PART I

ITEM 1. BUSINESS.

GENERAL

Information Systems Associates, Inc. (“ISA” or the “Company”) was incorporated in Florida on May 31, 1994 to engage in the business of developing software for the financial and asset management industries. ISA developed a methodology for the efficient data collection of assets contained within large data centers and was awarded a patent in 2010. ISA’s original mission was to develop, market and implement software and professional services to the world’s largest data centers in the area of IT Asset Management (ITAM). From the Company’s inception, ISA’s strategy included expanding its technology base through organic development efforts and strategic partnerships. More recently, the Company engaged in discussions with multiple companies with the objective of merging with or being acquired by a strategic partner. In late 2014, ISA entered into negotiations with Duos Technologies, Inc. (“Duos”) for the purposes of executing a reverse triangular merger. This transaction was completed on March 31, 2015 and effective as of April 1, 2015 (“Effective Date”). Duos was incorporated under the laws of the State of Florida on November 30, 1990 for the purpose of the design, development and deployment of proprietary technology applications and turn-key engineered systems. Duos, based in Jacksonville, Florida, employs approximately 30 people and is a technology company with a strong portfolio of intellectual property, with core competencies that include advanced intelligent technologies that are delivered through its proprietary integrated enterprise command and control platform.

Background of the Merger

On December 5, 2014, Duos and ISA executed a non-binding Letter of Intent (“LOI”) to merge their respective companies. As outlined in the LOI, the proposed transaction was to be structured as a reverse triangular merger pursuant to which a newly formed subsidiary of ISA would merge with and into Duos, with Duos as the surviving entity.

In connection with the proposed transaction, the Duos shareholders were expected to receive common stock of ISA that would equal approximately 96% of the issued and outstanding common stock of ISA, on a fully diluted basis, as of the Effective Date. Subject to satisfaction of certain conditions, the parties intended to enter into a definitive merger agreement on the transactions contemplated under the LOI by January 31, 2015. Duos and ISA subsequently extended this deadline. Following the closing of the proposed Merger, Duos planned to effect a change in the ISA Board of Directors and management as Duos’ management would deem appropriate.

On February 6, 2015, ISA, Duos and Duos Acquisition Corporation, a Florida corporation and wholly owned subsidiary of the Company (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement and subject to the satisfaction or waiver of the conditions therein, Merger Sub would merge with and into Duos in a statutory reverse triangular merger (the “Merger”) with Duos as the surviving wholly owned subsidiary of the Company. Once consummated, at the closing of the Merger (the "Closing"), the Company would issue to Duos’ shareholders, in exchange for all of the issued and outstanding shares of Duos, such number of the Company’s common stock equal to 96% of the Company’s issued and outstanding common stock on a fully diluted basis.

In anticipation of the Merger, and as required under the Merger Agreement, ISA executed a recombination of its Class A and Class B Common stock into a single class and implemented a reverse stock split in the ratio of 1 for 200 of its outstanding common stock.

The Merger Agreement contained customary representations, warranties and covenants from each of the parties. Closing of the Merger was subject to various closing conditions, including the right to terminate the Merger Agreement by either party if Closing did not occur on or before March 15, 2015 (“Execution Date” or “Closing Date”) unless mutually extended by both parties. The parties subsequently amended the Merger Agreement by extending the Closing Date to April 30, 2015. The Merger became effective on April 1, 2015.

ISA intends to continue to operate the Duos business as an independent subsidiary (Duos Technologies, Inc. under the brand name “duostech”) and to shift its legacy services operation to its wholly owned subsidiary TrueVue360, Inc.

BUSINESS OVERVIEW

The original focus of ISA evolved from the founder’s twenty-year expertise in technology and knowledge-based professional services for the collection and analyzes of large data center assets. Over the years, the Company created and refined efficient methodologies for IT asset management. Although the Company plans to continue and to expand this line of business, the recent merger with Duos will drive significant emphasis and focus to Duos’ core business of creating and marketing sophisticated, proprietary technology applications and turnkey engineered systems.

Duos provides an array of sophisticated, proprietary intelligent technology applications and turnkey engineered systems to the government, healthcare, transportation, utilities and commercial/industrial sectors. From its inception, Duos initially focused on security solutions for the homeland security and critical infrastructure protection markets, and has adapted its technologies over the years to a highly diversified suite of applications.

Duos IP is built upon two of its core technology platforms (praes i dium ® and cen t raco™), both distributed as licensed software suites, and natively embedded within engineered turnkey systems.

praes i dium® is a modular suite of analytics applications which process and simultaneously analyze data streams from a virtually unlimited number of conventional sensors and/or data points. Native algorithms compare analyzed data against user defined criteria and rules in real time and automatically report any exceptions, deviations and/or anomalies. This application suite also includes a broad range of conventional operational system components and subsystems, including an embedded feature-rich video management engine and a proprietary Alarm Management Service (AMS). This unique service provides continuous monitoring of all connected devices, processes, equipment and sub-systems, and automatically communicates to the front end-user interface, if and when an issue, event or performance anomalies are detected.

