | 2,684,785 | 458,337 | 5,079,455 | 1,180,193 |
Maintenance and Technical Support Revenues [Member] | ||||
REVENUES: | ||||
Total Revenues | 371,110 | 288,137 | 881,004 | 914,438 |
COST OF REVENUES: | ||||
Total Cost of Revenues | 89,077 | 131,363 | 300,593 | 366,357 |
IT Asset Management Services Revenues [Member] | ||||
REVENUES: | ||||
Total Revenues | 196,576 | 92,386 | 816,903 | |
COST OF REVENUES: | ||||
Total Cost of Revenues | $ 68,691 | $ 47,989 | $ 328,730 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash from operating activities: | ||
Net Loss | $ (744,842) | $ (3,737,959) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 71,318 | 36,519 |
Gain on settlement of debt | (64,647) | |
Stock based compensation | 403,070 | |
Stock issued for services | 40,000 | |
Interest expense related to debt discounts of notes payable | 3,064,086 | |
Warrant derivative gain | (1,901,219) | |
Changes in assets and liabilities: | ||
Accounts receivable | (1,093,143) | (326,160) |
Contract assets | 76,228 | 131,587 |
Prepaid expenses and other current assets | 58,934 | 207,936 |
Accounts payable | 168,692 | 622,946 |
Accounts payable-related party | 875 | 1,238 |
Payroll taxes payable | 50,671 | 734,190 |
Accrued expenses | 17,523 | 455,780 |
Contract liabilities | 1,057,747 | 23,221 |
Deferred revenue | (159,532) | (333,626) |
Net cash used in operating activities | (92,459) | (1,046,108) |
Cash flows from investing activities: | ||
Software development costs | (60,000) | |
Purchase of patents/trademarks | (5,500) | |
Purchase of fixed assets | (157,804) | (22,549) |
Net cash used in investing activities | (223,304) | (22,549) |
Cash flows from financing activities: | ||
Bank overdraft | 688 | |
Repayments of line of credit | (2,997) | |
Repayments of related party notes | (48,215) | (19,911) |
Repayments of insurance and equipment financing | (197,792) | (153,496) |
Repayments of notes payable | (172,500) | |
Proceeds from warrants exercised | 195,000 | |
Proceeds of notes payable, net of 185,250 cash fees | 1,239,750 | |
Net cash (used in) provided by financing activities | (54,004) | 894,531 |
Net decrease in cash | (369,767) | (174,126) |
Cash, beginning of period | 1,941,818 | 174,376 |
Cash, end of period | 1,572,051 | 250 |
Supplemental Disclosure of Cash Flow Information: | ||
Interest paid | 7,411 | 110,919 |
Supplemental Non-Cash Investing and Financing Activities: | ||
Common stock issued for accrued BOD fees | 73,708 | |
Accrued interest forgiven related to note payable settlement | 20,697 | |
Debt discount related to notes payable | 1,571,250 | |
Note issued for financing of insurance premiums | $ 217,173 | $ 208,201 |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Parenthetical) | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Statement of Cash Flows [Abstract] | |
Cash fees | $ 185,250 |
NATURE OF OPERATIONS, BASIS OF
NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Duos Technologies Group, Inc. (the “Company”), through its operating subsidiary Duos Technologies, Inc. (“duostech”) 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.” duostech’s IP is built upon two of its core technology platforms (praes i ® i ® The Company’s strategy includes expansion of its technology base through organic development efforts, strategic partnerships, and growth through strategic acquisitions. The Company provides its broad range of technology solutions with an emphasis on mission critical security, inspection and operations within the rail transportation, commercial, petrochemical, government, and banking sectors. The Company also offers professional and consulting services for large data centers. As reported previously, The Company previously conducted a reverse merger between duostech and a wholly owned subsidiary of Information Systems Associates, Inc., a Florida corporation (“ISA”), which became effective as of April 1, 2015 resulting in duostech becoming a wholly owned subsidiary of the merged entity. The merger was followed by a corporate name change to Duos Technologies Group, Inc., a symbol change from IOSA to DUOT and up-listing from OTC Pink to OTCQB. ISA’s 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 strategic partners. ISA 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 nine months ended September 30, 2018 are not indicative of the results that may be expected for the year ending December 31, 2018 or for any other future period. These unaudited consolidated financial statements and the unaudited condensed notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission (the “SEC”) on April 2, 2018. All share and per share amounts have been presented to give retroactive effect to a 1-for-35 reverse-stock split that occurred in May 2017. Principles of Consolidation The consolidated financial statements include the accounts of the Company including its wholly-owned subsidiaries, Duos Technologies, Inc. and TrueVue 360, Inc. All inter-company transactions and balances are eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the 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 consolidated financial statements include the allowance on accounts receivable, valuation of deferred tax assets, valuation of intangible and other long-lived assets, estimates of net contract revenues and the total estimated costs to determine progress towards contract completion, valuation of derivatives, valuation of warrants issued with debt, valuation of beneficial conversion features in convertible debt, and valuation of stock-based awards. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Concentrations Cash Concentrations Cash is maintained at financial institutions and at times, balances may exceed federally insured limits. We have not experienced any losses related to these balances. As of September 30, 2018, balance in one financial institution exceeded federally insured limits by approximately $1,656,500. Significant Customers and Concentration of Credit Risk The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows: For the nine months ended September 30, 2018, two customers accounted for 47% and 36% of revenues, respectively. For the nine months ended September 30, 2017, three customers accounted for 25%, 19% and 19% of revenues, respectively. At September 30, 2018, four customers accounted for 30%, 22%, 12%, and 10% of accounts receivable. At December 31, 2017, . Geographic Concentration Approximately 49% of revenue is generated from three customers outside of the United States. Accounting for Derivatives The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. 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. Software Development Costs Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs. The technological feasibility of a software product is established when the Company has completed all planning, designing, coding, and testing activities that are necessary to establish that the product meets its design specifications, including functionality, features, and technical performance requirements. Software development costs incurred after establishing technological feasibility for software sold as a perpetual license, as defined within ASC 985-20 (Software – Costs of Software to be sold, Leased, or Marketed) are capitalized and amortized on a product-by-product basis when the product is available for general release to customers. Earnings (Loss) Per Share Basic earnings per share (EPS) are computed by dividing net loss applicable to common stock by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss applicable to common stock 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, convertible preferred stock or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. At September 30, 2018, there was an aggregate of 24,916,332 outstanding warrants to purchase shares of common stock. At September 30, 2018, there was an aggregate of 2,242,000 shares of employee stock options to purchase shares of common stock of which 406,000 are currently unvested. All warrants and options were excluded from the calculation of dilutive earnings per share because none of them were in the money at September 30, 2018. However, at September 30, 2018, 5,660,000 common shares issuable upon conversion of Series B convertible preferred stock, were included in the computation of dilutive earnings per share. Revenue Recognition As of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-89, Revenue from Contracts with Customers (“ASC 606”), that affects the timing of when certain types of revenues will be recognized. The basic principles in ASC 606 include the following: a contract with a customer creates distinct unrecognized contract assets and performance obligations; satisfaction of a performance obligation creates revenue; and a performance obligation is satisfied upon transfer of control to a good or service to a customer. Revenue is recognized for sales of systems and services over time using cost-based input methods, in which significant judgement is required to evaluate assumptions including the amount of net contract revenues and the total estimated costs to determine our progress towards contract completion and to calculate the corresponding amount of revenue to recognize. Revenue is recognized by evaluating our revenue contracts with customers based on the five-step model under ASC 606: 1. Identify the contract with the customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to separate performance obligations; and 5. Recognize revenue when (or as) each performance obligations is satisfied. Accordingly, the Company now bases its revenue recognition on ASC 606-10-25-27, where control of a good or service transfers over time if the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date including a profit margin or reasonable return on capital. Control is deemed to pass to the customer instantaneously as the goods are manufactured and revenue is recognized accordingly. In addition, the Company has adopted ASC 606-10-55-21 such that if the cost incurred is not proportionate to the progress in satisfying the performance obligation, we adjust the input method to recognize revenue only to the extent of the cost incurred. Therefore, the Company will recognize revenue at an equal amount to the cost of the goods to satisfy the performance obligation. To accurately reflect revenue recognition based on the input method, the Company has adopted the implementation guidance as set out in ASC-606-10-55-187 through 192. Segment Information The Company operates in one reportable segment. Stock Based Compensation The Company accounts for employee stock-based compensation in accordance with ASC 718-10, “ Share-Based Payment The Company accounts for non-employee stock-based compensation in accordance with ASC 505-50-25, “ Equity Based Payments to Non-Employees, Determining Fair Value Under ASC 718-10 The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The Company’s determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding the number of highly subjective variables. The Company estimates volatility based upon the historical stock price of the Company and estimates the expected term for employee stock options using the simplified method for employees and directors and the contractual term for non-employees. The risk-free rate is determined based upon the prevailing rate of United States Treasury securities with similar maturities. Recent Accounting Pronouncements In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flow (Topic 230). This update is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The update provides new guidance regarding the classification of debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies including bank-owned life insurance policies, distributions received from equity method investments, beneficial interests in securitized transactions, and separately identifiable cash flows and application of the predominance principle. This standard is effective for financial statements issued by public companies for the annual and interim periods beginning after December 15, 2017. Early adoption of the standard is permitted. The standard will be applied in a retrospective approach for each period presented. We have completed an initial evaluation of this standard, which requires cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities. We have determined that there were no cash payments involved in debt extinguishment during the nine months ended September 30, 2018, hence there will be no potential impact on our financial statements due to this update. We will continue to evaluate the potential impact of this guidance on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)” (“ASU 2016-02”). The FASB issued ASU 2016-02 to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under ASU 2016-02, a lessee will recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-to-use asset representing its right to use the underlying asset for the lease term. The amendments of this ASU are effective for reporting periods beginning after December 15, 2018, with early adoption permitted. An entity will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Management currently does not plan to early adopt this guidance and is evaluating the potential impact of this guidance on the consolidated financial statements as well as transition methods. In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718). This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. This standard will be effective for financial statements issued by public companies for the annual and interim periods beginning after December 15, 2018. Early adoption of the standard is permitted. The standard will be applied in a retrospective approach for each period presented. Management currently does not plan to early adopt this guidance and is evaluating the potential impact of this guidance on the consolidated financial statements as well as transition methods. |
GOING CONCERN
GOING CONCERN | 9 Months Ended |
Sep. 30, 2018 | |
GOING CONCERN [Abstract] | |
GOING CONCERN | NOTE 2 – GOING CONCERN As reflected in the accompanying unaudited consolidated financial statements, the Company had a net loss of $744,842 for the nine months ended September 30, 2018. During the same period, cash used in operating activities was $92,459. The working capital and accumulated deficit as of September 30, 2018 were $286,144 and $29,433,788. It is management’s opinion that these matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. While the company attained profitability in the three-month period ending September 30, 2018, the ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan, drive significant additional revenue and achieve profitability on a sustained basis. Effective November 24, 2017, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with accredited investors (the “Purchasers”). Pursuant to the Securities Purchase Agreement, the Purchasers purchased 16,402,742 shares of common stock, 22,068,742 purchaser warrants (the “Offering Warrants”), and 2,830 shares of Series B Preferred Stock (collectively, the “SPA Securities”) worth $11,031,371 (including the conversion of liabilities and redemptions of shares of the Company’s Series A Preferred Stock) (the “Private Offering”). Part of the cash received was used to retire long-term debt and payables including full payment to the Internal Revenue Service, excluding accrued late fees in the amount of $108,262, in which the Company is making monthly payments in the amount of $15,000 which began in July 2018 to pay down the accrued late fees. The remaining cash and near-term receivables and anticipated billings of approximately $2.1 million will be used to support operations for signed and anticipated contracts which are expected to generate revenues throughout 2018, as well as a growth plan implemented throughout 2018. While no assurance can be provided, management believes that these actions provide the opportunity for the Company to continue as a going concern and to grow its business and achieve profitability without the requirement to raise additional capital for existing operations. Ultimately 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 consistently 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. |
SOFTWARE DEVELOPMENT COSTS
SOFTWARE DEVELOPMENT COSTS | 9 Months Ended |
Sep. 30, 2018 | |
SOFTWARE DEVELOPMENT COSTS [Abstract] | |
SOFTWARE DEVELOPMENT COSTS | NOTE 3 – SOFTWARE DEVELOPMENT COSTS At September 30, 2018, the Company capitalized $60,000, relating to the development of new software products. These software products were developed by a third-party and had passed the preliminary project stage prior to capitalization. Software development costs consisted of the following at September 30, 2018 and December 31, 2017: September 30, 2018 December 31, 2017 Software Development Costs $ 60,000 $ — Less: Accumulated amortization (15,000 ) — Total $ 45,000 $ — Amortization expense of software development costs for the nine months ended September 30, 2018 and September 30, 2017 was $15,000 and zero, respectively. |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE 4 – DEBT Notes Payable - Financing Agreements The Company’s notes payable relating to financing agreements classified as current liabilities consist of the following as of: September 30, 2018 December 31, 2017 Notes Payable Principal Interest Principal Interest Third Party - Insurance Note 1 $ 2,219 10.30 % $ 25,075 10.30 % Third Party - Insurance Note 2 19,804 10.00 % 11,679 10.00 % Third Party - Insurance Note 3 25,818 8.80 % — Third Party - Insurance Note 4 21,197 10.25 % 12,903 9.24 % Total $ 69,038 $ 49,657 The Company entered into an agreement on December 23, 2017 with its insurance provider by executing a $25,075 note payable (Insurance Note 1) issued to purchase an insurance policy, secured by that policy with an annual interest rate of 10.30% payable in monthly installments of principal and interest totaling $2,234 through October 23, 2018. The balance of Insurance Note 1 as of September 30, 2018 and December 31, 2017 was $2,219 and $25,075, respectively. The Company entered into an agreement on September 15, 2018 renewing with its insurance provider by executing a $15,810 note payable (Insurance Note 2), secured by that policy, with an annual interest rate of 10.75% payable in monthly installments of principal and interest totaling $1,660 through July 15, 2019. At September 30, 2018 and December 31, 2017, the balance of Insurance Note 2 was $19,804 and $11,679, respectively. The Company entered into an agreement on February 3, 2018 with its insurance provider by executing a $127,561 note payable (Insurance Note 3) issued to purchase an insurance policy, secured by that