DUOS TECHNOLOGIES GROUP, INC.

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”) and Duos Energy Corporation (“Energy”) (Duos Technologies Group, Inc., Duos, Edge, and Energy 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, 2024, 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 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.

Previous wording

The Company expects services revenue from both its power, hosting and related data center services to grow throughout 2025 and further into 2026. Growth drivers include the anticipated deployment of additional power plants under the AMA, the expansion of edge data centers coming online, and the addition of other revenues related to the growth within the data center space.

Current wording

Expansion of Edge Data Center Platform

Previous wording

The Company is focused on improving operational and technical execution, which, in turn, will enable commercial expansion and new technology offerings. The primary objectives for 2025 and beyond include:

Current wording

The Company’s primary objectives for 2026 and beyond include:

Previous wording

Although the Company’s prospects for future revenue growth are anticipated to be favorable, investing in our securities involves risk and careful consideration should be made before deciding to purchase our securities. There are many risks that affect our business and results of operations, some of which are beyond our control and unexpected macro events can have a severe impact on the business. Please see the risk factors identified in “Item 1A – Risk Factors” of our Annual Report on Form 10-K filed with the SEC on March 31, 2025.

Current wording

Although the Company’s prospects for future revenue growth are anticipated to be favorable, investing in our securities involves risk and careful consideration should be made before deciding to purchase our securities. There are many risks that affect our business and results of operations, some of which are beyond our control and unexpected macro events can have a severe impact on the business. Please see the risk factors identified in “Item 1A– Risk Factors” in the 2025 Annual Report.

Previous wording

The decreases in technology systems revenues from $2,221,310 to $369,991 for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, is primarily attributed to 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 later this year. The Company is anticipating potential further delays related to this project in light of reviews currently being conducted by the Federal Government. Additionally, the Company continues to see opportunities for expansion of its programs with existing customers. In spite of the timing delays that continue to impact the quarterly results, management remains confident in the long-term potential of the RIP product.

Current wording

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 wording

The significant increase in services and consulting revenue for the quarter ended September 30, 2025, was primarily driven by Duos Energy executing on the Asset Management Agreement ("AMA") with New APR that was established on December 31, 2024. Under the AMA, Duos Energy oversees the deployment and operations of a fleet of mobile gas turbines and related balance-of-plant inventory, providing management, sales, and operational support services to New APR. As a result, the Company generated $4,248,680 in revenue from the AMA during the third quarter of 2025. In addition, the Company recognized $904,125 in revenue from amortized deferred revenue liability associated with its 5% non-voting equity interest in the ultimate parent of New APR. Revenue from the AMA and the 5% interest is reported under “Services and consulting – related parties” on the statements of operations. The remaining balance of $1,436,568 for services and consulting related to our legacy technology systems business is consistent with the 2024 comparable period.

Current 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.

Previous wording

During the nine months ended September 30, 2025, the cost of revenues on technology systems decreased compared to the equivalent period in 2024; however, the decrease was less significant than the corresponding drop in revenue due to fixed cost components that do not vary with revenue. This reduction primarily reflects our ability to reallocate certain fixed operating and servicing costs for technology systems to support the AMA, an allocation we could not make in the comparative period because the agreement was not yet in effect. It also reflects the ramp-down of manufacturing ahead of field installation of our two high-speed Railcar Inspection Portals, which has continued to temporarily slow project activity and further reduced cost of revenues while we await customer readiness for site deployment.

Current wording

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 wording

The net loss for the three months ended September 30, 2025 and 2024 was $1,040,254 and $1,401,663, respectively. The 26% decrease in net loss was mostly attributed to increase in revenues generated by Duos Energy through the AMA with New APR as described above, offset by the non-cash stock-based compensation charged for restricted stock that was not in the comparative period. Net loss per common share was $0.06 and $0.18 for the three months ended September 30, 2025 and 2024, respectively.

Current wording

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 wording

As of September 30, 2025, the Company has a working capital surplus of $27,574,533 and the Company had a net loss of $6,637,948 for the nine months ended September 30, 2025.

Current 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.

Previous wording

Net cash used in operating activities for the nine months ended September 30, 2025 and 2024 was $11,031,943 and $ 6,200,147, respectively. The increase in net cash used in 2025 was driven primarily by the decrease in contract liabilities and increase in accounts receivable offset by elevated non-cash add-backs for depreciation, amortization, and stock-based compensation. The significant build-up in accounts receivable occurred as project and service billings outpaced collections coupled with a draw-down of contract liabilities as we execute on the AMA.

Current wording

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 wording

Net cash used in investing activities was $7,873,079 and $1,555,544 for the nine months ended September 30, 2025 and 2024, respectively. The increase in 2025 reflects continued investment in capitalized construction-in-progress costs associated with the edge data centers currently owned by the Company that are being deployed in 2025.

Current wording

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 wording

Net cash provided by financing activities for the nine months ended September 30, 2025 and 2024 was $45,840,224 and $5,959,962, respectively. Cash flows provided by financing activities during the first nine months of 2025 were primarily attributable to gross proceeds of $8,927,347 from our At-The-Market (ATM) offering program and a public offering of common stock for gross proceeds of approximately $45 million, offset partially by $2,200,000 in repayments toward the principal balance of the secured promissory notes entered into with 21 April Fund LP and 21 April Fund Ltd. Cash flows provided by financing activities during the first nine months of 2024 were primarily attributable to gross proceeds of approximately $2,995,002 from issuances of Series D and Series E Convertible Preferred Stock, along with a combined total of $1,096,532 in proceeds from the issuance of common stock via warrant exercises of $899,521 and our At-The-Market (ATM) offering program for proceeds of $197,011.

Current 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.

