Good afternoon. Welcome to Duos Technologies' Fourth Quarter and Full Year 2020 Earnings Conference Call. Joining us for today's call are Duos' CEO, Chuck Ferry, and CFO, Adrian Goldfarb. Following their remarks, we will open the call for your questions. Then before we conclude today's call, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call. Now, I'd like to turn the call over to Duos’ CEO, Chuck Ferry. Sir, please proceed.

Welcome everyone and thank you for joining us. Earlier today, we issued a press release announcing our financial results for the fourth quarter and full year 2020, as well as other operational highlights. A copy of the press release is available in the Investor Relations section of our website. I encourage all listeners to view that release, as well as our forthcoming 10-K filing with the SEC to better understand some of the details we'll be discussing during our call. Now, let's get started. As of today, I’ve officially been operating as CEO of Duos Technologies for just a little over six months. In this short period of time, I'm encouraged by the great work our team has accomplished, and we are pushing forward to meet the objectives of our 2021 operating plan, which I will discuss later today. Financially, we exceeded our most recent fourth quarter and 2020 guidance in conjunction with making a number of improvements across the business that we had discussed in our third quarter earnings call. I'm pleased to report that good initial improvements have been made to enhance our operational and technical delivery, internal communication processes, product development, cost structures, and reporting and responsiveness to our customers, which has directly resulted in improved customer satisfaction, financial performance, and employee morale. With that said, we still have a lot of work to do this year to ensure we meet our 2021 operating plan. We have many updates to cover today. So, before I proceed further, I'd like to turn the call over to our CFO, Adrian Goldfarb, who will walk us through the financial results for the quarter and the year. Adrian?

Thank you, Chuck. Before I discuss the detailed financials, I would like to state that I'm very comfortable with Duos' financial position at this time. The company now has a strong balance sheet, with no debt, and sufficient working capital and reserves, with expected growth in the business this year. Turning to the numbers, total revenue for the fourth quarter decreased 34% to $3.78 million, compared to $5.75 million in the equivalent quarter in 2020. The decrease in total revenue was driven by fewer systems deployed in the current year period. On a sequential basis, total revenues increased 195% as a result of a delay in receiving an order for a large project, which was initially planned for execution during the third quarter of 2020 and was substantially completed in the fourth quarter. Revenues also increased as a result of certain clients allowing Duos employees to visit facilities after their COVID restrictions were relaxed, which helped sales efforts. Total revenue for the full year 2020 decreased 41% to $8.04 million from $13.64 million last year. The decrease in total revenue was driven by significant delays in expected new orders during the year as a result of the COVID-19 pandemic. The company received no cancellations of current contracts or expected orders, with order flow starting to recover beginning in the fourth quarter of 2020. Gross profit in Q4 was $1.65 million, or 44% of total revenue, which was a decrease of 48% from $3.15 million or 55% of total revenue for the equivalent quarter in 2019. The decrease in gross profit was the result of the decrease in total revenues previously noted. During the period, total cost of revenues decreased by 27%, which was driven by a decrease in technology systems expenses, as a result of fewer systems deployed in the current year period. Furthermore, some additional costs were recognized as a result of the deployment of certain new technologies, although the additional costs are expected to be one-time in nature. Gross profit for the full year 2020 decreased 57% to $2.79 million, or 35% of total revenue from $6.48 million, or 48% of total revenue last year. The decrease in gross profit was mainly the result of a slowdown in project revenues due to delays in new orders previously noted. As a percentage, the overall gross margin also decreased as a result of some higher costs related to new products being deployed during the year and certain fixed project costs having a significant effect on the low revenue. Turning to our costs, operating expenses decreased 18% in Q4 2020 to $2.06 million from $2.52 million in the same quarterly period last year. The decrease in operating expenses was primarily driven by lower engineering costs, as well as lower overall software development costs after the completion of the TrueVue 360 platform. The company had previously reduced certain operating expenses, primarily for personnel and travel as a result of the pandemic. Operating expenses for the full year 2020 increased 6% to $9.42 million from $8.89 million last year; excluding a one-time payment related to the retirement of the company's former CEO, expenses from continuing operations would have decreased overall by 24%. The decrease was driven by headcount reductions, lower research and development, and software costs after the completion of the TrueVue 360 platform, as well as a decrease in sales and marketing costs. We recorded a net loss in Q4 of $426,000, or $0.12 loss per share, compared to a net income of $592,000, or $0.33 per share in the equivalent quarter in 2019. The net loss was primarily attributable to the decrease in revenues previously noted. Net loss for the full year 2020 totaled $6.75 million, or $2.03 loss per share, compared to a net loss of $2.47 million, or $1.39 loss per share a year ago. The greater net loss was primarily attributable to the decrease in revenues, as well as the one-time charges related to the former CEO severance as previously noted. Let's now discuss the balance sheet. We ended the quarter with approximately $4 million in cash and cash equivalents, and we also had net receivables of $1.19 million. For the full year period, we used $4.23 million of cash in operations compared to $4.02 million in the same year-ago period. The increase in net cash used in operations for the full year 2020 was the result of higher expenditures related to current and future project execution in anticipation of new projects. Towards the end of last month, we entered into a securities purchase agreement with two of our larger existing shareholders, who agreed to purchase a total of 4,500 shares of newly authorized Series C convertible preferred stock. Duos received net proceeds of $4.5 million from this transaction. Along with our recently approved $1.4 million GDP loan forgiveness, these actions have improved our balance sheet significantly and have prepared us for the expected growth in revenues this year and beyond. I'd now like to provide an update on our financial projections. For the fiscal year ending December 31, 2021, we expect total revenue to be approximately $18 million. As a reminder, our guidance is based on contracted backlog and near-term pending orders that are already performing or scheduled to be executed by the fourth quarter of 2021. Assuming we can achieve our top-line guidance, we also expect operations to achieve breakeven or profitability in 2021, with an improved cash liquidity position by year-end. Although uncertainties continue in the macroeconomic climate, we believe that 2021 will yield a much stronger financial performance for revenue and profitability. Finally, I'd like to mention a few housekeeping items related to the presentation of our financials. Beginning in Q1, we will be consolidating and reclassifying our revenue segments to simplify our reporting structure in line with some of the restructuring actions that we've taken recently. More specifically, we'll be moving to a two-line revenue structure divided into technology systems, licensing, and services and consulting, with related sub-segments broken out in these two areas. Having separate line items will also allow us to showcase revenues within our business that are essentially recurring in nature. We plan to grow revenue steadily within the segment over time, as they provide a higher margin, more predictable opportunity for our business. Additionally, with the consolidation of our former TrueVue 360 subsidiary into our main business, those revenues will now be classified within technology systems and licensing. We will provide additional disclosures regarding these changes when we record our financial results for the first quarter of 2021. This completes my financial commentary. I'll now turn the call back over to Chuck to provide a further update on the business.

