DUOS TECHNOLOGIES GROUP, INC.
For the period ended Jun 30, 2026. Filed Aug 19, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 19, 2026
DUOT$5.02+6.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-15.
0001553350-26-000088
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-19.
0001079973-26-001151
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 132 previous paragraphs and 124 current paragraphs.
56 unchanged; 21 reworded; 41 added; 54 removed; 1 previous and 6 current paragraphs rearranged.
Tables are not compared: 14 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (41)
Current report
Second Quarter 2026 Financial Highlights
Current report
Recent Developments – Divestiture of Duos Technologies, Inc.
Current report
On August 5, 2026, subsequent to the end of the quarter, the Company completed the divestiture of its legacy rail technology subsidiary, Duos Technologies, Inc., through the transfer of all of its issued and outstanding shares to Sandbank Acosta, LLC, a related party (see Note 18 – Subsequent Events). The results of Duos Technologies, Inc. are reported as discontinued operations for all periods presented, and the discussion below is presented on a continuing operations basis unless otherwise noted. Following the divestiture, the Company’s operations are conducted through Duos Edge AI, Inc. and Duos Technology Solutions, Inc., focused on providing technology and colocation solutions for the rapidly growing data center market, with Duos Energy Corporation continuing to support the wind-down of the Asset Management Agreement with New APR.
Current report
During the first half of 2026, the Company completed a fundamental repositioning of its business around data center infrastructure and technology-enabled services. The Company divested its legacy rail technology business (completed August 5, 2026), discontinued further investment in and management of that business, wound down the Asset Management Agreement with New APR and realized the value of its related minority investment, and increased its emphasis on its two core growth platforms: Duos Edge AI, Inc. and Duos Technology Solutions, Inc.
Current report
Wind-Down of the Asset Management Agreement; Energy Services Dormant
Current report
The Company entered into an Asset Management Agreement ("AMA") with New APR beginning in January 2025 and, in connection with this agreement, also acquired a minority, non-voting equity interest in the ultimate parent of New APR. The AMA was amended after one year, with residual billings occurring in the first quarter of 2026, and the personnel supporting the AMA were transferred out of the Company, eliminating the related staffing expense. In the second quarter of 2026, substantially all of New APR’s assets were sold and the Company realized the value of its minority interest, receiving approximately $60 million, consisting of approximately $50.4 million in cash distributions and a $10.0 million holdback receivable (see Note 8). The Energy Services business is currently dormant; the power and energy infrastructure skills retained within the Company are being applied to its data center expansion initiatives, and the business could be reactivated if suitable opportunities arise.
Current report
Increased Emphasis on Duos Edge AI and Technology Solutions
Current report
Following the divestiture of the rail technology business, the Company has discontinued investment in the proprietary machine vision and inspection technologies associated with that business, and its capital and management attention are concentrated on Duos Edge AI, Inc. and Duos Technology Solutions, Inc.
Current report
Duos Edge AI is expanding its network of modular edge data centers and preparing its GPU-as-a-service operations, while Duos Technology Solutions is scaling its infrastructure sourcing, integration, and supply chain services. The Company expects these two businesses, together with related hosting and colocation services, to be the principal drivers of future revenue growth.
Current report
The Company’s recurring revenue model is centered on multi-year hosting and colocation agreements at its edge data centers, GPU-as-a-service arrangements, and repeat order flow from Technology Solutions customers. This approach is intended to improve scalability and increase recurring revenue over time.
Current report
Divestiture of Legacy Rail Technology Business
Current report
The Company’s legacy rail technology business, conducted through Duos Technologies, Inc. and centered on the Railcar Inspection Portal, was divested effective August 5, 2026 (see Note 18). The results of this business are presented as discontinued operations for all periods presented in this report.
Current report
The results of the divested business are reported as discontinued operations for all periods presented. The Company has no continuing involvement in the rail technology business other than transitional services provided to the purchaser on a cost-reimbursement basis through December 31, 2026 and the promissory note received in connection with the divestiture (see Notes 3 and 18).
Current report
Energy and Power Capabilities (Currently Dormant)
Current report
Following the wind-down of the AMA and the realization of the Company’s investment in the ultimate parent of New APR, the Energy Services business is currently dormant. The Company has retained power and energy infrastructure expertise, which is currently being applied to its data center expansion initiatives, including the evaluation of power requirements for its edge data center deployments and the Columbus, Georgia facility.
Current report
Concentration of Resources on Core Data Center Businesses
Current report
The Company’s investment and management resources are now concentrated on scaling Duos Edge AI’s edge data center network and GPU-as-a-service operations and growing the Technology Solutions business, which became the Company’s largest source of revenue from continuing operations during the second quarter of 2026.
Current report
The Company believes that its focused strategy — centered on edge data centers, colocation, GPU-as-a-service, and technology solutions for the data center market — positions it to pursue growth opportunities while retaining optionality in adjacent areas such as energy services.
Current report
With its focus on edge data centers, colocation, GPU-as-a-service and technology solutions for the data center market following the divestiture of its legacy rail technology business, the Company believes it is well-positioned to drive increased revenue, improve profitability, and generate long-term shareholder value.
Current report
Gross margin improved from 37.3% during the three months ended June 30, 2025 to 55.8% during the same period in 2026, primarily due to the significantly reduced cost of revenues associated with the AMA and the growing contribution of the Technology Solutions business. In addition, the Company recognized $2,712,375 of revenue during the three months ended June 30, 2026 related to its 5% non-voting equity interest in the ultimate parent of New APR, compared to $904,125 in the comparable 2025 period. As this revenue had no associated cost of revenue, it contributed at a 100% gross margin.