The core modules are tailored to specific industry applications and its analytics engine(s) process any type of conventional sensor outputs, thereby adding “intelligence” to any third party sensor technology. The processed information is instantly distributed simultaneously to an unlimited number of users in a visualized and correlated user interface using the Duos’ proprietary modular cen t raco™ command and control platform, i.e. enterprise information management suite.

This multi-layered command and control interface functions as the central point for information consolidation, connectivity and communications. The platform is browser based and completely agnostic to the interconnected sub-systems and provides full LDAP (Active Directory) integration for seamless user credentialing. cen t raco™ performs the following major functions:

cen t raco™ can be securely installed as a stand-alone application suite inside a local area network or pushed outside a wide area network using the same browser-based interface. It leverages industry standards for data security, access, and encryption as appropriate. The platform also operates as a cloud-hosted solution. The permission tree is based on (a) the number of technology modules licensed to a customer and (b) individual permissions assigned to each user inside the customer organization. All devices and systems can be networked into a common framework which provides secure, remote access to each node on the network, real-time alert capabilities at the sensor level, integration into the client’s operating environment and automated detection points of failure anywhere along the network. This provides a seamless, cost-effective solution with a demonstrable ROI to our customers. The cen t raco™ suite of broad based solutions were designed to be hardware agnostic.

Duos made its initial mark with the development and deployment of a comprehensive homeland and border security-centric critical infrastructure applications suite. These applications are currently operated by major (Class-1) freight rail operators and by various divisions of the Department of Homeland Security (DHS). After achieving initial success in the transportation industry, Duos broadened its market reach and expanded into servicing the commercial, industrial, healthcare, utilities and government sectors.

Duos’ revenue is derived from a combination of turnkey project delivery (predominantly to its Fortune 500 client base) and post-sales technical support contracts (“TSC”).

INTELLECTUAL PROPERTY

On July 6, 2010, the US Patent and Trademark Office issued a technology process patent to ISA for its software and methodologies. The patent awarded to ISA solidifies the Company’s reputation in this specialized area and provides a solid foundation for the Company to add new software enhancements and services to its portfolio.

With the acquisition of Duos, ISA has significantly expanded its IP portfolio. Duos currently holds 17 patents as well as other proprietary technology built upon two of its core technology platforms (praesidium® and centraco™). Duos’ proprietary technologies are distributed as licensed software suites, as well as natively embedded within engineered turnkey systems. praesidium® is a modular suite of analytics applications which process and simultaneously analyze data streams from a virtually unlimited number of conventional sensors and/or data points. Native algorithms compare analyzed data against user defined criteria and rules in real time and automatically report any exceptions, deviations and/or anomalies. This application suite also includes a broad range of conventional operational system components and subsystems, including an embedded feature-rich video management engine and a proprietary Alarm Management Service (AMS). This unique service provides continuous monitoring of all connected devices, processes, equipment and sub-systems, and automatically communicates to the front end-user interface if and when an issue, event or performance anomalies are detected.

INDUSTRY BACKGROUND AND OVERVIEW

The market sector that ISA’s legacy services compete in is within the Information Technology, Systems Management discipline. The addition of Duos as a subsidiary through the merger significantly expands the technology portfolio of ISA. Duos will continue to focus on the design, development and deployment of “Intelligent Technologies” with specialization in the areas of video analytics for security applications, data analytics of a wide range of sensor outputs, and specialized applications for a broad range of industries. One of Duos’ flagship technologies is its comprehensive automated rail inspection portal system.

The Company’s proprietary Intelligent Video Analytics technology is primarily focused on the video surveillance market, which according to Homeland Security Research Corporation (“HSRC”) ^[1] represents the fastest growing segment within the homeland security market. According to the Homeland Security Research group, the Intelligent Video Surveillance, ISR Analytics and Video Analytics industry is forecasted to experience decades of rapid growth. The industry revenues totaled $13.5 billion in 2012, expected to grow at a CAGR of 13.8% from 2012 to 2020. This growth is being driven by the following industry trends:

In the past year, intelligent video surveillance, ISR and video analytics with mature technology have attracted a lot of attention. HSRC estimates that the global market ^[2] will triple by 2020.

The Company’s comprehensive rail inspection portal system which includes automated inspection of all sides of a rail car for anomalies and particularly a newly developed sub system for the inspection of vehicle under carriages, is expected to drive significant revenues for years to come. This proprietary system branded the “ vue ” encompasses broad coverage of the rail cars inspection that includes:

CUSTOMERS

We provide our solutions to customers in a variety of industries, including: healthcare, public authorities, manufacturing, retail, telecommunications and financial services sectors. Our services are not industry specific and therefore are not limited by industry. With the acquisition of Duos, we will be focusing on specific industries for future growth, specifically the freight and transit rail industries and targeted government entities with an emphasis on border security.

