Good afternoon and welcome to Duos Technologies First Quarter 2020 Earnings Conference Call. Joining us for today's call are Duos’ Chairman and CEO, Gianni Arcaini; and CFO Adrian Goldfarb. Following their remarks, we will open up the call for your questions. Then before we conclude today's call, I will provide the necessary caution regarding Forward-Looking Statements made by management during this call. Now, I would like to turn the call over to Duos’ Chairman and CEO Gianni Arcaini. Thank you. Please proceed.

Thank you, operator. Welcome everyone and thank you for joining us. First and foremost, our heart goes out to the many families impacted by the devastating effects of the coronavirus. We hope you and your families remain safe and healthy during this challenging time. Given that not much time has passed since our last update call a little over a month ago, my prepared remarks today will be brief. Earlier today we issued a press release announcing our financial results for the first quarter of 2020 as well as other operational highlights. A copy of the press release is available in the Investor Relations section of our website. As I mentioned on our last call just a few weeks ago, we began to see significant operational momentum and are in one of the strongest positions in the company's history. We had a record financial performance in 2019 and achieved a number of multi-year company milestones in the first few months of 2020. In February, we completed a successful capital raise of more than $9 million and up-listed to the NASDAQ capital market. In better times, we believe the added visibility from the NASDAQ listing will allow us to grow our profile within a more substantial investment pool. Additionally, our secured capital position will provide us with the necessary resources to continue growing our business over the long term. In the interim, we have the necessary reserves to face the current unprecedented market volatilities. Turning to our results for the first quarter, like many businesses, we were not immune to the effects of the ongoing global pandemic which caused business disruptions for most of our key customers and consequently impacted our operations in this current quarter. As an essential business, we were able to continue working uninterrupted, allowing us to provide critical services and tech support for our ongoing commitments. As I mentioned on our last call, prior to the COVID-19 outbreak, our expectations had already been affected in a modest start to the year with some sequential growth going forward, and that projection remains intact. The $1.8 million RIP award we received in April was a strong step forward in the right direction and hopefully an indication of progress ahead. We expect to receive a number of additional awards in the very near future. However, because of the uncertainty that remains, we cannot accurately quantify the full impact on our operations for the remainder of the year at this time. We have and will continue to push forward in a challenging environment and we remain confident in the long-term growth opportunity in rail transportation and the other industries we serve. We remain bullish about our long-term prospects and in the midst of the current environment, we are continuing to control what is within our power to ensure that we are ready and fully operational when things hopefully return to some semblance of normalcy. The development of several new technologies which we initiated before the start of the pandemic is continuing uninterrupted and we will announce completion as they pass our better testing phase. Now before I go any further into our recent updates, I will now turn the call over to our CFO, Adrian Goldfarb, who will walk us through our financial results for the quarter. Adrian?