Current report
Income (Loss) from Operations
Current report
Income from operations from continuing operations was $49,093 for the three months ended June 30, 2026, compared to a loss from continuing operations of $1,540,182 for the same period in 2025. The decrease was primarily driven by the favorable impact of increased Technology Solutions revenue, accelerated recognition of the remaining AMA-related deferred revenue, and improved gross margins.
Current report
Other income, net for the three months ended June 30, 2026 was $53,590,497, compared to other expense, net of $(77,348) for the comparative period in 2025. Other income in 2026 was primarily driven by a gain on sale of investments of $53,173,803 recognized in connection with the sale of substantially all of New APR’s assets and the related distributions received on the Company’s ownership interest in Sawgrass Parent, as well as higher interest income of $413,490 compared to $10,629 for the comparative period in 2025, resulting from a significantly larger cash balance.
Current report
Net Income (Loss)
Current report
Net income from continuing operations for the three months ended June 30, 2026 was $48,655,420, compared to net loss of $1,617,530 for the comparable period in 2025. Including the results of discontinued operations, consolidated net income for the three months ended June 30, 2026 was $47,844,430, compared to a consolidated net loss of $3,518,032 in 2025. The increase was primarily attributable to the $53.2 million gain on sale of investments described above. Basic net income per common share was $1.58 for the three months ended June 30, 2026, compared to a net loss per share of $(0.30) in 2025.
Current report
Comparison for the Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Current report
Revenues
Current report
The decrease in related-party services and consulting revenue for the six months ended June 30, 2026 was primarily driven by the reduced scope of services provided under the AMA and the sale by New APR of substantially all of its assets in May 2026. The Company generated $847,402 of revenue under the AMA during the six months ended June 30, 2026, compared to $6,866,903 during the comparable 2025 period. In addition, the Company recognized $3,616,500 of revenue during the six months ended June 30, 2026 related to the deferred revenue associated with the Company’s 5% non-voting equity interest in the ultimate parent of New APR, including the accelerated recognition of the remaining balance following the sale of substantially all of New APR’s assets, compared to $1,808,250 during the comparable 2025 period. Revenue generated under the AMA and from the 5% interest is reported within "Services and consulting – related parties" in the statements of operations.
Current report
Cost of revenues related to services and consulting from related parties decreased significantly during the six months ended June 30, 2026, compared to the same period in the prior year. The reduction was primarily driven by the reduced scope of services provided under the AMA and the wind-down of AMA-related activities following the sale of substantially all of New APR’s assets in May 2026.
Current report
Gross Margin
Current report
Operating Expenses
Current report
During the six months ended June 30, 2026, total operating expenses from continuing operations increased to $7,626,720 from $5,106,020 in the comparable 2025 period. Sales and marketing expenses increased as additional resources were deployed to support business development for the Edge Data Center and Technology Solutions businesses. General and administration expenses increased by approximately 50%, primarily reflecting higher non-cash stock-based compensation related to restricted stock awards, and bonus expense in 2026 with no comparable amount in the prior-year period, and increased professional fees and public company costs.
Current report
Income (Loss) from Operations
Current report
Other Income (Expense)
Current report
Net Income (Loss)
Current report
Net income from continuing operations for the six months ended June 30, 2026 was $45,620,445, compared to a net loss from continuing operations of $2,436,865 for the comparable period in 2025. Including the results of discontinued operations, consolidated net income was $44,352,185 for the six months ended June 30, 2026, compared to a consolidated net loss of $5,597,694 in 2025. Basic net income per common share was $1.65 for the six months ended June 30, 2026, compared to a net loss per share of $(0.48) in 2025.
Current report
Net cash provided by (used in) operating activities for the six months ended June 30, 2026 and 2025 was $11,360,765 and $7,875,737, respectively. Cash flows from operating activities were primarily impacted by the collection of related-party receivables, increases in Technology Solutions contract liabilities and customer prepayments, including $18.8 million of contract liabilities as of June 30, 2026, and non-cash items, including the gain on sale of investments and stock-based compensation.
Current report
Net cash used in investing activities was $26,674,385 and $1,388,041 for the six months ended June 30, 2026 and 2025, respectively. Investing activities in 2026 primarily reflect deposits on GPU and server equipment (aggregate deposits on equipment of $68.8 million as of June 30, 2026), a $3,000,000 deposit on real estate, and continued investment in capitalized construction-in-progress costs related to the Company’s Edge Data Centers, partially offset by proceeds of approximately $50.4 million received in connection with the sale of substantially all of New APR’s assets. During the first quarter of 2026, the Company also purchased marketable securities in the amount of $29,693,638 and sold marketable securities for proceeds of $29,745,940.
Current report
Technology Solutions – delivers manufactuer-agnostic infrastructure sourcing, integration, and value-added supply chain services supporting data center, AI, and enterprise deployments,
Current report
Services and Consulting Services (which, through the wind-down of the AMA, included related party revenues)
Showing the first 40 of 41 passages. Open the source sections for the rest.
Removed paragraphs (54)
Previous report
During the first quarter of 2026, the Company continued to transition its business toward a more diversified model centered on digital infrastructure, artificial intelligence, and technology-enabled services. The Company’s operations are increasingly focused on expanding its edge computing platform, growing its energy and consulting capabilities, and enhancing its technology solutions offerings.