policy with an annual interest rate of 8.80% payable in monthly installments of principal and interest totaling $13,276 through November 3, 2018. At September 30, 2018 and December 31, 2017, the balance of Insurance Note 3 was $25,818 and zero, respectively. The Company entered into an agreement on April 15, 2017 with its insurance provider by executing a $49,000 note payable (Insurance Note 4) issued to purchase an insurance policy, secured by that policy with an annual interest rate of 9.24% payable in monthly installments of principal and interest totaling $4,373 through February 15, 2018. The policy renewed on April 15, 2018 in the amount of $49,000 with an annual interest rate of 10.25% payable in monthly installments of principal and interest totaling $4,378. At September 30, 2018 and December 31, 2017, the balance of Insurance Note 4 was $21,197 and $12,903, respectively. Notes Payable - Related Parties The Company’s notes payable to related parties classified as current liabilities consist of the following as of: September 30, 2018 December 31, 2017 Notes Payable Principal Interest Principal Interest CEO $ — 8 % $ 9,078 8 % Sub-total current portion — 9,078 Add long-term portion-CEO — 39,137 Total $ — $ 48,215 On July 19, 2016, the Company received a $60,000 loan less fees of $75 for a related party loan with proceeds of $59,925 from the Company’s CEO. The promissory note carries an annual interest rate of 7.99% with a monthly installment payment of $1,052 through July 19, 2022. On January 5, 2018, the Company repaid the loan in full from the funds received in November 2017 as a result of that capital raise. As of September 30, 2018, and December 31, 2017, the outstanding balance was zero and $48,215, respectively. |
LINE OF CREDIT
LINE OF CREDIT | 9 Months Ended |
Sep. 30, 2018 | |
LINE OF CREDIT [Abstract] | |
LINE OF CREDIT | NOTE 5 – 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 but is now closed to future borrowing. The balance as of September 30, 2018 and December 31, 2017, was $31,516 and $34,513, respectively, including accrued interest. This line of credit has no maturity date. The annual interest rate is 11.5% at September 30, 2018. The former CEO of ISA is the personal guarantor. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 6 – COMMITMENTS AND CONTINGENCIES Delinquent Payroll Taxes Payable As of the date hereof, the Company has paid its payroll taxes in full and the Company had appealed the IRS penalty payments for a reduction which was under review. The IRS has since responded, and the Company will be required to repay the penalties in connection with the delinquent payroll taxes. At September 30, 2018, the payroll taxes payable balance of $200,119 includes accrued late fees in the amount of $138,572. The Company has started making monthly payments in the amount of $15,000 starting in July 2018 to pay down the accrued late fees. Licensing Agreement The Company has entered into a new software license and configuration services agreement with a third-party vendor. The annual support and maintenance fees of approximately $300,000 include support and updates to the vendor’s Gateway software and customer access to their services (including web application, mobile application, and associated APIs) for gateway configuration, gateway monitoring and management, application configuration, application management, and automatic model updates. The Company has also entered into a SaaS Agreement with the same vendor that is an Amazon AWS-hosted software service enabling the automation of visual observation tasks using deep convolutional neural networks and other computer vision techniques. It consists of a public API, web application, iPhone application, and associated backend services. The system supports the labeling of example image data, the automatic building of classification, detection, localization, measuring and counting applications based on the labeled example data, and the run-time deployment of the trained application models. |
RELATED PARTIES
RELATED PARTIES | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTIES | NOTE 7 – RELATED PARTIES Letter Agreements In connection with the closing of the Company's Private Offering of common stock and warrants to purchase shares of the Company's common stock on November 24, 2017, (i) Gianni B. Arcaini, the Chief Executive Officer, converted $700,543 of accrued salary into 700,543 shares of the Company's common stock at $1.00 per share and was issued 700,543 warrants to purchase shares of common stock of the Company at an exercise price of $1.00 per share, expiring five years from the grant date; and (ii) Adrian G. Goldfarb, the Chief Financial Officer of the Company, converted $34,020 of liabilities into 34,020 shares of the Company's common stock at $1.00 per share and was issued 34,020 warrants to purchase shares of common stock of the Company at an exercise price of $1.00 per share, expiring five years from the grant date. As of September 30, 2018, and December 31, 2017, there was one note payable to the CEO, totaling zero and $48,215, respectively. (see Note 4) |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
STOCKHOLDERS' DEFICIT | NOTE 8 – STOCKHOLDERS’ EQUITY Common stock issued for board of director fees During the first quarter of 2018, the Company issued 52,209 shares of common stock totaling $73,708 for partial consideration in lieu of cash owed to independent members of the board of directors for their service in such capacity. These shares were valued at $26,105 or $0.50 based on a recent private investor offering, with a gain on settlement for $26,103 charged to additional paid in capital. Common stock issued for exercise of warrants During the third quarter of 2018, an existing shareholder who participated in the Private Offering elected to exercise certain Offering Warrants that were granted as a result of that investment. The Warrants are covered by a Registration Statement that became effective on December 29, 2017. The shareholder tendered $195,000 to the Company and the Company issued 300,000 shares of common stock in exchange. The shares are immediately available for sale. Stock-Based Compensation Stock-based compensation expense recognized under ASC 718-10 for the nine months ended September 30, 2018, was $403,070 for stock options granted to employees and directors. This expense is included in selling, general and administrative expenses in the unaudited consolidated statements of operations. Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. At September 30, 2018, the total compensation cost for stock options not yet recognized was approximately $67,407. This cost will be recognized over the remaining vesting term of the options of approximately 2½ years. Employee Stock Options A maximum of 2,500,000 shares were made available for grant under the 2016 Plan, as amended, and all outstanding options under the Plan provide a cashless exercise feature. The identification of individuals entitled to receive awards, the terms of the awards, and the number of shares subject to individual awards, are determined by our Board of Directors or the Compensation Committee, at their sole discretion. The aggregate number of shares with respect to which options or stock awards may be granted under the 2016 Plan and the purchase price per share, if applicable, shall be adjusted for any increase or decrease in the number of issued shares resulting from a stock dividend, stock split, reverse stock split, recapitalization or similar event. As of September 30, 2018, and December 31, 2017, options to purchase 2,242,000 and zero shares of common stock were outstanding under the 2016 Plan, respectively. The Company has no expired employee stock options at September 30, 2018. September 30, 2018 Weighted Average Exercise Shares Price Outstanding at beginning of year — $ — Granted 2,242,000 $ 1.00 Exercised — $ — Forfeited — $ — Expired — $ — Outstanding at September 30, 2018 2,242,000 $ 1.00 Exercisable at September 30, 2018 1,836,000 $ 1.00 Outstanding Weighted average remaining contractual term 4.75 Aggregate intrinsic value $ — Weighted average grant date fair value (per share) $ 0.21 Exercisable Weighted average remaining contractual term 4.75 Aggregate intrinsic value — Warrants The following is a summary of activity for warrants to purchase common stock for the nine months ended September 30, 2018: September 30, 2018 Number of Warrants Weighted Avg. Exercise Price Remaining Contractual Life (Years) Outstanding at the beginning of the year 25,216,332 $ .65 4.9 Warrants expired — Warrants issued — Warrants cancelled/exercised (300,000 ) Outstanding at end of period 24,916,332 .65 4.1 Exercisable at end of period 24,916,332 $ .65 4.1 During the third quarter of 2018, the Company received $195,000 for 300,000 shares of common stock as a result of the exercise of Offering Warrants. |
REVENUE
REVENUE | 9 Months Ended |
Sep. 30, 2018 | |
REVENUES: | |