Previous wording

On a long-term basis, our liquidity is dependent on the successful continuation of the revenue diversification strategy into the Energy and Edge Data Center subsidiaries, and expansion of operations and receipt of revenues across all operating segments. We believe our current capital and revenues are sufficient to fund such expansion and our operations over the next twelve months, although we are dependent on timely payments from our customers for projects and work in process. However, we expect such timely payments to continue. Material cash requirements will be satisfied within the normal course of business including substantial upfront payments from our customers prior to starting projects. The Company may elect to purchase materials and supplies in advance of contract award but where there is a high probability of that award.

Current wording

On a long-term basis, our liquidity is dependent on the successful continuation of the revenue diversification strategy into the Technology Solutions and Edge Data Center subsidiaries, and expansion of operations and receipt of revenues across all operating segments. We believe our current capital and revenues are sufficient to fund such expansion and our operations over the next twelve months, although we are dependent on timely payments from our customers for projects and work in process. However, we expect such timely payments to continue. Material cash requirements will be satisfied within the normal course of business including substantial upfront payments from our customers prior to starting projects. The Company may elect to purchase materials and supplies in advance of contract award but where there is a high probability of that award. Demand for our products and services will be dependent on, among other things, market acceptance of our products and services, the technology market in general, and general economic conditions, which are cyclical in nature. Because a major portion of our activities is the receipt of revenues from the sales of our products and services, our business operations may continue to be challenged by our competitors and prolonged recession periods.** **

Previous wording

As reflected in the accompanying consolidated financial statements, the Company had a net loss of $6,637,948 for the nine months ended September 30, 2025. During the same period, cash used in operating activities was $11,031,943. The working capital surplus and accumulated deficit as of September 30, 2025, were $27,574,533 and $81,005,957, respectively.

Current 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.

Previous wording

The Company was successful during 2023 in raising gross proceeds of over $11,500,000 from the sale of Series E and F Convertible Preferred Stock. Additionally, in the first and second quarters of 2024, the Company raised gross proceeds of $2,995,002 from the issuance of a combination of Series D and E Convertible Preferred Stock (See Note 9). The Company successfully raised approximately $3,544,689 in gross proceeds through its At-The-Market (ATM) offering program in 2024 and secured an additional $3,954,940 in gross proceeds during the first two months of 2025. Furthermore, in the second quarter of 2025, the Company raised $1,835,874 in gross proceeds through its ATM offering program, followed by an additional $3,136,533 in July 2025. On July 30, 2025, the Company priced a public offering of its common stock for net proceeds of approximately $37.1 million. The offering closed on August 1, 2025, and was conducted pursuant to the Company’s effective shelf registration statement on Form S-3 and related prospectus supplements filed with the SEC. On September 2, 2025, the Underwriter exercised the Over-Allotment Option in full to purchase 838,851 shares of Common Stock, generating additional net proceeds of approximately $4.7 million. The Over-Allotment Option closed on September 2, 2025. 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

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

Previous wording

In addition, management has taken and continues to take actions including, but not limited to, elimination of certain costs that do not contribute to short term revenue, and re-aligning both management and staffing with a focus on improving certain skill sets necessary to build growth and profitability and focusing product strategy on opportunities that are likely to bear results in the relatively short term. The Company believes that, with the combination of its current capital and commercial sales success, it will have sufficient working capital to meet its obligations over the following twelve months. In the last twelve months the Company has seen growth in its contracted backlog as well as significant, positive signs from new commercial projects that indicate improvements in future revenues.

Current wording

In addition, management has taken and continues to take actions including, but not limited to, elimination of certain costs that do not contribute to short term revenue, and re-aligning both management and staffing with a focus on improving certain skill sets necessary to build growth and profitability and focusing product strategy on opportunities that are likely to bear results in the relatively short term. The Company believes that, with the combination of its current capital and commercial sales success, it will have sufficient working capital to meet its obligations over the following twelve months. Recently, the Company has seen growth in its contracted backlog as well as significant, positive signs from new commercial projects that indicate improvements in future revenues.

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 AMA and the 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, 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.

Previous wording

The Company follows Accounting Standards Codification 606, 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 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

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.

Previous wording

The Company generates revenue from five sources:

Current wording

The Company generates revenue from six sources:

Previous wording

The Company assesses its equity method investment for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. No impairment losses were recognized during the year ended December 31, 2024 or the nine months ended September 30, 2025.** **

Current wording

The Company assesses its equity method investment for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. No impairment losses were recognized during thethree months ended March 31, 2026 or 2025.

Previous wording

In May 2024, the Company recorded an intangible asset with a fair value of $11,161,428. This asset represents non-monetary consideration received under a 5-year customer contract, in which the Company will provide maintenance services to the customer. The intangible asset represents Digital Image data rights in the form of a license agreement received by the Company from the customer.

Current wording

In May 2024, the Company recorded an intangible asset with a fair value of $11,161,428. This asset represents non-monetary consideration received under a 5-year customer contract, in which the Company would provide maintenance services to the customer. The intangible asset represents Digital Image data rights in the form of a license agreement received by the Company from the customer.

Previous wording

On the contract inception date, the Company also recorded an immediate amortization of the intangible asset of $199,008 related to the pre-contract costs incurred relating to a pilot program for this contract and recorded deferred revenue of $11,161,428 as contract liabilities with a current and non-current component, and then immediately recognized $199,008 of this deferred revenue relating to the completed pilot program. The remaining deferred revenue is being recognized over the 5-year term.

Current wording

On the contract inception date, the Company recorded deferred revenue of $11,161,428 as contract liabilities with a current and non-current component, and then immediately recognized $199,008 of this deferred revenue relating to the completed pilot program. The remaining deferred revenue was being recognized over the 5-year term.