Thank you, Gianni. Now turning to our financial results for the first quarter. Total revenue for the first quarter decreased 77% to $991,000 compared to $4.35 million in the equivalent quarter in 2019. I would note that the original plan put in place before the current situation was for just $1.17 million for the quarter due to the cyclical nature of our business after a very strong Q4. Most of the decrease in total revenue for the quarter was due to delays in anticipated contract awards due to business interruptions affecting several customers. Such business interruptions have also caused delays in some project execution. We called the quarter to be slightly worse than anticipated. The current pandemic related to the coronavirus COVID-19 outbreak has temporarily impacted expected receipt of awards and caused delays in execution due to travel and other restrictions. Gross profit in Q1 was $103,000 or 10% of revenues, which was a decrease of 95% from $2.13 million or 49% of revenues for the equivalent quarter in 2019. The overall decrease in gross profits reflects the lower revenues for the quarter and certain fixed costs related to project implementation which were not offset by revenues in the current quarter due to certain customer delays previously described. Turning to our costs, operating expenses increased 5% in Q1 2020 to $2.19 million from $2.08 million in the same quarterly period last year. The increase in operating expense was primarily due to an increase in resources to support our anticipated growth including research and development, administration and artificial intelligence technologies expenses, which were offset by a decrease in engineering and sales and marketing expenses. We recorded a net loss in Q1 of $2.15 million or $0.80 loss per share compared to net income of $44,000 or $0.01 per share in the equivalent quarter in 2019. The increase in net loss was primarily attributable to the lower revenues previously disclosed. The loss also includes approximately $317,000 in R&D expenses for the Truevue360 subsidiary which did not recognize any revenue in the quarter. Let's now discuss the balance sheet. We ended the quarter with $6.6 million in cash and cash equivalents. We also had net receivables of $646,000. As Gianni mentioned earlier, our substantially improved cash position was the result of our successful capital raise of more than $9 million in February of this year before banking fees and expenses. In Q1, we used $1.7 million in cash in operations. The increase in net cash used in operations for the three months ended March 31, 2020 was the result of higher expenditures related to current and future project execution in anticipation of new projects. Finally, I'd like to provide an update on our current financial projections. We have previously provided revenue guidance of $20 million for 2020, which would represent an approximate 47% increase over the $13.6 million recorded in 2019. This guidance was based on contracts in backlog and near-term pending orders that are already performing or scheduled to be executed throughout the course of 2020. As a result of delays in project execution resulting from the restrictive travel environment currently in place as well as the additional uncertain impact on the overall economy from the COVID-19 outbreak, we are not providing 2020 revenue guidance at this time. Going forward we will continue to reevaluate the growth and predictability of our operating performance with respect to providing financial forecasts. While we still expect to generate growth in 2020, we have refrained from providing updated annual revenue expectations until more reliable information becomes available. With that, I'll now turn the call back over to Gianni to provide an update on the business. Gianni?