REVENUE | NOTE 9 - REVENUE Revenue Recognition and Contract Accounting The Company generates revenue from three sources: (1) Project Revenue; (2) Maintenance and Technical Support and (3) IT Asset Management (consulting and auditing). The Company constructs intelligent technology systems consisting of materials and labor under customer contracts. Revenues and related costs on project revenue are recognized based on ASC 606-10-25-27, where control of a good or service transfers over time if the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date including a profit margin or reasonable return on capital. Control is deemed to pass to the customer instantaneously as the goods are manufactured and revenue is recognized accordingly. In addition, the Company has adopted ASC 606-10-55-21 such that if the cost incurred is not proportionate to the progress in satisfying the performance obligation, we adjust the input method to recognize revenue only to the extent of the cost incurred. Therefore, the Company will recognize revenue at an equal amount to the cost of the goods to satisfy the performance obligation. To accurately reflect revenue recognition based on the input method, the Company has adopted the implementation guidance as set out in ASC 606-10-55-187 through 192. Under this method, contract revenues are recognized over the performance period of the contract in direct proportion to the costs incurred. Costs include direct material, direct labor, subcontract labor and other allocable indirect costs. All un-allocable indirect costs and corporate general and administrative costs are also charged to the periods as incurred. Any recognized revenues that have not been billed to a customer are recorded as an asset in “contract assets”. Any billings of customers more than recognized revenues are recorded as a liability in “contract liabilities”. However, in the event a loss on a contract is foreseen, the Company will recognize the loss when such loss is determined. |
NET INCOME (LOSS) PER SHARE
NET INCOME (LOSS) PER SHARE | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
NET INCOME (LOSS) PER SHARE | NOTE 10 - NET INCOME (LOSS) PER SHARE The Company has 27,158,332 outstanding options and warrants to acquire common stock as of September 30, 2018. They are not included in the computation of net loss per common share for the nine months ended September 30, 2018 because the effects of inclusion would be anti-dilutive. For the three months ended September 30, 2018, basic net income (loss) per common share applicable to common stockholders was computed based on the weighted average number of common shares outstanding during the period. Diluted net loss per common share applicable to common stockholders was computed based on the weighted average number of common shares and dilutive securities outstanding. Dilutive securities having an anti-dilutive effect on diluted net loss per common share were excluded from the calculation. There were 27,158,332 out-of-the-money stock options and warrants excluded from the computation of diluted earnings per share for the three months ended September 30, 2018. Basic and diluted net income per share, for the three months ended September 30, 2018, were calculated as follows: Basic Diluted Numerator Net income applicable to common stock $ 632,625 $ 632,625 $ 632,625 $ 632,625 Denominator Weighted average common shares outstanding 20,752,450 20,752,450 Preferred Stock — 5,660,000 Warrants and options — — 20,752,450 26,412,450 Net income per share $ 0.03 $ 0.02 |
CONTRACT ACCOUNTING
CONTRACT ACCOUNTING | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
CONTRACT ACCOUNTING | NOTE 11 – CONTRACT ACCOUNTING Contract Assets Contract assets on uncompleted contracts represents costs and estimated earnings in excess of billings and/or cash received on uncompleted contracts accounted for under the input method, which recognizes revenue only to the extent of the cost incurred. At September 30, 2018 and December 31, 2017, contract assets on uncompleted contracts consisted of the following: September 30, 2018 December 31. 2017 Costs and estimated earnings recognized $ 1,026,938 $ 1,613,731 Less: Billings or cash received (679,373 ) (1,189,938 ) Contract assets $ 347,565 $ 423,793 Contract Liabilities Contract liabilities on uncompleted contracts represents billings and/or cash received that exceed accumulated revenues recognized on uncompleted contracts accounted for under the input method, which recognizes revenue only to the extent of the cost incurred. At September 30, 2018 and December 31, 2017, contract liabilities on uncompleted contracts consisted of the following: September 30, 2018 December 31. 2017 Billings and/or cash receipts on uncompleted contracts $ 8,446,856 $ 573,847 Less: Costs and estimated earnings recognized (7,188,697 ) (373,437 ) Contract liabilities $ 1,258,159 $ 200,410 A contract is considered complete when all costs except insignificant items have been incurred and the installation is operating according to specifications or has been accepted by the customer. The Company has contracts in various stages of completion. Such contracts require estimates to determine the appropriate cost and revenue recognition. Costs estimates are reviewed periodically on a contract-by-contract basis 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 to complete projects, must be made and used in connection with the revenue recognized in the accounting period. Current estimates may be revised as additional information becomes available. Maintenance and Technical Support Maintenance and technical support services are provided on both an as-needed and extended-term basis and may include providing both parts and labor. Maintenance and technical support provided outside of a maintenance contract are on an as-requested basis, and revenue is recognized as the services are provided. Revenue for maintenance and technical support provided on an extended-term basis is recognized ratably over the term of the contract. For sales arrangements that do not involve multiple elements such as professional services, which are of short-term duration, revenues are recognized when services are completed. IT Asset Management Services (“ITAM”) The Company’s ITAM business generates revenues under contract with customers from three sources: (1) Professional Services (consulting and auditing); (2) Software licensing with optional hardware sales; and (3) Customer Service (training and maintenance support). For sales arrangements that do not involve performance obligations: (1) Revenues for professional services, which are of short-term duration, are recognized when services are completed; (2) For all periods reflected in this report, software license sales have been one-time sales of a perpetual license to use our software product and the customer also has the option to purchase third party manufactured handheld devices from us if they purchase our software license. Accordingly, the revenue is recognized upon delivery of the software and delivery of the hardware, as applicable, to the customer; (3) Training sales are one-time upfront short-term training sessions and are recognized after the service has been performed; and (4) Maintenance/support is an optional product sold to our software license customers under one-year contracts. Accordingly, maintenance payments received upfront are deferred and recognized over the contract term. Multiple Elements Arrangements with customers may involve multiple elements including project revenue and maintenance services in our Intelligent Technology Systems business. Maintenance will occur after the project is completed and may be provided on an extended-term basis or on an as-needed basis. In our ITAM business, multiple elements may include any of the above four sources. Training and maintenance on software products may occur after the software product sale while other services may occur before or after the software product sale and may not relate to the software product. Revenue recognition for multiple element arrangement is as follows: Each element is accounted for separately when each element has value to the customer on a standalone basis and there is Company specific objective evidence of selling price of each deliverable. For revenue arrangements with multiple deliverables, the Company allocates the total customer arrangement to the separate units of accounting based on their relative selling prices as determined by the price of the items when sold separately. Once the selling price is allocated, the revenue for each element is recognized using the applicable criteria under GAAP as discussed above for elements sold in non-multiple element arrangements. A delivered item or items that do not qualify as a separate unit of accounting within the arrangement are combined with the other applicable undelivered items within the arrangement. The allocation of arrangement consideration and the recognition of revenue is then determined for those combined deliverables as a single unit of accounting. The Company sells its various services and software and hardware products at established prices on a standalone basis which provides Company specific objective evidence of selling price for purposes of multiple element relative selling price allocation. The Company only sells maintenance services or spare parts based on its established rates after it has completed a system integration project for a customer. The customer is not required to purchase maintenance services. All elements in multiple element arrangements with Company customers qualify as separate units of account for revenue recognition purposes. Deferred Revenue Deferred revenues represent billings or cash received in excess of revenue recognizable on service agreements that are not accounted for under the percentage of completion method. Disaggregation of Revenue The Company is following the guidance of ASC 606-10-55-296 and 297 for disaggregation of revenue. Accordingly, revenue has been disaggregated according to the nature, amount, timing and uncertainty of revenue and cash flows. We are providing qualitative and quantitative disclosures. Qualitative: 1. We have three distinct revenue sources: a. Turnkey, engineered projects; b. Associated maintenance and support services; and c. Professional services related to auditing of data center assets. 