Previous report
The Company entered into an Asset Management Agreement (“AMA”) with New APR beginning in January 2025. In connection with this agreement, the Company also acquired a minority, non-voting equity interest in the ultimate parent of New APR. In 2026, the Company and New APR mutually agreed to reduce the scope of services under the AMA, resulting in a corresponding decline in related party revenue and associated costs as part of streamlining operations and aligning resources with its core strategic initiatives.
Previous report
Development of AI Technologies and Automation
Previous report
The Company continues to invest in the development of proprietary artificial intelligence technologies, including computer vision, machine learning, and predictive analytics.
Previous report
These technologies are being integrated across the Company’s platforms to enhance performance, enable automation, and support real-time data processing. The Company is also advancing AI-powered capabilities such as self-diagnostics, predictive maintenance, and system monitoring.
Previous report
In connection with its inspection technologies, the Company has introduced more modular and flexible deployment options, allowing customers to select specific capabilities aligned with their operational requirements. This approach is intended to improve scalability and increase recurring revenue over time.
Previous report
Legacy Technology Systems
Previous report
The Company’s legacy business, which is the railcard inspection portal, has become less important to the Company’s future as we diversify our business strategy.
Previous report
The Company expects that over time, its legacy systems will represent a decreasing percentage of total revenues as newer infrastructure and service-based offerings expand.
Previous report
Expansion of Energy and Power Solutions
Previous report
The Company intends to build upon its initial energy and consulting activities, including the AMA with New APR, to expand its presence in the distributed energy and fast power markets.
Previous report
Continued Development of AI and Automation Technologies
Previous report
The Company plans to continue enhancing its AI capabilities to improve system performance, enable automation, and support advanced analytics across its platforms.
Previous report
The Company believes that its diversified strategy, including digital infrastructure, energy solutions, and technology services, positions it to pursue growth opportunities in multiple markets.
Previous report
With the diversification into Edge Computing and power generation, coupled with continued growth in its core machine vision and AI-based inspection technologies, the Company is well-positioned to drive increased revenue, improve profitability, and generate long-term shareholder value.
Previous report
The decrease in technology systems revenues to $44,259 from $64,684 for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, is primarily attributed to continued delays outside of the Company’s control with deployment of our two high-speed Railcar Inspection Portals, which are recorded in the technology systems portion of our business. Although these systems remain largely ready for deployment, customer delays at the deployment site continue to prevent installation even though these two high-speed Railcar Inspection Portals were deep into their production and manufacturing phases, which did not allow us to record the next phase of recognition. We believe that the customer is approaching the completion of the local site preparation and is preparing for field installation in 2026.
Previous report
The decrease in services and consulting revenue from the rail business from $972,751 to $532,467 for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily attributable to the cessation of revenue recognition related to the CN Digital Image Agreement.
Previous report
Cost of Revenues
Previous report
During the three months ended March 31, 2026, cost of revenues related to technology systems decreased compared to the same period in 2025, primarily driven by a reduction in personnel-related fixed costs. The decrease also reflects the continued ramp-down of manufacturing activities in advance of field installation of the Company’s two high-speed Railcar Inspection Portals, which has temporarily slowed project activity and further reduced cost of revenues pending customer readiness for site deployment.
Previous report
Cost of revenues related to services and consulting from the rail business decreased for the three months ended March 31, 2026, compared to the same period in 2025, primarily attributable to the cessation of amortization expense recognized in connection with the CN Digital Image Agreement, which had previously been recorded in cost of revenues, as well as lower personnel-related fixed costs.
Previous report
Loss from Operations
Previous report
Net Loss
Previous report
Net loss for the three months ended March 31, 2026 and 2025 was $3,492,245 and $2,079,663, respectively. The increase in net loss was primarily attributable to lower revenues resulting from the reduced scope of services provided by Duos Energy under the AMA with New APR, as discussed above, as well as higher operating expenses, including increased non-cash stock-based compensation expense related to restricted stock awards. Net loss per common share was $0.15 and $0.18 for the three months ended March 31, 2026 and 2025, respectively.
Previous report
Net cash used in operating activities for the three months ended March 31, 2026 and 2025 was $1,361,911 and $ 4,673,425, respectively. The decrease in net cash used in operating activities in 2026 was primarily driven by the collection of related-party accounts receivable, growth in Technology Solutions contract liabilities, and higher non-cash add-backs related to stock-based compensation. These favorable impacts were partially offset by a larger net loss, increases in trade accounts receivable and contract assets as project and service billings exceeded collections, continued reductions in related-party contract liabilities as the Company executes under the AMA, and lower depreciation and amortization expense compared to the prior-year period.
Previous report
Net cash used in investing activities was $41,189,127 and $581,623 for the three months ended March 31, 2026 and 2025, respectively. The increase in 2026 reflects continued investment in capitalized construction-in-progress costs related to the edge data centers currently owned by the Company, as well as significant deposits made on GPUs scheduled for deployment in 2026. For the three months ended March 31, 2026 we purchased marketable securities in the amount of $29,693,638 and sold marketable securities for proceeds of $29,745,940 for a gain of $52,302. There were no such transactions in the three months ended March 31, 2025.
Previous report
Technology Systems
Previous report
AI Technologies
Previous report
Technical Support including related party revenues from the AMA which began in January 2025
Previous report
Consulting Services including related party revenues from the AMA which began in January 2025
Previous report
Hosting
Previous report
Technology Solutions
Previous report
Equity Method Investments
Previous report
If an investment qualifies for the equity method of accounting, the Company’s investment is recorded initially at cost and subsequently adjusted for equity in net income (loss) and cash contributions and distributions. The net income or loss of an unconsolidated equity method investment is allocated to its investors in accordance with the provisions of the operating agreement of the entity. The allocation provisions in these agreements may differ from the ownership interest held by each investor. Differences, if any, between the carrying amount of our investment in the respective equity method investee and the Company’s share of the underlying equity of such equity method investee are amortized over the respective lives of the underlying assets as applicable. These items are reported as a single line item in the consolidated statements of operations as income or loss from investments in unconsolidated equity method investees. Investments are reviewed for changes in circumstance or the occurrence of events that suggest an other-than-temporary event where our investment may not be recoverable.