Thank you, Adrian. For the remainder of my remarks today, I'd like to provide an update on our strategy and 2021 operating plan, which is focused on implementing a number of improvements across the business. Then I'll provide a brief update on our outlook before turning it over to questions. Beginning first with our strategy and operating plan. As a reminder, in September 2020, after joining Duos, we conducted a company-wide assessment to identify areas where we were performing well and areas that needed improvement in the following operational areas: commercial, finance, and personnel. I'm going to discuss each area in that order, beginning with our operations. At Duos, we're aiming for operational excellence in all that we do. To date, we've made encouraging progress across all divisions and are continuing to make improvements. Our newly appointed Chief Operating Officer, Ben Eiser, heads up our operations and has made a very positive impact on the business since joining Duos last November. Our current customers have also noticed and provided positive feedback on our improved performance and customer service. This is now triggering new orders and other opportunities for our business development pipeline, many of which we look forward to announcing in the coming months. Given these positive developments, we must recognize that substantial work still needs to be done this year, and potentially later on, to ensure the business can reliably deliver our technology and achieve profitability. In just the last 45 days, we've made incremental back-end investments in several engineering tools, including 3D Solidworks, along with electrical and optical test equipment, which have helped us more effectively design, develop, test, and deliver a new vehicle undercarriage examiner, which we call Oblique VUE, and has been under development for some months. Our first Oblique VUE is currently being installed at one of our existing Railcar Inspection Portals. Once operational, it can inspect an additional 21 inspection points on the underside of a railcar at high speed, including an outcome that is critical, but particularly difficult to see. We expect to deploy this new device across our other rail inspection portals in the future, and it can also be used separately from the portal. Finally, we will be filing our patent for this Oblique VUE. As part of the overall engineering development cycle, we've implemented a more rigorous modeling and testing protocol. These new Oblique VUEs are an example; we conducted nine rounds of modeling and testing, which also included live track testing at one of our nearby Railcar Inspection Portal sites. Now instead of taking six to eight weeks to make installations, and then possibly having to return to fix problems, installations will take no more than 48 hours with unit acceptance tests finished in a few days. This makes our customers happier and saves installation costs for us. Another area of operation we've been focused on is improving collaboration between our program management team and service operation center. When I spoke on our last call, the average number of open tickets on our service desk was roughly 150. Today, we're at 15 or less, which is a 90% improvement. As a general rule, the number of tickets our service desk processes indicates how well a business is serving its customers. We view this as a dual benefit of getting deployments done right and being better about responsiveness. I want to make it clear that we did not add more people to address the issue; instead, we changed the leadership approach and streamlined processes between the service desk, which handles inbound calls, and the back-end technical team. To summarize our operations update, we're continuing to improve operational and technical execution and customer satisfaction, which means delivering projects on time, on budget, and with improved technical and service reliability. Moving to our commercial update, the commercial team led by our Chief Commercial Officer, Scott Carns, is functionally organized into sales, marketing, proposals, and contracts. This small but critically important team is working on several initiatives to ensure we achieve our strategy and our 2021 operating plan. First, the collaboration between the commercial team and our operational and technical teams has improved. In our business, it is critical that our technical team and project managers are involved in developing the solutions within our proposals, including detailed technical concepts, project timelines, and accurate basis of estimates and pricing. Second, the commercial team is working with new and existing customers to demonstrate how our improved customer service and reliable technology is valuable, which justifies asking for modest increases in our pricing. In the past few months, we've had a positive reception to this initiative. Something we've determined in these past six months is that we have historically underestimated the level of effort and cost it takes to properly maintain the hardware and software that we have deployed in the field. For hardware service and maintenance, we're changing our approach to service. Instead of reacting when something needs fixing, we're implementing a proactive program that will employ preventative maintenance checks and services, which makes our solution more reliable and allows us to justify modest price increases. Third, we are improving our proposals to make them easier to read and more compelling. This point is self-explanatory. Fourth, we are enhancing our contracts and subcontracts with more accurate statements of work and improved terms and conditions that better address risk management and liability issues. Regarding strategic partnerships, I believe our most important strategic partnerships are with our current rail operators. In our discussions, we've been informed by our rail customers that they consider us important teammates as they place greater emphasis on investment in the adoption of automated inspections and prepare to approach regulators about this approach. One of our most recent board members, Ed Harris, with his C-suite rail experience, has been very helpful to me and our team in better understanding the strategic goals of our rail customers, and we are very determined to improve our efforts to support them. Looking ahead, we have a number of promising opportunities in negotiation or our