NOTE 2 – LIQUIDITY

Under Accounting Codification ASC 205, Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. Management has assessed the Company’s ability to continue as a going concern in accordance with the requirement of ASC 205-40.

As reflected in the accompanying consolidated financial statements, the Company had a net income of $44,352,185 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.

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. 

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.

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 $112.3 112,308,012 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.

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 with access to additional capital funding. Ultimately the continuation of the Company as a going concern is dependent upon the ability of the Company to continue executing the plan described above which was put in place in late 2024 and will continue in 2026 and beyond. These 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.