Previous report
On December 31, 2024, the Company entered into an Asset Management Agreement (the “AMA”), with New APR, an entity formed by affiliates of Fortress Investment Group (“FIG”). Under the AMA, Duos Energy manages the deployment and operations of a fleet of mobile gas turbines and balance-of-plant inventory, providing management, sales and operations functions to New APR in connection with the assets. In exchange for services to be performed under the AMA, the Company received an initial cash payment and common units in Sawgrass Parent. While the Company has board representation in Sawgrass Parent, its common units are non-voting and the Company does not control the board of directors of Sawgrass Parent.
Previous report
Where the Company has an interest in a Variable Interest Entity (“VIE”) it will consolidate any VIE in which the Company has a controlling financial interest and is deemed to be the primary beneficiary. A controlling financial interest has both of the following characteristics: (1) the power to direct the activities of the VIE that most significantly impact its economic performance; and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could be significant to the VIE. If both of the characteristics are met, the Company is considered to be the primary beneficiary and therefore will consolidate that VIE into the consolidated financial statements.
Previous report
Investments in partnerships, unincorporated joint ventures and LLCs that maintain specific ownership accounts for each investor are excluded from the scope of ASC 323-10. However, ASC 323-30 provides guidance on applying the criteria for equity method accounting to investments in partnerships, unincorporated joint ventures and LLCs. When an investor in a partnership, unincorporated joint venture or LLC has the ability to exercise significant influence over that investment, it should apply the equity method (ASC 323-10) by analogy (ASC 323-30-25-1).
Previous report
Sawgrass Parent is deemed to be a VIE and the Company holds a 5% interest in Sawgrass Parent and an interest in the subsidiary New APR through the AMA, both of which are considered variable interests. However, the Company does not represent the primary beneficiary as it does not possess the ability to direct the activities that most significantly impact the economic performance of Sawgrass Parent. Accordingly, the Company does not consolidate Sawgrass Parent. Due to the Company’s interest in Sawgrass Parent, it was determined that the Company has significant influence over Sawgrass Parent. Therefore, the Company accounts for its investment in Sawgrass Parent as an Equity Method Investment.
Previous report
The Company also concluded that the arrangement with Sawgrass Parent is within the scope of ASC 606, Revenue from contracts with customers, and the common units issued to the Company by Sawgrass Parent represented non-cash consideration. The initial carrying value as of December 31, 2024 of $7.2 million was measured equal to the fair value of the common units received for future services to be performed under the AMA. The Company recorded $7.2 million of deferred revenue for services to be performed under the AMA. During the year ended December 31, 2024, the Company did not recognize any revenue associated with the AMA. The Company initially recorded the equity method investment in Sawgrass Parent of $7.2 million, equal to the fair value of the common units as of December 31, 2024.
Previous report
Due to the unavailability of Q1-2026 financials from Sawgrass Parent, our equity method investee, the Company has applied a one-quarter lag (in accordance with ASC 323-10-35-6) in reporting and recording the value of its 5% minority investment. The Company records its 5% interest using the Equity Method as we have significant influence. ASC 323-10-35-4 requires an entity to recognize its share of earnings or loss of an equity method investee which adjusts the carrying amount of the investment and is reflected as earnings or loss in income. Pursuant to the terms of the Amended and Restated Limited Liability Company Agreement of Sawgrass APR Holding LLC (the “Agreement”), Net Profit and Net Loss for any Fiscal Year is allocated among the members in such a manner that, as of the end of such fiscal year, the Capital Account Balance of each Member, as increased by the Member’s share of “minimum gain” and “partner minimum gain” (as such terms are used in Treasury Regulations Section 1.704-2), to the extent possible, to be equal to the amount which would have been distributed to such Member pursuant to a Hypothetical Liquidation, as defined in the Agreement, as of the end of the last day of such fiscal year. Under the Hypothetical Liquidation, the assets of Sawgrass Parent are disposed of in a taxable disposition for the book value of such assets and the remaining amounts, after repayment of outstanding obligations are distributed to the members pursuant to the Agreement. Per the Agreement, the Company is entitled to pro-rata distributions only after Preferred Holders have received their Total Contributed Capital and subsequent distributions to Preferred and Incentive Unit Holders have reached the Multiple on Invested Capital (MOIC) Threshold of 1.5 times the initial contributions. Therefore, it is likely that early periods will not generate sufficient earnings to provide the Company with a return in the form of a claim on net assets. Based on the terms of the Agreement our specified allocation of earnings and losses of 5% differs from the allocation of cash from operations and liquidation. Therefore, we will apply the guidance in ASC 970-323-35-17 by analogy, which states, if the specified allocation for earnings differs from the allocation of cash from operations and on liquidation, the investor should not use the specified earnings or loss percentages to determine its share of the investee’s earnings. Rather, the investor should analyze the investment agreement to determine how the increase or decrease in the investee’s net assets during the reporting period would affect the cash that the investor would receive over the investee’s life and on its liquidation.