SALES AND MARKETING

Both ISA and Duos previously marketed their services primarily through referrals from customers, entities with whom the companies had either a reseller agreement, or are authorized to provide consulting service to their clients. Potential customers were identified through direct contact, responses to requests for information, attendance at trade shows and through industry contacts. We principally focused on professionals and ongoing lead generation through our partner relationships and their valued added reseller program referrals. With the Company’s merger with Duos, we now have the ability to go direct to many of the same clients.

TECHNOLOGY PLATFORM

ISA has sought out and identified those solutions that are based upon proven technology platforms and contain the desired functionality to meet or exceed its client’s expectations. With the merger of Duos as a subsidiary, ISA now has access to a diversified set of products and services which can be further developed to deliver specific solutions to a rapidly growing number of customers.

praesidium® Platform

The core function of our praesidium® platform is the simultaneous processing and continuous analysis of data feeds from an unlimited number and types of sensors. All input data is algorithmically compared against specific, multi-dimensional, user defined rules. Anomalies are automatically flagged. Rules can be variable and/or conditional. In simple words: the result of an analytical test may be subject to an unlimited number of parameters, such as a specific time or a list of special conditions, and may result in different actions if such conditions change. The praesidium® platform essentially acts as the “back end” process that captures, organizes, analyzes and classifies the data streams. The built-in Alarm Management Module (“AMS”), which includes a powerful rules-based engine, automatically dispatches events considered actionable breaches of any rule. All data is passed on to and graphically visualized in our centraco® Physical Security Information Management (PSIM) user interface, which enables operators to view and respond to actionable events. The following diagram is a simplified topology of the interaction between the praesidium® back end process and the centraco® front end interface.

The praesidium® platform consists of a large number of responsive and analytical modules, which when combined in a certain sequence result in the various end user applications currently offered to our customers.

Each module acts as an essential building block for the adaptations of existing applications and/or the development of new applications.

A major natively embedded sub system includes our proprietary Video Analytics Suite, which encompasses a substantial number of application-specific “analytics” modules, discussed in more detail below.

RESEARCH AND DEVELOPMENT

ISA’s initial software development was aimed at defining the core functionality elements of our software application OSPI®, the features and functionality of the follow-up releases, the development of new software components, and the integration of superior third party technology into our environment. Starting in the middle of 2013, well before the merger with Duos, management engaged with a new development partner based in Toronto, Canada. The companies elected to cooperate on a core FacilityTeam based technology set, and then add specific modules for their respective target markets with the ability to re-license each other’s offerings as opportunities arise. This approach would have accomplished the objectives of significantly reducing anticipated software development costs and vastly improving time to market. As of the end of 2014, FacilityTeam had not completed the anticipated initial release of the new software and given that management was in discussions with Duos and their extensive software development experience, we elected to have the Duos research & development team perform a review of the FacilityTeam product and advise us as to further investment in this effort.

Following the merger with Duos, ISA will gain access to experienced research & development resources. Since its inception Duos has provided a broad variety of sophisticated, artificial intelligence-based technology applications and turnkey engineered solutions to a growing range of clientele. Duos not only develops and owns the application software source code for the various analytics processes, but also designs, develops and deploys turnkey engineered solutions, which pair their own proprietary applications with any third-party technology. The feedback from actual field deployments has enabled us to develop superior artificial intelligence-based analytics applications and is one of the major contributing factors as to why Duos intelligent analytics applications register the lowest false alarm rate in the industry.

As a result of the merger, Duos’ Chief Technology Officer has joined ISA’s executive management team, and under his direction, the R&D team will evaluate ISA’s core offerings and will begin working on designing and testing a series of engineered solutions to make ISA’s original business far more comprehensive and competitive.

COMPETITION (ISA CORE BUSINESS LINE)

According to Gartner Group, there are almost 70 providers of solutions and services that claim to compete in the space broadly defined as asset management/DCIM. These range from high cost integrated platforms down to niche solution providers aimed at select parts of the market. The belief is that although some vendors are working towards a fully integrated approach, no one vendor has achieved dominance yet. It is within this context that ISA has taken the approach of offering its solutions directly where it can directly answer all of a client’s requirements or through a partner where a larger solution is required. In conjunction with a planned migration to “Software as a Service” delivery of our software currently under development, we are evaluating our pricing relative to a contemplated significant change in our business model.

Competition in this market space continues to be divided into five broad categories or vendor groups:

ISA currently competes or co-operates with partners in all five areas by offering products and services within those categories.

With the Duos merger, our offerings will broaden substantially and will allow us to not only compete in the IT services sector but also in the Cloud services space as well as the Intelligent Technologies sector where Duos is already a leading player. What significantly differentiates Duos from its competitors, is that it not only develops and owns the application software code for the various analytics processes, but it also designs, develops and deploys turnkey engineered solutions, which integrates Duos’ own proprietary applications with any third-party technology through its native cen t raco™ platform. Typically, competitors specialize either on analytics software, command and control software or technology integration. The feedback from field deployments of turnkey engineered systems and the knowledge base built over many years of involvement in post-sales technical support services, uniquely positions Duos to continuously expand and advance their technology solutions, which we believe are unparalleled in today’s marketplace.