2. We currently operate in North America including the USA, Mexico and Canada. 3. Our customers include rail transportation, commercial, petrochemical, government, banking and IT suppliers. 4. Our contracts are fixed-price and fall into two duration types: a. Turnkey engineered projects and professional service contracts that are less than 1 year in duration and are typically three to nine months in length; and b. Maintenance and support contracts ranging from one to five years in length. 5. Transfer of goods and services are over time. Quantitative: For the Three Months Ended September 30, 2018 Segments Rail Commercial Petrochemical Government Banking IT Suppliers Total Primary Geographical Markets North America $ 4,045,590 $ 1,013,796 $ 33,481 $ 9,349 $ — $ — $ 5,102,216 Major Goods and Service Lines Turnkey Projects $ 3,712,399 $ 1,013,796 $ 15,783 $ (10,872) $ — $ — $ 4,731,106 Maintenance & Support 333,191 — 17,698 20,221 — — 371,110 Data Center Auditing Services — — — — — — — $ 4,045,590 $ 1,013,796 $ 33,481 $ 9,349 $ — $ — $ 5,102,216 Timing of Revenue Recognition Goods transferred over time $ 3,712,399 $ 1,013,796 $ 15,783 $ (10,872) $ — $ — $ 4,731,106 Services transferred over time 333,191 — 17,698 20,221 — — 371,110 $ 4,045,590 $ 1,013,796 $ 33,481 $ 9,349 $ — $ — $ 5,102,216 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 12 – SUBSEQUENT EVENTS On October 10, 2018, the Company’s Board of Directors approved the issuance of an aggregate of 496,215 five-year warrants with an exercise price of $0.65 to six investors. On October 10, 2018, the Company’s Board of Directors approved the issuance of up to 92,033 shares in exchange for $92,033 of accrued salary owed to a former officer of the Company. On October 24, 2018 the Company was notified by counsel handling a claim by the Company against a vendor that the vendor’s motion for dismissal on certain part of the Company’s claim was denied by the Court. Although the claim by the Company is valued currently at less than $50,000, the denial by the Court bolsters the Company’s claim against the vendor. The Company is continuing to pursue the claim unless an acceptable settlement can be reached in this matter. |
NATURE OF OPERATIONS, BASIS O_2
NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | Nature of Operations Duos Technologies Group, Inc. (the “Company”), through its operating subsidiary Duos Technologies, Inc. (“duostech”) 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.” duostech’s IP is built upon two of its core technology platforms (praes i ® i ® The Company’s strategy includes expansion of its technology base through organic development efforts, strategic partnerships, and growth through strategic acquisitions. The Company provides its broad range of technology solutions with an emphasis on mission critical security, inspection and operations within the rail transportation, commercial, petrochemical, government, and banking sectors. The Company also offers professional and consulting services for large data centers. As reported previously, The Company previously conducted a reverse merger between duostech and a wholly owned subsidiary of Information Systems Associates, Inc., a Florida corporation (“ISA”), which became effective as of April 1, 2015 resulting in duostech becoming a wholly owned subsidiary of the merged entity. The merger was followed by a corporate name change to Duos Technologies Group, Inc., a symbol change from IOSA to DUOT and up-listing from OTC Pink to OTCQB. ISA’s 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 strategic partners. ISA 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 nine months ended September 30, 2018 are not indicative of the results that may be expected for the year ending December 31, 2018 or for any other future period. These unaudited consolidated financial statements and the unaudited condensed notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission (the “SEC”) on April 2, 2018. All share and per share amounts have been presented to give retroactive effect to a 1-for-35 reverse-stock split that occurred in May 2017. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company including its wholly-owned subsidiaries, Duos Technologies, Inc. and TrueVue 360, Inc. All 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 consolidated financial statements include the allowance on accounts receivable, valuation of deferred tax assets, valuation of intangible and other long-lived assets, estimates of net contract revenues and the total estimated costs to determine progress towards contract completion, valuation of derivatives, valuation of warrants issued with debt, valuation of beneficial conversion features in convertible debt, and valuation of stock-based awards. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. |
Concentrations | Concentrations Cash Concentrations Cash is maintained at financial institutions and at times, balances may exceed federally insured limits. We have not experienced any losses related to these balances. As of September 30, 2018, balance in one financial institution exceeded federally insured limits by approximately $1,656,500. Significant Customers and Concentration of Credit Risk The Company had certain customers whose revenue individually represented 10% or more of the CompanyÂ’s total revenue, or whose accounts receivable balances individually represented 10% or more of the CompanyÂ’s total accounts receivable, as follows: For the nine months ended September 30, 2018, two customers accounted for 47% and 36% of revenues, respectively. For the nine months ended September 30, 2017, three customers accounted for 25%, 19% and 19% of revenues, respectively. At September 30, 2018, four customers accounted for 30%, 22%, 12%, and 10% of accounts receivable. At December 31, 2017, . Geographic Concentration Approximately 49% of revenue is generated from three customers outside of the United States. |
Accounting for Derivatives | Accounting for Derivatives The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. |
Fair Value of 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. |
Software Development Costs | Software Development Costs Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs. The technological feasibility of a software product is established when the Company has completed all planning, designing, coding, and testing activities that are necessary to establish that the product meets its design specifications, including functionality, features, and technical performance requirements. Software development costs incurred after establishing technological feasibility for software sold as a perpetual license, as defined within ASC 985-20 (Software – Costs of Software to be sold, Leased, or Marketed) are capitalized and amortized on a product-by-product basis when the product is available for general release to customers. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic earnings per share (EPS) are computed by dividing net loss applicable to common stock by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss applicable to common stock 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, convertible preferred stock or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. At September 30, 2018, there was an aggregate of 24,916,332 outstanding warrants to purchase shares of common stock. At September 30, 2018, there was an aggregate of 2,242,000 shares of employee stock options to purchase shares of common stock of which 406,000 are currently unvested. All warrants and options were excluded from the calculation of dilutive earnings per share because none of them were in the money at September 30, 2018. However, at September 30, 2018, 5,660,000 common shares issuable upon conversion of Series B convertible preferred stock, were included in the computation of dilutive earnings per share. |