Thanks, Adrian. I will now highlight some of our major achievements and wins for the quarter as well as provide an update on our Truevue360 activities before finishing with a brief outlook for the remainder of the year. Beginning first with our customer wins. As I mentioned on our last call in January of this year, we successfully implemented the first full-scale rail inspection portal in record time for CSX Transportation, one of the seven class 1 railroad operators that own and operate a combined 140,000 miles of rail track. After completion, the portal was featured in a promotional video published by CSX highlighting the renewed and expanded commitment to safety improvement and technological enhancements. As an existing customer and first-time buyer of our next generation rail car inspection portal system, CSX has shown that they remain committed to working with cutting-edge technology providers like Duos to ensure the highest level of safety and efficiency. The next phase of this project includes the addition of an initial set of 20 artificial intelligence models which, when installed over the coming month, will mark the completion of the overall automation process. Next, we're also substantially completed another rail inspection portal with a different customer which is scheduled for final acceptance at a site in Mexico as soon as COVID-19 travel restrictions are lifted. Moving to more recent awards, post Q1 in April we were awarded a $1.8 million contract for a turn-key rail inspection portal which is expected to be completed by the end of the third quarter of this year. While we're happy to get this deal finalized, this is the contract we had initially planned on signing in the first quarter and it's emblematic of the delays in major decision-making Adrian just mentioned earlier. Earlier this week, we were also awarded a $945,000 follow-on contract for the Monroe County Sheriff's Office in Florida to provide our Intelligent Correctional Automation System or ICAS. As a provider of intelligent analytical technology solutions, Duos is also a leader in intelligent integrated command and control solutions for correctional facilities. Our ICAS system provides all digital video, intercom, detention door control, and access control and is integrated into a singular command and control platform known as Centraco. The completely integrated system provides superior monitoring and control, is substantially more cost-effective, and integrates all aspects of control into a single intuitive user interface. ICAS was specifically designed to replace legacy jail and correctional facility automation systems based upon the old programmable logic controller technology and human-machine interfaces. The new modular digital input/output system will coordinate all aspects of controlled movement and situational awareness for the facility. Implementation is expected to begin later this year with the completion date in 2021. We appreciate our continued relationship and long-standing service to the Monroe County Sheriff's Office going forward. We plan to pursue correctional facilities as we expand our business development plan. Next, we move to Truevue360. At the beginning of the first quarter of 2019, we launched Truevue360, a subsidiary whose mission is to develop, market, and operate artificial intelligence and deep machine learning applications. Truevue360 will not only serve our current customer base but also pursue many AI opportunities with other verticals. In Q3 of 2019, we announced our first major contract and expect to begin recognizing initial revenue from our Truevue360 operations beginning in 2020. Long-term, we expect Truevue360 to contribute significantly to our recurring revenue base over time. The investment that we have and will continue to make in our Truevue360 subsidiary is included now for the consolidated financial statements. I will now take a minute to provide some specific updates on our Truevue360 artificial intelligence activities from the quarter. Beginning with our AI labeling, labeling images is one of the most important steps to ensure the functionality of any AI applications. This is where the system receives the instructions on what to look for. In addition to the millions of images we are ready to annotate, we currently have a library of approximately 4 million images in our labeling pipeline. Today, we have been using the AI student body of the University of Florida computer engineering class to label our database of images. Most recently, we have expanded the labeling team and now have a team of over 50 labelers working 24/7 for a total projected image processing of approximately 700,000 images per month, which represents a throughput of four times our current processing capacity. The increased throughput of image labeling will significantly impact our application quality as we will be able to present images to our AI engine at an order of magnitude greater than where we were before. Moving next to our AI applications, we are making great progress in developing the AI applications and models for our existing customers. On average, we are retraining seven models a week until we reach 95% accuracy, at which point these models are deployed for live validation in the customers' environments. We are also experimenting with novel AI applications using drone video footage processing and high-speed rail car analysis, looking for car separation. On the business development front, we are in active discussions with a number of existing and new potential customers, and I hope we'll be able to announce additional awards in the very near future. We are very optimistic about the long-term opportunity within our AI business and will continue to devote resources to support its growth. On that front, Truevue360 recently filled the important position of COO with the hiring of Aaron Wood. Aaron will be working side by side with our CTO David Ponevac to drive both the technical and business development of our AI business. We also recently agreed to terms with a new business development manager who will solely focus on business development with Truevue360 and will continue to recruit additional key personnel to meet our development roadmap. Looking ahead to the remainder of the year, our current outlook has been impacted to a degree based on the information we currently have. We still expect to grow this year driven by our success from 2019. However, the timeline for growth has been extended and remains a bit uncertain. We will continue to keep an open dialogue with all our customers as of Monday next week. We will resume regular operations as our local and state governments have lifted the work from home directives. We have and will continue to push forward in the challenging environment, and we remain confident in the long-term growth opportunity in innovative transportation and the other industries we serve. And with that, we are ready to open the call for your questions. Operator, please provide appropriate instructions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Ashok Kumar. Please go ahead with your question.

Thank you very much. Thank you, Gianni and Adrian. Could you comment on the bookings of $25 million to $30 million you had for the year? Is that still on track, and is the delivery timeline extended? Additionally, could you discuss the potential for increasing average selling prices due to the added functionality in your product line, including AI integration? Thank you very much.

Yes, I will address the question. So the bookings that you're referring to are the orders or anticipated orders and obviously with the current situation, there has been delays mainly because our customers, as Gianni referenced earlier, have been delayed in that. However, the good news is that we have not seen any cancellations at this time or a slowdown in the timeframe for implementation. Remember, our projects are typically long-term, but we are still quite comfortable with the booking situations.

Yes. As to the implementation of new technologies, we are at a fast pace in developing these new technologies. Number one, we were about to complete the installation of our first 3D automated pantograph system. Unfortunately, Chicago metro labor has been recalled during the COVID crisis, but we understand that that's going to resume rather soon. And so we are at the final stages; soon we can start beta testing. On the AI side, as recorded previously, we're making great progress in developing and implementing the AI into the models for rail and for our retail customers. We are in the process of upgrading our hardware infrastructure so that we can quadruple the learning process of the models. Right now we can only process a limited number, but we are already in the process of expanding our hardware platform, so we can quadruple that process.