Previous report
As per the guidance above, the subsequent recognition of the equity method investment should reflect the Company’s claim on net assets, determined by its rights to distributions and residual assets under the Agreement’s distribution waterfall. The Hypothetical Liquidation at Book Value (HLBV) method satisfies this requirement by simulating a hypothetical liquidation at each reporting period, allocating net assets based on the rights and priorities defined in the Agreement. This approach reflects the Company’s economic interest in the Sawgrass Parent by estimating the amount it would receive in a liquidation scenario, aligning the recognition of income or loss with the actual distribution provisions under the Agreement. Accordingly, this method appropriately represents the cash distribution under Section 10 and the allocation of profit and loss under Section 9.1 of the Agreement.
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Reworded paragraphs (21)
Previous wording
This quarterly report on Form 10-Q and other reports filed by Duos Technologies Group, Inc., and its operating subsidiaries, Duos Technologies, Inc. (“Duos”), Duos Edge AI, Inc. (“Edge”), Duos Energy Corporation (“Energy”), and Duos Technologies Solutions, Inc. (“Solutions”) (Duos Technologies Group, Inc., Duos, Edge, Energy, and Solutions, collectively the “Company” “we”, “our”, and “us”) from time to time with the Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” “aim,” “project,” “target,” “will,” “may,” “should,” “forecast” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements typically address the Company’s expected future business and financial performance and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ materially from those anticipated, believed, estimated, expected, intended, or planned.
Current wording
This quarterly report on Form 10-Q and other reports filed by Duos Technologies Group, Inc., and its operating subsidiaries, Duos Edge AI, Inc. (“Edge”), Duos Technology Solutions, Inc. (“Solutions”), and Duos Energy Corporation (“Energy”), and, for periods prior to its divestiture on August 5, 2026, Duos Technologies, Inc. (“Duos”) (Duos Technologies Group, Inc., Edge, Solutions, Energy and, as applicable, Duos, collectively the “Company” “we”, “our”, and “us”) from time to time with the Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” “aim,” “project,” “target,” “will,” “may,” “should,” “forecast” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements typically address the Company’s expected future business and financial performance and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ materially from those anticipated, believed, estimated, expected, intended, or planned.
Previous wording
The Company expanded its operations into energy and power solutions through Duos Energy Corporation, which focuses on energy consulting, power infrastructure planning, and behind-the-meter (“BTM”) energy solutions.
Current wording
The Company previously expanded into energy and power solutions through Duos Energy Corporation, which provided energy consulting, power infrastructure planning, and asset management services.
Previous wording
The Company’s prospects are influenced by its ability to execute its strategic initiatives and by broader industry trends affecting digital infrastructure, artificial intelligence, and energy markets.
Current wording
The Company’s prospects are influenced by its ability to execute its strategic initiatives and by broader industry trends affecting digital infrastructure and artificial intelligence, including sustained demand for data center capacity and the power required to support it.
Previous wording
As of March 31, 2026, the aggregate estimated cost of these capital commitments was approximately $145 million, as of March 31, 2026 $35.42 Million has been deposited to secure the respective GPUs and Server assets. The remaining commitments are expected to be funded through a combination of senior debt financing and customer prepayments. The Company will secure senior debt financing to fund approximately 70% of its GPU infrastructure investments after approximately $43.5 million in funding has been provided to the GPU vendor. The debt will be secured by the underlying GPU server assets and include customary covenants and reserve requirements. Interest rates may vary based on market conditions and the future customer risk profile.
Current wording
As of June 30, 2026, the aggregate estimated cost of these capital commitments was approximately $145 million, of which approximately $68.8 million has been deposited to secure the respective GPU and server assets. The remaining commitments are expected to be funded through a combination of senior debt financing and customer prepayments. The Company intends to secure senior debt financing to fund approximately 70% of its GPU infrastructure investments after approximately $43.5 million in funding has been provided to the GPU vendor. The debt is expected to be secured by the underlying GPU server assets and include customary covenants and reserve requirements. Interest rates may vary based on market conditions and the future customer risk profile. In June 2026, the Company also agreed to acquire a data center facility in Columbus, Georgia for $30.0 million, consisting of $15.0 million in cash and a $15.0 million secured seller note at 0% interest payable as additional power capacity of up to 15 MW is delivered to the property in 5 MW increments. The purchase closed subsequent to quarter end, and the facility is being equipped to support the operation of 2,304 NVIDIA B300 GPUs to be operated by Hydra Host for a third-party client (see Note 13 and Note 18).
Previous wording
The Company believes that increasing demand for power associated with data centers and AI infrastructure presents a significant opportunity; however, this market is subject to regulatory, operational, and competitive risks.
Current wording
The Company believes that increasing demand for power associated with data centers and AI infrastructure could present future opportunities, and the Energy Services business could be reactivated if suitable opportunities arise. Any such opportunities would be subject to regulatory, operational, and competitive risks.
Previous wording
The Company began recognizing revenues from its Technology Solutions business unit during the second half of 2025. The Technology Solutions business unit provides manufacturer-agnostic infrastructure sourcing, integration, and value-added supply chain services supporting data center, AI, and enterprise deployments. No such revenues were recognized during the comparable prior-year period.
Current wording
The Company began recognizing revenues from its Technology Solutions business unit during the second half of 2025 resulting in $3,231,544 of revenue for the three months ended June 30, 2026. The Technology Solutions business unit provides manufacturer-agnostic infrastructure sourcing, integration, and value-added supply chain services supporting data center, AI, and enterprise deployments. No such revenues were recognized during the comparable prior-year period.