SPECIFIC AREAS OF COMPETITION

ISA considers data collection and the software it has developed to perform these services, to be one of the two areas of focus for our business. With the Duos merger, it is the intent of ISA management to continue to promote the software as the practical solution to the specific problems encountered during the data collection process for IT (Information Technology) assets. As such, the combined entity is making investments in new product development to improve our market visibility. During the implementation process, we will continue to offer conventional full service solutions that meet our customer’s requirements.

Until recently, ISA generally did not encounter much direct competition for our software offerings due to our almost exclusive focus on selling through partners. This is expected to change as ISA becomes much more visible with new software offerings and competes more directly for specific opportunities.

PLAN OF OPERATION

As reported previously, ISA has been unable to scale the business as originally contemplated, which resulted in the appointment of Adrian Goldfarb as President and interim CFO in late 2011. The Board directed management under the leadership of Mr. Goldfarb, to change the Company's direction and to prioritize on identifying a strategic partner that would allow the Company to execute an aggressive growth plan. This mission was successfully accomplished with the merger with Duos. The combined entities will now be able to execute on our growth strategy and tap into an expanded total available market that is expected to grow to more than $2.5 billion by 2017 (Source: Homeland Security Research). We will focus on expanding our customer base both in numbers of customers and average revenue per customer as our offerings deliver greater value. In particular, our strategy is comprised of the following key components:

The Company is pursuing a two pronged strategy, i.e.

Acquisition Agreement entered into By Duos Prior to the Merger

Prior to the Merger, on September 19, 2014, Duos entered into a Stock Purchase Agreement, as subsequently amended as of February 12, 2015 (the “Stock Purchase Agreement”), with Unity International Group, Inc. (“Seller”) and Uni-Data and Communications, Inc. (“UDC”), pursuant to which Duos agreed to purchase all of the issued and outstanding shares of UDC for an aggregate consideration of $7,000,000. Prior to the amendment of the Stock Purchase Agreement in February 2015, Duos was obligated to pay $10,000,000 in cash. Following the amendment, Duos is entitled to pay up to $250,000 of the agreed upon consideration in shares of the Company’s Common Stock, valued at the average closing price of the Company’s Common Stock during the five (5) trading day period preceding the closing.

The Stock Purchase Agreement contains customary representations, warranties, covenants and indemnification provisions, including, among others, a covenant that requires UDC to conduct its business in the ordinary course of business, consistent with past practice and to comply with certain covenants regarding the operations of its business from the date of the Stock Purchase Agreement until closing.

The Stock Purchase Agreement provides for certain termination rights of the parties, including termination by a party if the closing does not occur on or before May 31, 2015.

The closing of the UDC acquisition is subject to the Company raising significant capital. While the Company intends to undertake capital raising efforts, the Company currently has no commitments from any party for the needed amounts and no assurance can be provided that the Company will be able to raise the necessary amount on commercial terms acceptable to the Company (see also Item 1A “Risk Factors).

UDC is a fully owned subsidiary of the Seller whose main operating subsidiary, Unity Electric, Inc., is a New York City-based provider of electrical construction, installation and maintenance services. UDC was established in 1989 to support the growing technology needs of the Seller’s Fortune 500 client base. UDC’s operations are comprised of two business units, IT Infrastructure Services and Cloud Hosting Services.

Uni-Data’s IT Infrastructure Services Division (“IIS”)

Since UDC’S inception in 1989, this division has supported the information technology needs of marquee customers and today is considered a leading provider of infrastructure support to the financial services industry with a national footprint. Uni-Data is known for its broad range of expertise, ranging from software imaging, print management, server and desktop virtualization, desktop maintenance, data center support, to installing trading floors and mission critical systems. The IIS division’s revenue for FY’14 was approximately $19M (unaudited). IIS’ services are contracted and delivered under multi-year service agreements that produce predictable recurring revenues.

Uni-Data’s Cloud Services Division ("CS")

The CS division employs a subscription-based business model, catering to the (SMB) market segment under the brand name “SKYLINE Cloud Services by Uni-Data”.

This business was designed to deliver the same enterprise-scale technologies to the SMB market as Uni-Data has been providing to its Wall Street customers: LANDesk for remote capabilities, utilizing BMC Remedy and ServiceNow.com for incident management, server technologies from HP, IBM Corporation, and Lenovo, and virtualization from Microsoft Corporation, Citrix Systems, Inc., VMware Inc. and Numecent, Inc. The company implements security protocols consistent with leading financial services firm standards, incorporating technologies from Cisco Systems Inc., Juniper Networks, Inc., F5 Networks, Inc. and Barracuda Networks, Inc. Typically SMB business owners resist making technology decisions, a key driver accelerating the transition to cloud-based services. Utilizing these best of breed technologies, Uni-Data deploys a robust and affordable cloud based service and data storage platform so that the SMB industry segment owners can focus on running their business and not waste time on day to day technology issues.