Okay. Thank you very much and all the best.

Thank you.

Thank you, Ashok.

Our next question comes from Michael Legg with Benchmark. Please state your question.

Could you guys talk a little bit about more of your conversations with your clients, specifically CSX? And you mentioned you have an open dialogue with them. Can you talk a little bit? Originally we thought you might have more access to the tracks given the pandemic, and now we're hearing that travel is kind of slowing it. What are you hearing from the customers as far as are they putting these on hold or are they in active dialogues trying to figure out a way to get them going?

Yes. I would say the latter is the fact. So the best example and confirmation is that CSX just gave us an order for the next rail inspection portal. We were hoping to get two in this year, but one of the delays they essentially instilled upon us is that they gave us one inspection portal for the $1.8 million revenue that we will complete before the end of the third quarter. We are hoping that the second one is still going to happen later this year, but I don't think there is a slowdown. Remember that our technology helps our customers economize on the cost of maintenance. So I would think that especially now, in these days where there is a distance and social distancing process, and there's also a cost-cutting process within our large customers, I think that there will be continuous pressure on them to replace manual processes with technology. So we feel quite bullish that our process won't go away. It may be slowed down because of prudent capital allocation among those larger customers, but we don't see any risk of downside when we lose this revenue.

Okay, great. Now, on one of those lines, when you look at the pipeline that you have or you had at the beginning of the year, and obviously you said there's no cancellations, what can you do as far as getting those systems up and ready for installation? Do you need access for the site? How much can you complete ahead? And are you?

Actually, the good news is that we over the past year and a half have adjusted our deployment strategies. So when we needed two months for site installation, that's been cut down to one month. So we are pre-assembling pretty much everything before it gets installed, minimizing the lost track time we need from the customer. The limitations right now really are more the logistics within our customers than the logistics within our organization. We are fully operational, but most of the large customers, especially on the rail side, are limiting the free mobility of their staff. So I think it's really a question of a couple of months until we see a return to normal operation among the customers.

Okay, great. And then just one last or two actually one, is rail regarding the segments more of a focus for you now, or are they also going from the RIP term to also the command and control? Any area that you can proceed more so during this environment?

No, we really, from our standpoint, we are not limited by it. I think that we just push you right now to complete the projects that are on the drawing board. We expect a couple of follow-on orders from another customer in Canada. I don't like to say the name, but those should be forthcoming very, very soon. It’s a matter of days, I believe, and then we will be able to install everything. Those we are not dependent on our travel capability because the physical installations are done by our subcontractors, who are local. So again, I think going forward we continue to be quite bullish.

And this is the last question. I mean, obviously, this is impacting everyone's balance sheet. Now your balance sheet is very strong, and you're well-positioned for the rest of the year. Obviously, with the delay in the business model going forward from the COVID, how far do you think this cash will get you through breakeven, or do you not know at this point?

Yes. At this time, I've done considerable analysis on this, and this cash will get us through breakeven. There is no plan for any capital raises.

Okay, great. Thanks, guys.

No problem.

Thank you. Our next question comes from Bill Chapman. Please state your question.

Okay. Thank you very much. Good morning, guys.

Good morning, Bill.

I was curious about your correctional automation system. Will you be marketing that directly, or will it be through Biltmore Constructions or anyone else to help you market it?

So the dialogue with the end users, the customer Sheriff's office has been direct. However, they are building a new courthouse in the new jail, and the general contractor is with Biltmore. That's why the contract itself was done through Biltmore, but we talked to the end user directly. One of the interesting things about the correctional market is that almost the entire market is controlled by engineering firms that are essentially specialized in correctional facilities. So yes, that's the answer to it.