Previous wording
The decrease in related-party services and consulting revenue for the three months ended March 31, 2026 was primarily driven by New APR beginning to reduce the scope of services provided under the Asset Management Agreement (“AMA”) established on December 31, 2024. Under the AMA, Duos Energy oversees the deployment and operation of a fleet of mobile gas turbines and related balance-of-plant inventory and provides management, sales, and operational support services to New APR. As a result, the Company generated $648,447 of revenue under the AMA during the three months ended March 31, 2026, compared to $3,010,625 during the comparable 2025 period. In addition, the Company recognized $904,125 of revenue during each of the three months ended March 31, 2026 and 2025 related to the amortization of a deferred revenue liability associated with the Company’s 5% non-voting equity interest in the ultimate parent of New APR. Revenue generated under the AMA and from the 5% interest is reported within “Services and consulting – related parties” in the statements of operations.
Current wording
The decrease in related-party services and consulting revenue for the three months ended June 30, 2026 was primarily driven by the continued reduction in the scope of services provided under the Asset Management Agreement ("AMA") established on December 31, 2024, and the sale by New APR of substantially all of its assets in May 2026. Under the AMA, Duos Energy oversaw the deployment and operation of a fleet of mobile gas turbines and related balance-of-plant inventory and provided management, sales, and operational support services to New APR. The Company generated $198,955 of revenue under the AMA during the three months ended June 30, 2026, compared to $3,856,278 during the comparable 2025 period. In addition, following the sale of substantially all of New APR’s assets, the Company recognized the remaining $2,712,375 of deferred revenue associated with the non-cash consideration received for its 5% non-voting equity interest in the ultimate parent of New APR, compared to $904,125 recognized during the comparable 2025 period. Revenue generated under the AMA and from the 5% interest is reported within "Services and consulting – related parties" in the statements of operations.
Previous wording
During the second quarter of 2025, the Company began recognizing revenues from the deployment of Edge Data Centers, which are reported within the “Hosting” category. The $30,275 of revenue recognized during the three months ended March 31, 2026 relates to Edge Data Centers that became operational during the second quarter of 2025. The Company continues to invest capital in expanding its network of Edge Data Centers, each of which is expected to begin generating revenue upon deployment and commencement of operations with its anchor tenant.
Current wording
During the second quarter of 2025, the Company began recognizing revenues from the deployment of Edge Data Centers, which are reported within the "Hosting" category. The Company recognized $32,549 of Hosting revenue during the three months ended June 30, 2026, compared to $8,000 during the comparable 2025 period. The Company continues to invest capital in expanding its network of Edge Data Centers, each of which is expected to begin generating revenue upon deployment and commencement of operations with its anchor tenant.
Previous wording
Cost of revenues related to services and consulting from related parties decreased significantly during the three months ended March 31, 2026, compared to the same period in the prior year. The reduction was primarily driven by New APR beginning to scale back the scope of services provided under the AMA, pursuant to which Duos Energy manages the deployment and operations of a fleet of mobile gas turbines and related balance-of-plant inventory, including management, sales, and operational support services for New APR.
Current wording
Cost of revenues related to services and consulting from related parties decreased significantly during the three months ended June 30, 2026, compared to the same period in the prior year. The reduction was primarily driven by the reduced scope of services provided under the AMA and the wind-down of AMA-related activities following the sale of substantially all of New APR’s assets in May 2026.
Previous wording
Consistent with the revenues generated from the deployment of Edge Data Centers, reflected in the Hosting category, the Company has begun recognizing associated cost of goods sold, primarily consisting of depreciation of the Edge Data Center pods and operating costs required to support the operation of the hosting infrastructure. No such costs were recognized during the comparable prior-year period.
Current wording
Consistent with the revenues generated from the deployment of Edge Data Centers, reflected in the Hosting category, the Company has begun recognizing associated cost of goods sold, primarily consisting of depreciation of the Edge Data Center pods and operating costs required to support the operation of the hosting infrastructure. Such costs were not significant during the comparable prior-year period, as the Edge Data Center business was in the early stages of deployment and operations.
Previous wording
During the three months ended March 31, 2026, the Company experienced an increase in overall operating expenses compared to the same period in 2025. Sales and marketing expenses increased as additional resources were deployed to support business development initiatives. Research and development expenses decreased to zero due to scaled-back testing activities related to prospective technologies. General and administration expenses increased by 99%. This was due to multiple factors (1) the reduction of AMA related expenses, in 2026 there were approximately $187,000 required to be reclassed to COGS compared to AMA related expenses of approximately $1.2 million which were reclassed to COGS in 2025. (2) Higher non-cash stock-based compensation of approximately $1.3 million in 2026 compared to approximately $1 million in 2025. (3) Bonus expense of approximately $600,000 in 2026 compared to zero in 2025. Overall, the Company continues to focus on managing operating expenses while supporting the evolving needs of its customers.
Current wording
During the three months ended June 30, 2026, total operating expenses from continuing operations increased to $3,397,003 from $3,316,773 in the comparable 2025 period. Sales and marketing expenses increased as additional resources were deployed to support business development for the Edge Data Center and Technology Solutions businesses. General and administration expenses decreased by approximately 4%, primarily reflecting lower non-cash stock-based compensation expense in the second quarter of 2026 due to some forfeitures of restricted stock, compared to the comparative period in 2025. Overall, the Company continues to focus on managing operating expenses while supporting the evolving needs of its customers.** **
Previous wording
Gross margin improved from 27% during the three months ended March 31, 2025 to 59% during the same period in 2026, primarily due to reduced cost of revenues under the AMA related costs impacting cost of goods sold within the Technology Systems and Services and Consulting business lines. In addition, the Company recognized $904,125 of revenue during each of the three months ended March 31, 2025 and 2026 related to its 5% non-voting equity interest in the ultimate parent of New APR. As this revenue had no associated cost of revenue, it contributed at a 100% gross margin.