Uni-Data’s cloud is comprised of several physical locations and is managed centrally from the company’s own network operations center (NOC) located at its New York City headquarters. Disaster recovery and business continuity concerns are met at Uni-Data’s co-location facility located on Long Island, NY. The company is in the process of expanding its private Cloud and is planning to build a third data management node which will go live in Q4 of 2015. Longer term plans are driven around the need to reduce network latency and increase overall reliability by implementing data center nodes in the Southeast, Midwest and West. The company’s deep experience in deploying full network-enabled cloud hosting environments will allow rapid implementation as the company evolves.

If the Company successfully consummates the acquisition of UDC as contemplated by the terms of the Stock Purchase Agreement, then it is planned that UDC will operate as a subsidiary of the Company. The organization has been modeled to incorporate each entity as a division of ISA, with ISA’s legacy business being integrated into UDC’s IT.

The acquisition of Uni-Data and the merger of their respective talent pools, products and services will create significant synergies that will result in a highly diversified technology provider. To date, Duos has predominantly delivered its high-tech solutions into their customer’s local area network (LAN) and wide area network (WAN) environments. Duos recently launched its enterprise-level command and control platform over the cloud, under the brand “Connected Intelligence”. This will provide customers with the ability to allow end-users to combine data streams from any format, location and source into a unified fusion platform. The combination of this model with Uni-Data’s cloud and SaaS expertise will allow Duos to overcome potential cloud connectivity vulnerabilities and offer its expanding services under a new brand “Cloud Enabled Connected Intelligence”. The industry is trending towards the virtualization of server installations and is undergoing a paradigm shift favoring delivery of software under a SaaS model over ownership and perpetual licensing of complex software.

Organization and Business Units

ISA will act as the parent company which will only be staffed with the corporate senior management team and administration (CEO, COO, CSO, CFO, and CTO). Subject to size and scope, future acquisitions may either be managed as subsidiaries or incorporated into one of the existing subsidiaries. Administrative and other general services will be streamlined to avoid duplication of overhead.

The growth and M&A strategy anticipates that ISA will eventually operate three main business units, each with its own management team.

Intelligent Technologies Division

Cloud Services and SaaS Division

IT Services Division (IIS)

The divisions will cross-sell their products and services to their respective customer bases.

Products and Services

The Company’s enterprise command and control platform (centraco™) will become central to its digital products offering as it will be distributed as the “aggregator” of its family of applications and third party applications. Additional services and/or products developed or acquired through mergers in the future will be bolted on to the centraco™ platform, thereby taking advantage of the economies of scale of the Company’s marketing campaigns. The centraco™ platform is modular and was designed to be agnostic with respect to third-party hardware and applications, hence the incorporation i.e. development of new applications and services into additional “modules” (each new technology will represent a new module which will expand the diversified application suite of this platform), will require minimal effort to become “market ready”.

The addition of delivering the Company’s software application suite through cen t raco™ as a service (SaaS) will position ISA significantly ahead of its competition. A major growth driver will be the Company’s rapidly expanding cloud services, currently marketed under “SKYLINE Cloud Services by Uni-Data”. This product will be offered in a combination of owned and leased capacity.

COMPLEMENTARY GROWTH AREAS

In addition to our focus on business through our two business units, management continues to work closely with other companies to allow for participation in additional opportunities. Specifically we plan to expand by seeking technologies, products, and services that complement our existing business. If appropriate opportunities are available, we may acquire businesses, technologies or products or enter into strategic relationships that may further diversify revenue sources and product offerings, expand our customer base or enhance our technology platform.

Increase in Revenue and Profitability Opportunities

Based upon our analysis, we believe that through the combination of resources, logistics and the addition of working capital, we can substantially increase profitability of each division. Over the next few years, the CS Division plans a major transformation with respect to creating and acquiring intellectual property, reducing third party licensing expenses, moving upstream into higher valued software and services. The management team will be chiefly focused on extending server management efficiencies, attaining lower customer acquisition costs, achieving higher conversion rates, and lower churn. As such, we plan to implement the following initiatives immediately following the acquisition:

EMPLOYEES

As of April 2015, following the merger, we now have 35 full-time employees. None of our employees are subject to a collective bargaining agreement.

ITEM 1A. RISK FACTORS.

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors in addition to the other information presented in this report before deciding whether to invest in ISA. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations or our financial condition. If any of the events discussed in the risk factors below occur, our business, consolidated financial condition, results of operations or prospects could be materially and adversely affected. In such case, the value and marketability of the common stock could decline, and you may lose all or part of your investment.

Risk Factors Relating to our Company

Our ability to continue as going concern is in doubt absent obtaining adequate new debt or equity financing and achieving sufficient sales levels.

We incurred a net loss of approximately $735,000 in 2014. We anticipate that we may continue to lose money during 2015 as we integrate new operations and acquire additional entities as part of our plan of operation. Our continued existence is dependent upon generating sufficient working capital and obtaining adequate new debt or equity financing. Because of our continuing losses, we may have to continue to reduce our expenditures, without improvements in our cash flow from operations or new financing. Working capital limitations continue to impinge on our day-to-day operations, thus contributing to continued operating losses.

We may fail to realize some or all of the anticipated benefits of the Merger.