near-term pipeline, which I'm confident will translate to customer wins in the coming weeks and months to meet and ideally exceed the guidance we've issued. We look forward to sharing those details when the agreements are finalized. Finally, on the commercial side, as indicated in the 8-K filed earlier today, we received a notice of award from Amtrak to provide two Railcar Inspection Portals and two Thermal Vehicle Undercarriage Examiners. The work is expected to begin on April 1st of this year, and we anticipate receiving a notice to proceed with authorization funding, which will allow us to initiate procurement of long lead items while we complete the contract negotiations. This new opportunity is accretive to the guidance of $18 million that Adrian provided earlier. Once we enter the contract phase of the engagement, we'll conduct a reforecast, issue updated financial guidance, and provide more details. Notably, this particular opportunity required putting a bond program in place, which we successfully completed several weeks ago. On the financial side, as I mentioned during our last call, we've introduced more rigor around financial reporting, which includes weekly accounts receivable, accounts payable, and cash flow forecasts. We've also improved our monthly financial management reports, including more accurate project-level budgets, G&A reviews, and consolidated financials for the company. We have now established a more accurate review process of the financials for the entire leadership team. My approach is that having P&L leaders more involved in reviewing the financials with their financial counterparts will allow them to better identify the financial and operational levers that will enable them to better control costs and gain efficiencies with the goal of improving performance while also reducing costs and improving both margins and cash positions. Our goal is to become a more consistent, predictable, and profitable company. Starting in Q1 2021, the former TrueVue 360 subsidiary will be consolidated into our mainstream operations. This decision was made to reflect our increasing focus on artificial intelligence, as much as it was to simplify our reporting. Looking at our balance sheet, our recently completed $4.5 million capital raised in late February, led by two existing shareholders, has positioned us well to support potential working capital requirements for larger opportunities that we are currently pursuing. With our current visibility into the next 12 months of orders and deployments on the horizon, we project $18 million in revenue for the year, which would bring us to a breakeven level and also cash flow positive. That said, I want to stress that this is a very conservative view. As the year progresses and we determine the positive impact of the Amtrak opportunity, we'll update our guidance and provide more details for everyone. As it relates to personnel, we have a very talented workforce, and I believe we're only scratching the surface of that potential. That said, over the last six months, we've undergone some significant restructuring. We've replaced ten people and added an additional nine, mostly within the operational and technical teams, with minimal incremental costs through operating efficiencies and certain expense reductions. In a business of roughly 55 employees, including 19 new hires in highly technical positions, achieving this with almost no incremental cost is a serious undertaking. While we will continue to add for growth in all areas, we are pleased with the caliber of talent within our ranks and believe we have people who are capable of executing our goals for operational and technical excellence. I’ll now move to more specific hires and updates. First, we hired Andrew Murphy as Vice President of Commercial Operations. Andrew is a senior finance professional who previously worked for me at APR Energy. I've seen firsthand his abilities when it comes to contract proposals, pricing projects, basis of estimates, and forecasting. Andrew has been heavily engaged with our commercial team while communicating from a financial perspective how and why our contract pricing terms need to be updated and improved, which has been well-received by our customers. He was also the lead for securing our bonding program, which was a prerequisite for the Amtrak award. Secondly, we hired Jeff Necciai, the former CTO for NASCENT, to lead our overall software efforts. Jeff, along with the service desk and project management team, have been working on several initiatives to improve our automated logistics Information System business, which will be implemented later this year. Our current CTO, David Ponevac, will now focus strictly on our artificial intelligence business. In the coming months, we'll be adding resources to increase the quality and capacity of both the software and artificial intelligence teams. Finally, we’ve recently brought on an experienced railroad mechanical car inspector and safety manager and plan to add additional subject matter expertise to better assist our technical teams as they deliver into our rail customers. I hope it is evident that we are implementing improvements as quickly as possible to improve our operational and technical delivery, customer satisfaction, and financial performance. However, there's still a lot of work to be done this year to get the business to where we would really like to see it. These continued improvements will allow us to produce new and better quality products, close more deals on more favorable terms, and form stronger customer and strategic partner relationships within our industry. With the backdrop of the tentative global economic recovery underway and a return to more normalized business conditions, we believe 2021 will see Duos return to growth as we build for scale and sustain profitability. Lastly, I am personally very happy and honored to be leading the Duos team. While it's always challenging to turn a business around, I am doing what I love to do, and the team around me is outstanding. I am very optimistic about the future of our company, and I appreciate the support from our board and our shareholders. And with that, we're ready to open the call for your questions. Operator, please provide the appropriate instructions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Jim Barrett with Barrett Asset Management. Please go ahead with your question.