Okay, well, so I'm assuming this will be a slow growth initiative for you guys, I presume?

Yes, the correctional automation is slow because of the budget cycle, mainly because of the budget cycle. Typically the lifecycle for contract is about a year, year and a half. But the interesting thing is that we believe we have the only modern technology for correction facilities. The one thing we did last time in the first phase was that we were able to upgrade their technology while the population was still inside the jail. So we didn't have to evacuate anything, and that's a very unique capability because typically most technologies require a shutdown of one and installation of the other. We were able to develop the process in a way that we can really, in parallel, upgrade our technology without affecting the population of the jail.

Okay. You mentioned the substantial cost savings. Is this more with less personnel in the facility?

Yes, it's less personnel, and much more accurate information flow directly to the Sheriff's office. So I got to say one thing that we are going to slow down the hiring process and we're going to try to revisit the resources we add to our organization. Since this is a longer lead item, we are most likely not going to proceed with hiring a dedicated business development team for that. We haven't included in our projections any income for additional jails at this point. So that would be the prudent thing to do to postpone hiring a dedicated team. But as long as we don't hire a dedicated team, the business development obviously is not going to come by itself. But that's one of the things I don't want to mislead you into thinking that we're going to have 5 to 10 jails a year because we don't have the infrastructure and the staffing to do that right now.

Okay. That's really where I was heading with this. Thanks for clarifying.

Thanks.

Okay, goodbye.

Goodbye.

Our next question comes from Richard Jackson with TrueNorth Financial Solutions. Please state your questions.

Good morning, gentlemen. I'm fairly new to the story here, but I thought I read in past press releases that you're doing some beta tests with both the MTA and on a few banks involving their security systems. Can we get updates on those? And is the bank's solution similar to the present solution or is it a different platform?

So with the banks, particularly a big customer, Texas Capital Bank, in the last year, we provided a security infrastructure to 36 subsidiaries where we did the entire soup-to-nuts from digital video to access control in a calm digitally in the common support. What that's been our legacy bread-and-butter, and so we have an infrastructure which can handle these things. We expect that the bank, who is in the process of merging and adding hundreds of additional branches, will see some business flow. Again, we have been very conservative in our projections; we have only projected a modest increase in that business, but most likely we will be pleasantly surprised. On the MTA and New York transit, I presume you talk about that, we have matured our product and it's now branded as Trackwheel, where we are using artificial intelligence not only to detect objects of people falling on the track but we also can now classify what the objects are. For instance, we can classify if someone's wearing a hard hat and safety vest, and we can then decide this is an allowed intrusion. We can look at other classifications. So that product is matured, and we are talking to a variety of potential customers to apply that technology. We are also in discussions with the Florida DOT and hopefully will be able to have a solution for grade crossings throughout the state of Florida. This same technology can be applied not only to the tracks of a passenger rail but also can be applied to railroad crossings and any other similar conditions where you have people including safety space. So that's part of our this year's initiative. I discussed that Truevue360 added the business development capability, and that will be one of the major targets that we're going to pursue this year.

Thank you.

Welcome.

At this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Gianni Arcaini for his closing remarks.

Well, thank you for joining us today. I especially want to thank our employees, partners, and investors for their continued support. We look forward to updating you on our next call. Operator?

Thank you. Before we conclude today's call, I would like to provide to you a safe harbor statement that includes important cautions regarding forward-looking statements made during this call. This earnings call contains forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. Forward-looking terminology such as “believes”, “expects”, “may”, “will”, “should”, “anticipate”, “plans”, and their opposites or similar expressions are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based and could cause Duos Technologies Group, Inc. actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include but are not limited to those described in item 1-A in Duos's annual report on Form 10-K, which is expressly incorporated here and by reference and other factors as may periodically be described in Duos filings with the SEC. Thank you for joining us today for Duos Technology Groups 2020 first quarter earnings conference call. You may now disconnect.