The success of the Merger will depend, in part, on the Company’s ability to realize anticipated cost savings and to combine the businesses of ISA and Duos in a manner that permits growth opportunities to be realized and does not materially disrupt the existing customer relationships of Duos nor result in decreased revenues due to any loss of customers. However, to realize these anticipated benefits, the businesses of ISA and Duos must be successfully combined and their management teams and employees successfully integrated. If our management is not able to achieve these objectives, the anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected.

The anticipated cost savings from the Merger are largely expected to derive from elimination of duplicative costs upon completion of the Merger. It is possible that the integration process could result in the loss of key employees, as well as the disruption of each company's ongoing businesses or inconsistencies in standards, controls, procedures and policies, any or all of which could adversely affect ISA's ability to maintain relationships with clients, customers, suppliers and employees or to achieve the anticipated benefits of the Merger. Integration efforts between the two companies will also divert management attention and resources. Some of these risks are beyond the control of either company. A failure to successfully navigate the complicated integration process could have an adverse effect on the combined company.

We will need to raise significant capital in order to realize our business plan and the failure to obtain the needed funding could lead to our operational failure.

We will need to raise at least $2 million in order to maintain operations following the Merger and not accounting for the acquisition of UDC. In order to consummate the UDC acquisition we will need to raise a total of $14 million. Without adequate funding, we also may not be able to accelerate the development and deployment of our products, respond to competitive pressures and develop new or enhanced products. At the present time, we have no commitments for any financing, and there can be no assurance that capital will be available to us on commercially acceptable terms or at all. We may have difficulty obtaining additional funds as and when needed, and we may have to accept terms that would adversely affect our stockholders.   Any failure to achieve adequate funding will delay our development programs and product launches and could lead to abandonment of one or more of our development initiatives, as well as prevent us from responding to competitive pressures or take advantage of unanticipated acquisition opportunities.

Any additional equity financing may be dilutive to stockholders, and debt and certain types of equity financing, if available, may involve restrictive covenants or other provisions that would limit how we conduct our business or finance our operations.

Even if we raise funds to address our immediate working capital requirements, we also may be required to seek additional financing in the future to respond to increased expenses or shortfalls in anticipated revenues, accelerate product development and deployment, respond to competitive pressures, develop new or enhanced products, or take advantage of unanticipated acquisition opportunities.

These conditions raise substantial doubt as to our ability to continue as a going concern and may make it more difficult for us to raise additional capital when needed. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability of reported assets or liabilities should we be unable to continue as a going concern.

If we successfully raise the needed capital and the UDC transaction is completed, we will need to successfully combine and merge the business of a entity far larger than ours and failure to successfully integrate the business of UDC may have negative implication for our operations.

T he acquisition of UDC is subject to several conditions, the primary one being our successful raise of the needed capital. Assuming that we are able to raise the needed funds and close on the UDC acquisition, we then face the challenge of integrating the operations of a much larger entity than our current business. UDC employs approximately 250 employees and is based in New York, with scale of operations that exceed our current scale of operations. While we specific plans to integrate the UDC business and operations to realize our business plan, no assurance can be provided that we will be able to successfully integrate the UDC business, retain the continued service employees of UDC and otherwise realize our business plans. Failure to are likely to negatively affect our business, prospects and profitability.     

In addition, even if we are able to successfully integrate the UDC business, we may not achieve the anticipated increase in revenues and profitability. As noted, the historical revenues measures of the various UDC divisions have not been audited and we are unable to provide assurance that these historical figures present the basis for measuring success. Failure to meet our planned revenue and profitability goals may adversely affect our prospects and stock price.

We have a history of losses and expect to incur losses and negative operating cash flows in the future.

Our accumulated deficit was approximately $6.1 million as of December 31, 2014, not accounting for Duos. We expect our operating losses to continue as we continue to expend resources to further develop and enhance our technology offering, to complete prototyping for proof-of-concept, obtain regulatory clearances or approvals as required, expand our business development activities and finance capabilities and conduct further research and development. We also expect to experience negative cash flow in the short-term until licensing revenues increase from our planned acquisitions.

We do not have a long operating history which makes it difficult for you to evaluate our business.

Although ISA commenced operations in 1994 and we introduced our first product into the marketplace in 2008, there is no history of our company post-Merger. Accordingly, there is currently no historical information regarding our revenue trends and operations upon which investors can evaluate our business. Our prospects must be considered in light of the substantial risks, expenses, uncertainties and difficulties encountered by entrants into the medical device industry, which is characterized by increasing intense competition and the relative failure rates.

The nature of the technology management platforms utilized by Duos is complex and highly integrated, and if we fail to successfully manage releases or integrate new solutions, it could harm our revenues, operating income, and reputation.

The technology platforms developed by Duos accommodate integrated applications that include our own developed technology and third-party technology, thereby substantially increasing their functionality. By enabling such system interoperability, our communications platform both reduces implementation and ongoing costs, and improves overall management efficiencies.