Revenue Recognition | Revenue Recognition As of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-89, Revenue from Contracts with Customers (“ASC 606”), that affects the timing of when certain types of revenues will be recognized. The basic principles in ASC 606 include the following: a contract with a customer creates distinct unrecognized contract assets and performance obligations; satisfaction of a performance obligation creates revenue; and a performance obligation is satisfied upon transfer of control to a good or service to a customer. Revenue is recognized for sales of systems and services over time using cost-based input methods, in which significant judgement is required to evaluate assumptions including the amount of net contract revenues and the total estimated costs to determine our progress towards contract completion and to calculate the corresponding amount of revenue to recognize. Revenue is recognized by evaluating our revenue contracts with customers based on the five-step model under ASC 606: 1. Identify the contract with the customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to separate performance obligations; and 5. Recognize revenue when (or as) each performance obligations is satisfied. Accordingly, the Company now bases its revenue recognition on ASC 606-10-25-27, where control of a good or service transfers over time if the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date including a profit margin or reasonable return on capital. Control is deemed to pass to the customer instantaneously as the goods are manufactured and revenue is recognized accordingly. In addition, the Company has adopted ASC 606-10-55-21 such that if the cost incurred is not proportionate to the progress in satisfying the performance obligation, we adjust the input method to recognize revenue only to the extent of the cost incurred. Therefore, the Company will recognize revenue at an equal amount to the cost of the goods to satisfy the performance obligation. To accurately reflect revenue recognition based on the input method, the Company has adopted the implementation guidance as set out in ASC-606-10-55-187 through 192. |
Segment Information | Segment Information The Company operates in one reportable segment. |
Stock Based Compensation | Stock Based Compensation The Company accounts for employee stock-based compensation in accordance with ASC 718-10, “ Share-Based Payment The Company accounts for non-employee stock-based compensation in accordance with ASC 505-50-25, “ Equity Based Payments to Non-Employees, Determining Fair Value Under ASC 718-10 The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The Company’s determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding the number of highly subjective variables. The Company estimates volatility based upon the historical stock price of the Company and estimates the expected term for employee stock options using the simplified method for employees and directors and the contractual term for non-employees. The risk-free rate is determined based upon the prevailing rate of United States Treasury securities with similar maturities. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flow (Topic 230). This update is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The update provides new guidance regarding the classification of debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies including bank-owned life insurance policies, distributions received from equity method investments, beneficial interests in securitized transactions, and separately identifiable cash flows and application of the predominance principle. This standard is effective for financial statements issued by public companies for the annual and interim periods beginning after December 15, 2017. Early adoption of the standard is permitted. The standard will be applied in a retrospective approach for each period presented. We have completed an initial evaluation of this standard, which requires cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities. We have determined that there were no cash payments involved in debt extinguishment during the nine months ended September 30, 2018, hence there will be no potential impact on our financial statements due to this update. We will continue to evaluate the potential impact of this guidance on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)” (“ASU 2016-02”). The FASB issued ASU 2016-02 to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under ASU 2016-02, a lessee will recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-to-use asset representing its right to use the underlying asset for the lease term. The amendments of this ASU are effective for reporting periods beginning after December 15, 2018, with early adoption permitted. An entity will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Management currently does not plan to early adopt this guidance and is evaluating the potential impact of this guidance on the consolidated financial statements as well as transition methods. In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718). This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. This standard will be effective for financial statements issued by public companies for the annual and interim periods beginning after December 15, 2018. Early adoption of the standard is permitted. The standard will be applied in a retrospective approach for each period presented. Management currently does not plan to early adopt this guidance and is evaluating the potential impact of this guidance on the consolidated financial statements as well as transition methods. |
SOFTWARE DEVELOPMENT COSTS (Tab
SOFTWARE DEVELOPMENT COSTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
SOFTWARE DEVELOPMENT COSTS [Abstract] | |
Schedule of Software Development Costs | Software development costs consisted of the following at September 30, 2018 and December 31, 2017: September 30, 2018 December 31, 2017 Software Development Costs $ 60,000 $ — Less: Accumulated amortization (15,000 ) — Total $ 45,000 $ — |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable - Financing Agreements | The Company’s notes payable relating to financing agreements classified as current liabilities consist of the following as of: September 30, 2018 December 31, 2017 Notes Payable Principal Interest Principal Interest Third Party - Insurance Note 1 $ 2,219 10.30 % $ 25,075 10.30 % Third Party - Insurance Note 2 19,804 10.00 % 11,679 10.00 % Third Party - Insurance Note 3 25,818 8.80 % — Third Party - Insurance Note 4 21,197 10.25 % 12,903 9.24 % Total $ 69,038 $ 49,657 |
Notes Payable - Related Parties | The Company’s notes payable to related parties classified as current liabilities consist of the following as of: September 30, 2018 December 31, 2017 Notes Payable Principal Interest Principal Interest CEO $ — 8 % $ 9,078 8 % Sub-total current portion — 9,078 Add long-term portion-CEO — 39,137 Total $ — $ 48,215 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Schedule of Employee Stock Options and Warrants | The Company has no expired employee stock options at September 30, 2018. September 30, 2018 Weighted Average Exercise Shares Price Outstanding at beginning of year — $ — Granted 2,242,000 $ 1.00 Exercised — $ — Forfeited — $ — Expired — $ — Outstanding at September 30, 2018 2,242,000 $ 1.00 Exercisable at September 30, 2018 1,836,000 $ 1.00 Outstanding Weighted average remaining contractual term 4.75 Aggregate intrinsic value $ — Weighted average grant date fair value (per share) $ 0.21 Exercisable Weighted average remaining contractual term 4.75 Aggregate intrinsic value — |
Warrant [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Schedule of Employee Stock Options and Warrants | The following is a summary of activity for warrants to purchase common stock for the nine months ended September 30, 2018: September 30, 2018 Number of Warrants Weighted Avg. Exercise Price Remaining Contractual Life (Years) Outstanding at the beginning of the year 25,216,332 $ .65 4.9 Warrants expired — Warrants issued — Warrants cancelled/exercised (300,000 ) Outstanding at end of period 24,916,332 .65 4.1 Exercisable at end of period 24,916,332 $ .65 4.1 |
NET INCOME (LOSS) PER SHARE (Ta
NET INCOME (LOSS) PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and Diluted Net Income | Basic and diluted net income per share, for the three months ended September 30, 2018, were calculated as follows: Basic Diluted Numerator Net income applicable to common stock $ 632,625 $ 632,625 $ 632,625 $ 632,625 Denominator Weighted average common shares outstanding 20,752,450 20,752,450 Preferred Stock — 5,660,000 Warrants and options — — 20,752,450 26,412,450 Net income per share $ 0.03 $ 0.02 |
CONTRACT ACCOUNTING (Tables)
CONTRACT ACCOUNTING (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Contract Assets on Uncompleted Contracts | At September 30, 2018 and December 31, 2017, contract assets on uncompleted contracts consisted of the following: September 30, 2018 December 31. 2017 Costs and estimated earnings recognized $ 1,026,938 $ 1,613,731 Less: Billings or cash received (679,373 ) (1,189,938 ) Contract assets $ 347,565 $ 423,793 |
Schedule of Contract Liabilities on Uncompleted Contracts | At September 30, 2018 and December 31, 2017, contract liabilities on uncompleted contracts consisted of the following: September 30, 2018 December 31. 2017 Billings and/or cash receipts on uncompleted contracts $ 8,446,856 $ 573,847 Less: Costs and estimated earnings recognized (7,188,697 ) (373,437 ) Contract liabilities $ 1,258,159 $ 200,410 |
Schedule of Disaggregation of Revenue Quantitative | Quantitative: For the Three Months Ended September 30, 2018 Segments Rail Commercial Petrochemical Government Banking IT Suppliers Total Primary Geographical Markets North America $ 4,045,590 $ 1,013,796 $ 33,481 $ 9,349 $ — $ — $ 5,102,216 Major Goods and Service Lines Turnkey Projects $ 3,712,399 $ 1,013,796 $ 15,783 $ (10,872) $ — $ — $ 4,731,106 Maintenance & Support 333,191 — 17,698 20,221 — — 371,110 Data Center Auditing Services — — — — — — — $ 4,045,590 $ 1,013,796 $ 33,481 $ 9,349 $ — $ — $ 5,102,216 Timing of Revenue Recognition Goods transferred over time $ 3,712,399 $ 1,013,796 $ 15,783 $ (10,872) $ — $ — $ 4,731,106 Services transferred over time 333,191 — 17,698 20,221 — — 371,110 $ 4,045,590 $ 1,013,796 $ 33,481 $ 9,349 $ — $ — $ 5,102,216 |