Good afternoon, Chuck and Adrian.

Good afternoon.

Good afternoon.

Chuck, can you talk about the pending acquisition of Kansas City Southern by Canadian Pacific? Additionally, could you share your thoughts on how any future consolidation in the rail industry could have advantages and disadvantages for Duos?

Yes, that's a good question, and certainly that's been a significant topic in the news, especially in the rail industry. Ed Harris and I have been discussing it as well. So first off, we obviously have one of our key customers being Kansas City Southern, and we've made efforts in the past to do business with Canadian Pacific. So far, we've really had a lot of success. Both Ed and I feel that the merger between Canadian Pacific and Kansas City Southern will actually be helpful for us, as they’ll basically introduce us through that merger into Canadian Pacific. Canadian Pacific is intriguing because they have rail lines extending from Canada through the United States and all the way down into Mexico. We currently operate two of our Railcar Inspection Portals in Mexico, one for Ferromex and one for Kansas City Southern. So while we believe this will be a positive move for us, I think some challenges lie ahead, as Ed has explained to me. There are significant regulatory hurdles for Canadian Pacific and Kansas City Southern to overcome; they will need regulatory approval from the three governments, both the United States, Canada, and Mexico. So it will take some time for that process to occur. In the meantime, we're going to remain focused on our current customers and see how this works out. Hopefully, I answered your question.