Due to this complexity and the condensed development cycles under which we operate, we may experience errors in our software, corruption or loss of our data, or unexpected performance issues from time to time. For example, our solutions may face interoperability difficulties with software operating systems or programs being used by our customers, or new releases, upgrades, fixes or the integration of acquired technologies may have unanticipated consequences on the operation and performance of our other solutions. If we encounter integration challenges or discover errors in our solutions late in our development cycle, it may cause us to delay our launch dates. Any major integration or interoperability issues or launch delays could have a material adverse effect on our revenues, operating income and reputation.

Our inability to protect our intellectual property could impair our competitive advantage, reduce our revenue, and increase our costs.

Post-Merger, our success and ability to compete depend in part on our ability to maintain the proprietary aspects of our technologies and products. We rely on a combination of trade secrets, patents, copyrights, trademarks, confidentiality agreements, and other contractual provisions to protect our intellectual property, but these measures may provide only limited protection. We generally enter into written confidentiality and non-disclosure agreements with our employees, consultants, customers, manufacturers, and other recipients of our technologies and products and assignment of invention agreements with our employees and consultants. We may not always be able to enforce these agreements and may fail to enter into any such agreement in every instance when appropriate. We license from third parties certain technology used in and for our products. These third-party licenses are granted with restrictions; therefore, such third-party technology may not remain available to us on terms beneficial to us. Our failure to enforce and protect our intellectual property rights or obtain from third parties the right to use necessary technology could have a material adverse effect on our business, operating results, and financial condition. In addition, the laws of some foreign countries do not protect proprietary rights as fully as do the laws of the United States.

Patents may not issue from the patent applications that we have filed or may file in the future. Our issued patents may be challenged, invalidated, or circumvented, and claims of our patents may not be of sufficient scope or strength, or issued in the proper geographic regions, to provide meaningful protection or any commercial advantage. We have not applied for, and do not have, any copyright registration on our technologies or products. We have applied to register certain of our trademarks in the United States and other countries. We cannot assure you that we will obtain registrations of principal or other trademarks in key markets. Failure to obtain registrations could compromise our ability to protect fully our trademarks and brands, and could increase the risk of challenge from third parties to our use of our trademarks and brands.

We may be required to incur substantial expenses and divert management attention and resources in defending intellectual property litigation against us.

We cannot be certain that our technologies and products do not and will not infringe on issued patents or other proprietary rights of others. While we are not currently subject to any infringement claim, any future claim, with or without merit, could result in significant litigation costs and diversion of resources, including the attention of management, and could require us to enter into royalty and licensing agreements, any of which could have a material adverse effect on our business. We may not be able to obtain such licenses on commercially reasonable terms, if at all, or the terms of any offered licenses may be unacceptable to us. If forced to cease using such technology, we may be unable to develop or obtain alternate technology. Accordingly, an adverse determination in a judicial or administrative proceeding, or failure to obtain necessary licenses, could prevent us from manufacturing, using, or selling certain of our products, which could have a material adverse effect on our business, operating results, and financial condition.

Furthermore, parties making such claims could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief, which could effectively block our ability to make, use, or sell our products in the United States or abroad. Such a judgment could have a material adverse effect on our business, operating results, and financial condition. In addition, we are obligated under certain agreements to indemnify the other party in connection with infringement by us of the proprietary rights of third parties. In the event that we are required to indemnify parties under these agreements, it could have a material adverse effect on our business, financial condition, and results of operations.

We may incur substantial expenses and divert management resources in prosecuting others for their unauthorized use of our intellectual property rights.

Other companies, including our competitors, may develop technologies that are similar or superior to our technologies, duplicate our technologies, or design around our patents, and may have or obtain patents or other proprietary rights that would prevent, limit, or interfere with our ability to make, use, or sell our products. Although we do not have foreign operations at this time, we may compete for contracts in non-US countries from time to time. Effective intellectual property protection may be unavailable, or limited, in some foreign countries in which we may do business, such as China. Unauthorized parties may attempt to copy or otherwise use aspects of our technologies and products that we regard as proprietary. Our means of protecting our proprietary rights in the United States or abroad may not be adequate or competitors may independently develop similar technologies. If our intellectual property protection is insufficient to protect our intellectual property rights, we could face increased competition in the market for our technologies and products.

Should any of our competitors file patent applications or obtain patents that claim inventions also claimed by us, we may choose to participate in an interference proceeding to determine the right to a patent for these inventions, because our business would be harmed if we fail to enforce and protect our intellectual property rights. Even if the outcome is favorable, this proceeding could result in substantial cost to us and disrupt our business.

In the future, we also may need to file lawsuits to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. This litigation, whether successful or unsuccessful, could result in substantial costs and diversion of resources, which could have a material adverse effect on our business, financial condition, and results of operations.

We depend on key personnel who would be difficult to replace, and our business plans will likely be harmed if we lose their services or cannot hire additional qualified personnel.

Our success depends substantially on the efforts and abilities of our senior management and key personnel. The competition for qualified management and key personnel, especially engineers, is intense. Although we maintain noncompetition and nondisclosure covenants with most of our key personnel, we do not have employment agreements with most of them. The loss of services of one or more of our key employees, or the inability to hire, train, and retain key personnel, especially engineers and technical support personnel, could delay the development and sale of our products, disrupt our business, and interfere with our ability to execute our business plan.