NATURE OF OPERATIONS, BASIS O_3
NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Credit Risk) (Details) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Accounts Receivable | Customer A [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of Credit Risk | 30.00% | 42.00% | |
Accounts Receivable | Customer B [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of Credit Risk | 22.00% | 17.00% | |
Accounts Receivable | Customer C [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of Credit Risk | 12.00% | 13.00% | |
Accounts Receivable | Customer D [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of Credit Risk | 10.00% | 11.00% | |
Revenue [Member] | Customer A [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of Credit Risk | 47.00% | 25.00% | |
Revenue [Member] | Customer B [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of Credit Risk | 36.00% | 19.00% | |
Revenue [Member] | Customer C [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of Credit Risk | 19.00% | ||
Revenue [Member] | Outside of the US [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of Credit Risk | 49.00% |
NATURE OF OPERATIONS, BASIS O_4
NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Narrative) (Details) - USD ($) | 1 Months Ended | ||
May 31, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | |
Number of Warrants Outstanding | 24,916,332 | ||
Reverse split | 1 for 35 | ||
Cash, uninsured balance | $ 1,656,500 | ||
Number of employee stock options | 2,242,000 | ||
Number of unvested stock options | 406,000 |
GOING CONCERN (Narrative) (Deta
GOING CONCERN (Narrative) (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
Jul. 31, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Nov. 24, 2017 | |
Net loss | $ (632,625) | $ 124,868 | $ 744,842 | $ 3,737,959 | |||
Net cash used in operations | 92,459 | $ 1,046,108 | |||||
Working capital deficit | 286,144 | 286,144 | |||||
Accumulated deficit | 29,433,788 | 29,433,788 | $ 28,688,946 | ||||
Aggregate principal amount Promissory Note | $ 11,031,371 | ||||||
Long-term debt and payables | $ 138,572 | $ 138,572 | 108,262 | ||||
Working capital to fund additional resources | $ 2,100,000 | ||||||
Payment of accrued monthly late fee | $ 15,000 | ||||||
Series B Preferred Stock [Member] | |||||||
Number of shares issued | 2,830 | ||||||
Common Stock [Member] | |||||||
Number of shares issued | 16,402,742 | ||||||
Warrant [Member] | |||||||
Number of shares issued | 22,068,742 |
SOFTWARE DEVELOPMENT COSTS (Det
SOFTWARE DEVELOPMENT COSTS (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
SOFTWARE DEVELOPMENT COSTS [Abstract] | ||
Software Development Costs | $ 60,000 | |
Less: Accumulated amortization | (15,000) | |
Software Development Costs, net | $ 45,000 |
SOFTWARE DEVELOPMENT COSTS (Nar
SOFTWARE DEVELOPMENT COSTS (Narrative) (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
SOFTWARE DEVELOPMENT COSTS [Abstract] | ||
Capitalized development of new software products | $ 60,000 | |
Amortization expense of software development costs | $ 15,000 | $ 0 |
DEBT (Schedule of Notes Payable
DEBT (Schedule of Notes Payable - Financing Agreements) (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Debt Instrument [Line Items] | ||
Notes Payable, Principal | $ 69,038 | $ 49,657 |
Third Party - Insurance Note 1 [Member] | ||
Debt Instrument [Line Items] | ||
Notes Payable, Principal | $ 2,219 | $ 25,075 |
Notes Payable, Interest | 10.30% | 10.30% |
Third Party - Insurance Note 2 [Member] | ||
Debt Instrument [Line Items] | ||
Notes Payable, Principal | $ 19,804 | $ 11,679 |
Notes Payable, Interest | 10.00% | 10.00% |
Third Party - Insurance Note 3 [Member] | ||
Debt Instrument [Line Items] | ||
Notes Payable, Principal | $ 25,818 | |
Notes Payable, Interest | 8.80% | |
Third Party - Insurance Note 4 [Member] | ||
Debt Instrument [Line Items] | ||
Notes Payable, Principal | $ 21,197 | $ 12,903 |
Notes Payable, Interest | 10.25% | 9.24% |
DEBT (Schedule of Notes Payab_2
DEBT (Schedule of Notes Payable - Related Parties) (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Debt Instrument [Line Items] | ||
Sub-total current portion | $ 9,078 | |
Add long-term portion-CEO | 39,137 | |
Notes Payable - Related Parties, Principal Amount | 48,215 | |
CEO [Member] | ||
Debt Instrument [Line Items] | ||
Sub-total current portion | $ 9,078 | |
Notes Payable - Related Parties, Interest Rate | 8.00% | 8.00% |
DEBT (Narrative) (Details)
DEBT (Narrative) (Details) - USD ($) | 1 Months Ended | 9 Months Ended | |||||
Apr. 15, 2017 | Jul. 19, 2016 | Sep. 30, 2018 | Sep. 15, 2018 | Feb. 03, 2018 | Dec. 31, 2017 | Dec. 23, 2017 | |
Related party loan from CEO [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Monthly installments of principal and interest | $ 1,052 | ||||||
Interest rate | 7.99% | ||||||
Notes payable outstanding balance | $ 59,925 | $ 0 | $ 48,215 | ||||
Proceeds from loan | 60,000 | ||||||
Fees on loan proceeds | $ 75 | ||||||
Third Party - Insurance Note 1 [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Monthly installments of principal and interest | 2,234 | ||||||
Interest rate | 10.30% | ||||||
Notes payable outstanding balance | 2,219 | 25,075 | $ 25,075 | ||||
Third Party - Insurance Note 2 [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Monthly installments of principal and interest | 1,660 | ||||||
Interest rate | 10.75% | ||||||
Notes payable outstanding balance | 19,804 | $ 15,810 | 11,679 | ||||
Third Party - Insurance Note 3 [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Monthly installments of principal and interest | 13,276 | ||||||
Interest rate | 8.80% | ||||||
Notes payable outstanding balance | 25,818 | $ 127,561 | 0 | ||||
Third Party - Insurance Note 4 [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Monthly installments of principal and interest | $ 4,378 | ||||||
Interest rate | 9.24% | ||||||
Notes payable outstanding balance | $ 49,000 | $ 21,197 | $ 12,903 |
LINE OF CREDIT (Narrative) (Det
LINE OF CREDIT (Narrative) (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Apr. 02, 2015 |
Line of Credit Facility [Line Items] | |||
Line of Credit - Wells Fargo Bank | $ 31,516 | $ 34,513 | |
Line of Credit - Wells Fargo Bank [Member] | |||
Line of Credit Facility [Line Items] | |||
Line of Credit - Wells Fargo Bank | $ 31,516 | $ 34,513 | $ 40,000 |
Interest rate | 11.50% |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Narrative) (Details) - USD ($) | 1 Months Ended | 9 Months Ended | |
Jul. 31, 2018 | Sep. 30, 2018 | Nov. 24, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Payroll taxes payable | $ 200,119 | ||
Long-term debt and payables | 138,572 | $ 108,262 | |
Software maintenance fees | $ 300,000 | ||
Payment of accrued monthly late fee | $ 15,000 |
RELATED PARTIES (Narrative) (De
RELATED PARTIES (Narrative) (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Related Party Transaction [Line Items] | ||
Notes and loans payable to CEO | $ 48,215 | |
October 2017 Arcaini Letter Agreement [Member] | Chief Executive Officer [Member] | ||
Related Party Transaction [Line Items] | ||
Amount owed to related party from conversion of deferred compensation into common stock | $ 700,543 | |
Warrants to be issued to related party upon consumation of Offering | 700,543 | |
October 2017 Goldfarb Letter Agreement [Member] | Mr. Adrian Goldfarb [Member] | ||
Related Party Transaction [Line Items] | ||
Amount owed to related party from conversion of deferred compensation into common stock | $ 34,020 | |
Warrants to be issued to related party upon consumation of Offering | 34,020 |
STOCKHOLDERS' EQUITY (Narrative
STOCKHOLDERS' EQUITY (Narrative) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2018 | |
Class of Stock [Line Items] | |||
Total compensation cost for stock options not yet recognized | $ 67,407 | $ 67,407 | |
Total compensation cost for stock options not yet recognized, period | 2 years 6 months | ||
2016 Plan [Member] | |||
Class of Stock [Line Items] | |||
Shares available for grant | 2,500,000 | 2,500,000 | |
Board of Directors [Member] | |||
Class of Stock [Line Items] | |||
Common stock issued | 52,209 | ||
Common stock issued, Value | $ 73,708 | ||
Gain on settlement | 26,103 | ||
Board of Directors [Member] | Private Placement [Member] | |||
Class of Stock [Line Items] | |||
Common stock issued, Value | $ 26,105 | ||
Employees and directors [Member] | |||
Class of Stock [Line Items] | |||
Stock-based compensation expense | $ 403,070 | ||
Stockholder [Member] | Warrant [Member] | |||
Class of Stock [Line Items] | |||
Common stock issued | 300,000 | ||
Common stock issued, Value | $ 195,000 | ||
Stockholder [Member] | Private Placement [Member] | |||
Class of Stock [Line Items] | |||
Common stock issued | 300,000 | ||
Common stock issued, Value | $ 195,000 |
STOCKHOLDERS' EQUITY (Schedule
STOCKHOLDERS' EQUITY (Schedule of Employee Stock Options) (Details) | 9 Months Ended |
Sep. 30, 2018USD ($)$ / sharesshares | |
Shares | |
Outstanding at the beginning of the year | shares | |
Granted | shares | 2,242,000 |
Exercised | shares | |
Forfeited | shares | |
Expired | shares | |
Outstanding at end of period | shares | 2,242,000 |
Exercisable at end of period | shares | 1,836,000 |