Current wording
Gross margin improved from 34.9% during the six months ended June 30, 2025 to 54.1% during the same period in 2026, primarily due to reduced AMA-related cost of revenues and the contribution of the Technology Solutions business. In addition, the Company recognized $3,616,500 of revenue during the six months ended June 30, 2026 related to its 5% non-voting equity interest in the ultimate parent of New APR, compared to $1,808,250 in the comparable 2025 period. As this revenue had no associated cost of revenue, it contributed at a 100% gross margin.
Previous wording
Loss from operations was $3,631,546 for the three months ended March 31, 2026, compared to $1,789,628 for the same period in 2025. The increase in operating loss was primarily driven by lower revenues during the quarter, resulting from the reduced scope of services provided under the Asset Management Agreement, as well as higher operating expenses, including non-cash stock-based compensation expense related to restricted stock awards.
Current wording
Loss from operations for continuing operations was $3,125,183 for the six months ended June 30, 2026, compared to loss from continuing operations of $2,072,747 for the same period in 2025. Improved gross margins and the growth of the Technology Solutions business was offset by higher operating expenses, including non-cash stock-based compensation expense related to restricted stock awards.
Previous wording
Other income(expense) for the three months ended March 31, 2026 was $139,301 and ($290,035) for the comparative period in 2025. Other income in 2026 was primarily driven by higher interest income resulting from a significantly larger cash balance compared to the prior period, as well as a $52,302 gain on the sale of investments recognized during the first quarter of 2026, which did not occur in the comparable 2025 period and no interest expense in 2026 compared to $322,577 in 2025.
Current wording
Other income, net for the six months ended June 30, 2026 was $53,729,798, compared to other expense, net of $(364,118) for the comparative period in 2025. Other income in 2026 was primarily driven by the $53,226,105 gain on sale of investments, including $53,173,803 recognized in the second quarter in connection with the sale of substantially all of New APR’s assets, as well as higher interest income of $497,049 resulting from a significantly larger cash balance. Interest expense was immaterial in 2026, compared to $406,660 in the comparable 2025 period.
Previous wording
As of March 31, 2026, the Company has a working capital surplus of $29,179,849 and the Company had a net loss of $3,492,245 for the three months ended March 31, 2026.
Current wording
As of June 30, 2026, the Company had cash of $112,308,012 and a working capital surplus of approximately $119.6 million, and the Company had net income of $44,352,185 for the six months ended June 30, 2026, which included a gain on sale of investments of $53,226,105.
Previous wording
Net cash provided by financing activities for the three months ended March 31, 2026 and 2025 was $60,109,600 and $2,788,033, respectively. Cash flows provided by financing activities during the first three months of 2026 were primarily attributable to a public offering of common stock for net proceeds of approximately $60.3 million. Cash flows provided by financing activities during the first three months of 2025 were primarily attributable to gross proceeds of $3,954,940 from our At-The-Market (ATM) offering program, offset partially by $1,000,000 in repayments toward the principal balance of the secured promissory notes entered into with 21 April Fund LP and 21 April Fund Ltd.
Current wording
Net cash provided by financing activities for the six months ended June 30, 2026 and 2025 was $112,149,403 and $4,471,877, respectively. Cash flows provided by financing activities during 2026 were primarily attributable to the public offering of common stock completed on March 2, 2026 for gross proceeds of approximately $65 million and the underwritten offering completed in June 2026 of 2,000,000 shares of common stock for gross proceeds of $19.0 million and pre-funded warrants to purchase 3,800,000 shares of common stock for gross proceeds of $36.1 million all offset by offering costs of $8 million. Cash flows provided by financing activities during 2025 were primarily attributable to gross proceeds of $3,954,940 from the Company’s At-The-Market (ATM) offering program, offset partially by $1,000,000 in repayments toward the principal balance of the secured promissory notes entered into with 21 April Fund LP and 21 April Fund Ltd.
Previous wording
As reflected in the accompanying consolidated financial statements, the Company had a net loss of $3,492,245 for the three months ended March 31, 2026. During the same period, cash used in operating activities was $1,361,911. The working capital surplus and accumulated deficit as of March 31, 2026, were $29,179,849 and $87,695,285, respectively.
Current wording
As reflected in the accompanying consolidated financial statements, the Company had a net income of $45,352,185 for the six months ended June 30, 2026. During the same period, cash provided by operating activities was $11,360,765. The working capital surplus and accumulated deficit as of June 30, 2026, were $114,403,798 and $39,850,855, respectively.