Potential strategic alliances may not achieve their objectives, and the failure to do so could impede our growth.

We may enter into strategic alliances. Among other matters, we continually explore strategic alliances designed to enhance or complement our technology or to work in conjunction with our technology; to provide necessary know-how, components, or supplies; to attract additional customers; and to develop, introduce, and distribute products utilizing our technology. Any strategic alliances may not achieve their intended objectives, and parties to our strategic alliances may not perform as contemplated. The failure of these alliances may impede our ability to introduce new products.

Risks Related to Our Common Stock

There is not an active liquid trading market for the Company’s common stock.

The Company voluntarily reports under the Exchange Act and its Common Stock is eligible for quotation on the OTC Markets. However, there is no regular active trading market in the Company’s Common Stock, and we cannot give an assurance that an active trading market will develop. If an active market for the Company’s Common Stock develops, there is a significant risk that the Company’s stock price may fluctuate dramatically in the future in response to any of the following factors, some of which are beyond our control:

Our common stock is subject to the “penny stock” rules of the Securities and Exchange Commission, which may make it more difficult for stockholders to sell our common stock.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a person’s account for transactions in penny stocks, and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person, and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination, and that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of the Company’s common stock if and when such shares are eligible for sale and may cause a decline in the market value of its stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

We may not be able to attract the attention of brokerage firms because we became a public company by means of a reverse acquisition.

Because we became public through a “reverse acquisition,” securities analysts of brokerage firms may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of the Company in the future.

Our Board of Directors may issue and fix the terms of shares of our Preferred Stock without stockholder approval, which could adversely affect the voting power of holders of our Common Stock or any change in control of our Company.

Our Articles of Incorporation authorize the issuance of up to 10,000,000 shares of "blank check" preferred stock, $0.001 par value per share (the "Preferred Stock"), with such designation rights and preferences as may be determined from time to time by the Board of Directors.  Our Board of Directors is empowered, without shareholder approval, to issue shares of Preferred Stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of our Common Stock.  In the event of such issuances, the Preferred Stock could be used, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our Company. 

We will incur increased costs and demands upon management and accounting and finance resources as a result of complying with the laws and regulations affecting public companies.

We incur legal, accounting and other expenses as a result of being a public company.  Prior to the Merger, Duos was a private company and not subject to these expenses. We may need to enhance and supplement Duos’ internal accounting resources with additional accounting and finance personnel with the requisite public company experience and expertise, as well as refine our quarterly and annual financial statement closing process, to enable us to satisfy our reporting obligations. We will need to devote time and financial resources to compliance programs, investor relations activities, financial reporting obligations and other activities relevant to being a public company. The costs associated with these activities, as well as any diversion of management’s time and attention, may have a material adverse effect on our future business.

We do not expect to pay dividends and investors should not buy our Common Stock expecting to receive dividends.

We do not anticipate that we will declare or pay any dividends in the foreseeable future. Consequently, you will only realize an economic gain on your investment in our Common Stock if the price appreciates. You should not purchase our Common Stock expecting to receive cash dividends. Since we do not pay dividends, and if we are not successful in establishing an orderly trading market for our shares, then you may not have any manner to liquidate or receive any payment on your investment. Therefore our failure to pay dividends may cause you to not see any return on your investment even if we are successful in our business operations. In addition, because we do not pay dividends we may have trouble raising additional funds which could affect our ability to expand our business operations.

We are likely to raise additional funds, finance acquisitions or develop strategic relationships by issuing capital stock.

We have financed our operations, and we expect to continue to finance our operations, acquisitions and develop strategic relationships, by issuing equity or convertible debt securities, which could significantly reduce the percentage ownership of our existing stockholders. Furthermore, any newly issued securities could have rights, preferences and privileges senior to those of our existing Common Stock. Moreover, any issuances by us of equity securities may be at or below the prevailing market price of our Common Stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of our Common Stock to decline.

We may also raise additional funds through the incurrence of debt, and the holders of any debt we may issue would have rights superior to your rights in the event we are not successful and are forced to seek the protection of the bankruptcy laws.

Our operating results are likely to fluctuate from period to period.

We anticipate that there may be fluctuations in our future operating results. Potential causes of future fluctuations in our operating results may include:

·   period-to-period fluctuations in financial results;

·   issues in manufacturing products;

·   unanticipated potential product liability claims;

·   the introduction of technological innovations or new commercial products by competitors;

·   the entry into, or termination of, key agreements, including key strategic alliance agreements;

·   the initiation of litigation to enforce or defend any of our intellectual property rights;

·   the loss of key employees;

·   regulatory changes;

·   failure of any of our products to achieve commercial success;

·   general and industry-specific economic conditions that may affect research and development expenditures;

·   future sales of our Common Stock; and

·   changes in the structure of healthcare payment systems resulting from proposed healthcare legislation or otherwise.

Moreover, stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of our Common Stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.