Weighted Average Exercise Price | |
Outstanding at the beginning of the year | |
Granted | 1 |
Exercised | |
Forfeited | |
Expired | |
Outstanding at end of period | 1 |
Exercisable at end of period | $ 1 |
Outstanding | |
Outstanding Weighted average remaining contractual term | 4 years 9 months |
Outstanding Aggregate intrinsic value | $ | |
Outstanding Weighted average grant date fair value (per share) | $ 0.21 |
Exercisable | |
Exercisable Weighted average remaining contractual term | 4 years 9 months |
Exercisable Aggregate intrinsic value | $ |
STOCKHOLDERS' EQUITY (Schedul_2
STOCKHOLDERS' EQUITY (Schedule of Activity of Warrants) (Details) | 9 Months Ended |
Sep. 30, 2018$ / sharesshares | |
Number of Warrants | |
Outstanding at the beginning of the year | |
Warrants expired | |
Outstanding at end of period | 2,242,000 |
Exercisable at end of period | 1,836,000 |
Weighted Avg. Exercise Price | |
Outstanding at the beginning of the year | $ / shares | |
Warrants expired | $ / shares | |
Outstanding at end of period | $ / shares | 1 |
Exercisable at end of period | $ / shares | $ 1 |
Remaining Contractual Life (Years) | |
Outstanding at end of period | 4 years 9 months |
Exercisable at end of period | 4 years 9 months |
Warrant [Member] | |
Number of Warrants | |
Outstanding at the beginning of the year | 25,216,332 |
Warrants expired | |
Warrants issued | |
Warrants cancelled/exercised | (300,000) |
Outstanding at end of period | 24,916,332 |
Exercisable at end of period | 24,916,332 |
Weighted Avg. Exercise Price | |
Outstanding at the beginning of the year | $ / shares | $ 0.65 |
Outstanding at end of period | $ / shares | 0.65 |
Exercisable at end of period | $ / shares | $ 0.65 |
Remaining Contractual Life (Years) | |
Outstanding at the beginning of the year | 4 years 10 months 25 days |
Outstanding at end of period | 4 years 1 month 6 days |
Exercisable at end of period | 4 years 1 month 6 days |
NET INCOME (LOSS) PER SHARE (Na
NET INCOME (LOSS) PER SHARE (Narrative) (Details) | 9 Months Ended |
Sep. 30, 2018shares | |
Convertible Preferred Stock [Member] | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Antidilutive securities excluded from computation of earnings per share | 27,158,332 |
Out-of-the-money Stock Options and Warrants [Member] | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Antidilutive securities excluded from computation of earnings per share | 27,158,332 |
NET INCOME (LOSS) PER SHARE (Sc
NET INCOME (LOSS) PER SHARE (Schedule of Basic and Diluted Net Income) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Earnings Per Share [Abstract] | ||||
Net income applicable to common stock, Basic | $ 632,625 | $ (130,788) | $ (744,842) | $ (3,755,719) |
Net income applicable to common stock, Diluted | $ 632,625 | |||
Weighted average common shares outstanding, Basic | 20,752,450 | 1,899,716 | 20,724,153 | 1,896,578 |
Preferred Stock, Diluted | 5,660,000 | |||
Warrants and options, Diluted | ||||
Weighted average common shares outstanding, Diluted | 26,412,450 | 1,899,716 | 20,724,153 | 1,896,578 |
Net income per share, Basic | $ 0.03 | $ (0.07) | $ (0.04) | $ (1.98) |
Net income per share, Diluted | $ 0.02 | $ (0.07) | $ (0.04) | $ (1.98) |
CONTRACT ACCOUNTING (Schedule o
CONTRACT ACCOUNTING (Schedule of Contract Assets on Uncompleted Contracts) (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Revenue from Contract with Customer [Abstract] | ||
Costs and estimated earnings recognized | $ 1,026,938 | $ 1,613,731 |
Less: Billings or cash received | (679,373) | (1,189,938) |
Contract assets | $ 347,565 | $ 423,793 |
CONTRACT ACCOUNTING (Schedule_2
CONTRACT ACCOUNTING (Schedule of Contract Liabilities on Uncompleted Contracts) (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Revenue from Contract with Customer [Abstract] | ||
Billings and/or cash receipts on uncompleted contracts | $ 8,446,856 | $ 573,847 |
Less: Costs and estimated earnings recognized | (7,188,697) | (373,437) |
Contract liabilities | $ 1,258,159 | $ 200,410 |
CONTRACT ACCOUNTING (Schedule_3
CONTRACT ACCOUNTING (Schedule of Disaggregation of Revenue Quantitative) (Details) | 3 Months Ended |
Sep. 30, 2018USD ($) | |
Disaggregation of Revenue [Line Items] | |
Revenue | $ 5,102,216 |
Goods transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 4,731,106 |
Services transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 371,110 |
Turnkey Projects [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 4,731,106 |
Maintenance & Support [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 371,110 |
Data Center Auditing Services [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
Rail [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 4,045,590 |
Rail [Member] | Goods transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 3,712,399 |
Rail [Member] | Services transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 333,191 |
Rail [Member] | Turnkey Projects [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 3,712,399 |
Rail [Member] | Maintenance & Support [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 333,191 |
Rail [Member] | Data Center Auditing Services [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
Commercial [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 1,013,796 |
Commercial [Member] | Goods transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 1,013,796 |
Commercial [Member] | Services transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
Commercial [Member] | Turnkey Projects [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 1,013,796 |
Commercial [Member] | Maintenance & Support [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
Commercial [Member] | Data Center Auditing Services [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
Petrochemical [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 33,481 |
Petrochemical [Member] | Goods transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 15,783 |
Petrochemical [Member] | Services transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 17,698 |
Petrochemical [Member] | Turnkey Projects [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 15,783 |
Petrochemical [Member] | Maintenance & Support [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 17,698 |
Petrochemical [Member] | Data Center Auditing Services [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
Government [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 9,349 |
Government [Member] | Goods transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | (10,872) |
Government [Member] | Services transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 20,221 |
Government [Member] | Turnkey Projects [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | (10,872) |
Government [Member] | Maintenance & Support [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 20,221 |
Government [Member] | Data Center Auditing Services [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
Banking [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
Banking [Member] | Goods transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
Banking [Member] | Services transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
Banking [Member] | Turnkey Projects [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
Banking [Member] | Maintenance & Support [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
Banking [Member] | Data Center Auditing Services [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
IT Suppliers [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
IT Suppliers [Member] | Goods transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
IT Suppliers [Member] | Services transferred over time [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
IT Suppliers [Member] | Turnkey Projects [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
IT Suppliers [Member] | Maintenance & Support [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
IT Suppliers [Member] | Data Center Auditing Services [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
North America [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 5,102,216 |
North America [Member] | Rail [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 4,045,590 |
North America [Member] | Commercial [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 1,013,796 |
North America [Member] | Petrochemical [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 33,481 |
North America [Member] | Government [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | 9,349 |
North America [Member] | Banking [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue | |
North America [Member] | IT Suppliers [Member] | |
Disaggregation of Revenue [Line Items] | |
Revenue |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent Event [Member] - USD ($) | Oct. 10, 2018 | Oct. 24, 2018 |
Litigation [Member] | Maximum [Member] | ||
Subsequent Event [Line Items] | ||
Amount of claim against vendor | $ 50,000 | |
Six Investors [Member] | ||
Subsequent Event [Line Items] | ||
Warrants issued | 496,215 | |
Warrant terms | 5 years | |
Exercise price of warrants | $ 0.65 | |
Former Company Officer [Member] | ||
Subsequent Event [Line Items] | ||
Share issuance in exchange of accrued salary owed, shares | 92,033 | |
Share issuance in exchange of accrued salary owed, value | $ 92,033 |