Previous wording
The Company successfully raised approximately $3,544,689 in gross proceeds from the sale of common stock through its At-The-Market (ATM) offering program in 2024 and raised an additional $8,927,347 in gross proceeds from the ATM in 2025. Furthermore, in 2025, the Company raised approximately $45 million from other equity offerings. More recently on February 26, 2026, the Company priced a public offering of its common stock for gross proceeds of approximately $65 million. The offering closed on March 2, 2026, and was conducted pursuant to the Company’s effective shelf registration statement on Form S-3 and related prospectus supplements filed with the SEC. The capital raised is expected to bolster the Company’s balance sheet and position it to pursue strategic initiatives related to Duos Edge AI, from a stronger financial foundation. In the long run, the continuation of the Company as a going concern is dependent upon the ability of the Company to continue executing its business plan, generate enough revenue, and attain consistently profitable operations. We have analyzed our cash flow under “stress test” conditions and have determined that we have sufficient liquid assets on hand or available via the capital markets to maintain operations for at least twelve months from the issuance date of this report
Current wording
Recently on February 26, 2026, the Company priced a public offering of its common stock for gross proceeds of approximately $65 million. The offering closed on March 2, 2026, and was conducted pursuant to the Company’s effective shelf registration statement on Form S-3 and related prospectus supplements filed with the SEC. Additionally, on June 17, 2026, the Company priced an underwritten registered direct offering consisting of shares of its common stock and pre-funded warrants for gross proceeds of approximately $55 million. The offering closed on June 18, 2026, and was conducted pursuant to the same shelf registration statement and the related prospectus supplement filed with the SEC. The capital raised is expected to bolster the Company’s balance sheet and position it to pursue strategic initiatives related to Duos Edge AI, from a stronger financial foundation. In the long run, the continuation of the Company as a going concern is dependent upon the ability of the Company to continue executing its business plan, generate enough revenue, and attain consistently profitable operations. We have analyzed our cash flow under “stress test” conditions and have determined that we have sufficient liquid assets on hand or available via the capital markets to maintain operations for at least twelve months from the issuance date of this report.
Previous wording
Management believes that, at this time, the conditions in our traditional market space with ongoing contract delays, the consequent need to procure certain materials in advance of a binding contract and the additional time needed to execute on new contracts previously reported could put a strain on our cash reserves. However, given the Company’s current capital, the anticipated steady cash flow from the Hosting and Technology Solutions lines of business and proven ability to raise capital via the public markets indicate there is no substantial doubt for the Company to continue as a going concern for a period of twelve months. We expect to continue executing the plan to grow our business and achieve profitability as previously discussed. The Company may selectively look at opportunities for fundraising in the future including potential debt offerings to support asset acquisitions. Management has extensively evaluated our requirements for the next twelve months and has determined that the Company currently has sufficient cash and access to capital to operate for at least that period.
Current wording
Management believes that, following the divestiture of the rail technology business and the wind-down of the AMA, the Company’s liquidity position is strong. With cash of approximately $112.4 million at June 30, 2026, a substantial working capital surplus, anticipated steady cash flow from the Hosting and Technology Solutions lines of business, and a proven ability to raise capital via the public markets, the Company expects to be able to meet its obligations over the next year. We expect to continue executing the plan to grow our business and achieve consistent profitability. The Company may selectively evaluate opportunities for fundraising in the future, including potential debt offerings to support asset acquisitions, such as the senior debt financing contemplated for its GPU infrastructure investments. Management has extensively evaluated our requirements for the next twelve months and has determined that the Company currently has sufficient cash and access to capital to operate for at least that period.
Previous wording
For technology systems, the Company recognizes revenue over time using a cost-based input methodology in which significant judgment is required to estimate costs to complete projects. These estimated costs are then used to determine the progress towards contract completion and the corresponding amount of revenue to recognize. The Company follows the principles in ASC 606 which include the following: a contract with a customer creates distinct 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.
Current wording
The Company recognizes revenue in accordance with ASC 606. For arrangements recognized over time, including certain Technology Solutions arrangements, significant judgment is required to estimate the costs to complete the related performance obligations; these estimated costs are used to determine progress toward completion and the corresponding amount of revenue to recognize. Revenue recognized over time using a cost-based input methodology for the divested rail technology systems business is reported within discontinued operations. The Company follows the principles in ASC 606, which include the following: a contract with a customer creates distinct contract assets and performance obligations, satisfaction of a performance obligation creates revenue, and a performance obligation is satisfied upon transfer of control of a good or service to a customer.
Previous wording
The Company generates revenue from six sources:
Current wording
The Company generates revenue from three sources:
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Current report — wording carried from elsewhere
The following table sets forth a summary of our unaudited Consolidated Statements of Operations and is used in the following discussions of our results of operations:
Current report — wording carried from elsewhere
The Company began recognizing revenues from its Technology Solutions business unit during the second half of 2025 resulting in $3,793,998 of revenue for the six months ended June 30, 2026. The Technology Solutions business unit provides manufacturer-agnostic infrastructure sourcing, integration, and value-added supply chain services supporting data center, AI, and enterprise deployments. No such revenues were recognized during the comparable prior-year period.
Current report — wording carried from elsewhere
During the second quarter of 2025, the Company began recognizing revenues from the deployment of Edge Data Centers, which are reported within the "Hosting" category. The Company recognized $62,824 of Hosting revenue during the six months ended June 30, 2026, compared to $8,000 during the comparable 2025 period. The Company continues to invest capital in expanding its network of Edge Data Centers, each of which is expected to begin generating revenue upon deployment and commencement of operations with its anchor tenant.
Current report — wording carried from elsewhere
The Company expects services revenue from both its hosting and technology solutions to increase throughout 2026. This growth is expected to be driven by the deployment of additional edge data centers coming online, as well as expanding technology solutions revenue tied to growth in the data center market.
Current report — wording carried from elsewhere
Cost of revenues largely comprises equipment and labor necessary to support the implementation of new systems, support and maintenance of existing systems, software projects, and support of the AMA with New APR.
Current report — wording carried from elsewhere
Consistent with the revenues generated from the deployment of Edge Data Centers, reflected in the Hosting category, the Company has begun recognizing associated cost of goods sold, primarily consisting of depreciation of the Edge Data Center pods and operating costs required to support the operation of the hosting infrastructure. Such costs were not significant during the comparable prior-year period, as the Edge Data Center business was in the early stages of deployment and operations.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Expansion into Energy and Power Solutions