That's very helpful. Thank you, and good luck.

Thank you, sir.

Our next question is from William Gallagher, a Private Investor. Please proceed with your question.

Hi. Thanks very much. My name is Bill Gallagher, and I'm a shareholder. Two-part question. One is, how do you perceive the current administration's position on the XL pipeline? And will more oil potentially be moved via railway to affect upcoming business in the foreseeable future? And the second part of the question is, I don't know, but do you currently have interest in pursuing business internationally in Europe, as well as in Asian countries?

Yes. So those are two good questions. I'll take the first one regarding the recent pipeline release that was given to us as a top work notice. I think that pipeline was not active yet, so from my perspective, the rail operators have not been impacted by that pipeline. So they’re carrying the same amount of freight they've been transporting throughout. However, I believe, based on information we are receiving from our sources, the new administration, like many before, is heavily focused on infrastructure investment. We understand that the rail industry is included in that, particularly transit rail. This administration appears to be more interested in using technology to safeguard our borders, as opposed to implementing physical barriers like the previous administration. Therefore, we perceive that the new administration may be favorable towards what we provide in technology and how we present it to rail operators. The second question pertains to Europe. Yes, we’re interested in potentially expanding our offerings into Europe and have had contact there. Years ago, the company engaged in some operations in Europe. Again, Mr. Harris has strong connections in regions such as Australia and Europe, and we plan to have discussions about this with our board in the coming years. We are making our improvements, and hopefully, I answered your question, sir.

Yes. Thank you, and best of luck in the coming year, and stay safe. Thank you.

Yes. Thank you.

Thank you. Our next question comes from Richard Jackson, a Private Investor. Please go ahead with your question.

All right. Thank you. Two questions, if I may. One, since you guys are now booking revenues as an application software and server contract sale, how much of the revenue dip would you say, year-over-year, was due to the accounting change? And secondly, congrats on the Amtrak news! Are things still moving in the right direction with the MTA in New York and the Boston and Washington commuter rails?

Yes, I'll let Adrian handle the first question, and I'll take the second one.

Hi, Richard. Regarding the perceived revenue change for 2020, just to be clear, the revenue dip was primarily due to delays in receiving contracts and execution. Although our model is going to change over time to become more of an OpEx type model with recurring revenues, most of that change hasn’t occurred yet. You will see an increase in recurring revenues as we move forward, with parts of the contract related to maintenance, which is traditional, and also related to some of our licensing that’s forthcoming. So the actual dip is not related to that.

Yes, I'll take the second part of the question, but I'll also add a little context. The business I ran called APR Energy was over $300 million and operated purely under an OpEx model. Based on my experience in OpEx models, we believe that as we enhance our service side of the business, which generates recurring revenue, along with a focus on hardware and software maintenance, you will see increases in that recurring revenue side for sure. Regarding transit rail, as you mentioned, we're currently finishing up a job with Chicago Metro that is ongoing, and we expect to complete shortly. We have several other opportunities with transit rail lines, and we've also discussed Amtrak, but this aspect is a smaller component of our business development pipeline. I would anticipate that as the year progresses, we'll likely see more activity from transit rail and other commuter systems based on the work we expect to undertake for Amtrak.

If I could follow up, you gave a total addressable market on your last conference call, which was very helpful. How much do you think of that is going to be cargo and how much of that will come from commuter rail?

Yes. Looking ahead at least for the next year, I’ll provide a perspective for now, as this could certainly change. But I believe the freight rail will still be the primary component of our revenue generation, perhaps around 65% to 70%. Adrian?

Yes.

I would estimate that 30% of our revenue could come from Amtrak. However, as the details with Amtrak become clearer, we will release those details for everyone to read.

Okay. Thank you.

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

Well, I want to thank everybody for joining us today. We're very excited about our business. And I'd like to thank you very much for attending. Thank you, operator, and thank you all for joining us on today's call.

Before we conclude today's call, I would like to provide Duos' 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 the Private Securities Litigation Reform Act of 1995. Forward-looking terminology such as believes, expects, may, will, should, anticipates, 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's 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 1A in Duos' Annual Report on Form 10-K, which is expressly incorporated herein 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 Group's 2020 fourth quarter and full year earnings conference call. You may now disconnect.