Good afternoon and welcome to Duos Technologies Second 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 the call for your questions. Then before we conclude today's call, I will provide the necessary cautious regarding forward-looking statements made by management during the call. Now, I would like to turn the call over to Duos' Chairman and CEO, Gianni Arcaini. Sir, please proceed.

Thank you very much. Welcome everyone and thank you for joining us. Earlier today, we issued a press release announcing our financial results for the second quarter of 2020, as well as other operational highlights. A copy of the press release is available as usual in the Investor Relations section of our website. Before I begin, I want to make it a point to emphasize that we are holding today's call in the midst of a broader company transition pace, both with respect to our senior leadership, as well as our operations. With that understanding our remarks today will be brief. As many of you listening today are aware about a month ago, I announced my retirement from the Duos CEO position. This will become effective September 1. While this decision of course has been bittersweet, [Adrian] and the board believe the timing is right to hand over the reins to a new leader, who will guide our company through its next phase of growth. I have a distinct privilege to build and lead an extraordinarily talented team, whose ingenuity and dedication has placed our company's disruptive technologies at the top of its class. Our up-listing to NASDAQ in February of this year was a significant milestone achievement, very few companies are able to attain. And I'm proud to be leaving the day-to-day operations of the company in a position of strength. We are well capitalized that our core technologies as the chief market adoption, both of which have Duos poised for growth and success in the future. I think our team members, customers, partners, and most importantly, our shareholders for the support and all that contributed to make Duos a success. Going forward, I plan on continuing to serve in my capacity as Chairman of the Board and we'll…

Thank you, Gianni. Before discussing the results for the quarter, I would like to add the best wishes on behalf of the entire Duos team for your service to our organization. We all wish you an enjoyable retirement. Now turning to our financial results for the second quarter. Total revenue for the second quarter increased 47% to $1.98 million, compared to $1.35 million in the equivalent quarter in 2019. The increase in total revenue for the quarter was due to completion of certain milestones in our technology systems area during the quarter. Total revenue for the six months ended June 30, 2020 decreased 48% to $2.97 million from $5.7 million in the same period last year. The decrease in total revenue was driven by a slowdown in overall business bookings during the first six months due to delays in executing new contracts, and certain travel restrictions related to COVID-19. Gross profit in Q2 was $739,000 or 37% of revenues, which was an increase of 324% from 174,000 or 30% of revenues for the equivalent quarter in 2019. The increase in gross profit was due to the increase in revenues previously described. Gross profit for the six months ended June 30, 2020 decreased 63% to 842,000 or 28.3% of total revenue from $2.31 million or 40.5% of total revenue in the same period last year. The decrease in gross profit was mainly the result of lower revenues during the period, and the proportion of costs allocated to projects being higher as a percentage against those lower revenues. Turning to our costs, operating expenses increased 2% in Q2 2020 to $2.17 million from $2.12 million in the same quarterly period last year. Operating expenses for the six months ended June 30, 2020 increased 4% to $4.36 million from $4.21 million in the…

Thanks a lot, Adrian. I will now highlight some of our major achievements and wins for the quarter before finishing with a brief outlook for the remainder of the year. Our most recent win came in June from an existing class 1 railroad customers. In total, we were awarded a $2.5 million contract to integrate up to a 100 artificial intelligence used cases into our centraco platform beginning later this summer. The initial integration will occur at one of the railroads existing rip sites with plans to expand to several other locations in the very near future. We will execute this project in two phases with half occurring in 2020 and the remainder in early 2021. The contract also includes a significant recurring service and maintenance component for the new software being developed. We are particularly excited about the expansion of our relationship with this current customer, because we believe it speaks to the already recognized value. We are able to provide to their inspection and safety efforts. Furthermore, this award is yet another major milestone in achieving full automation of the railcar mechanical inspection process. We believe this particular software platform expansion is not only adaptable to the rail sector, but also to many other industries. As we continue to improve our capabilities in our core markets, we will look to expand into these adjacent opportunities as a logical next step. As I mentioned on our last call in May, we were also awarded a $945,000 follow-on contract for Monroe County Sheriff's Office in Florida to provide our Intelligent Correctional Automation System, we call it the 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…

[Operator Instructions] Our first question today comes from Ashok Kumar of ThinkEquity. Please proceed with your question.

Well thank you. And Gianni, wish you the very best and look forward to the next phase. Just some broad questions Adrian and Gianni. The first is the $2.1 million add-on contract, is that with CSX? And I was wondering when it's the initiation and completion phase for that? And I think in earlier comments, you had mentioned about final acceptance of a rip project site in Mexico? I was wondering if you have any further visibility on the completion of that final acceptance? And in terms of the $1.8 million the turnkey rip, I think you reaffirmed that will be completed by the end the third quarter of this year? And then Gianni, I think also you talked briefly about the correctional facilities vertical. Are there any additional contracts that you could - that you far enough along that you'd be able to talk about the opportunity [indiscernible] like as platform? And the last question is on the further platform development for the truevue360. I think you had made extensive, I think progress in the AI labeling effort. If you could just provide any additional color? And once again, thank you very much and wish you all the best.

Thank you, Ashok. Let me try to dissect all the different questions. Number one, you stated, it was a CSX contract award or whatever. As an absolute policy, we do not and cannot disclose which customers particularly the railroad customers are very sensitive to mentioning their name in our press releases, but we have been servicing CSX, CN, KCS. So it's going to be one of those. With respect to Mexico, I'm pleased to report that the system in Mexico is completed. We are now working on calibrating some of the artificial intelligence applications. We are in the midst of that process, but the system works very well. And so, do the systems here in the United States, which we have recently deployed and in fact, one of the systems we deployed, we started about two months ago. I'm pleased to report that is close to completion. It is already in production. The question as to truevue360 applications, we are in the midst of expanding both Rail and Non-Rail applications. As we get awards, obviously, we will report those awards, as we get them in. I know that I sound a little bit ambiguous, but unfortunately, we are understanding requests from our rail customers, not to mention their name in connection with whatever we want, we will see. I hope, I think, I covered most of it.

Yes. Gianni just any brief color on the ICAS opportunity and the Correctional facility in vertical? Any visibility you got that you could provide us? Thank you.

Yes, on the Correctional facilities, that's an interesting vertical, because in the past, we have specifically done some of the video surveillance work inside the correctional facilities. This new expanded contract also includes the courthouse and essentially encompasses the entire Monroe County law enforcement community. So we should be completed with that work early '20, not early, but sometime in 2021. And once we have that, it will serve as a prototype to go to other facilities and other counties and state presence and offer that solution. So it is a combination of developing a prototype, of course, it is also a commercial application. But that will be a strong product for us going forward.

[Operator Instructions] Our next question is from Nelson Baquet of ThinkEquity. Please proceed with your question.

And I wanted to ask - it seems to me that the gross margins are like 300-plus percent and compared to last year and I wanted to know what the reason for that change was?

Yes. Adrian, do you want to address that?

Yes, yes, Gianni. Sure, I will. So I'm not sure what your fringes there, the 300%, but maybe let me give some clarity to the gross margin position. And I mentioned this in my comments. So, as you know, and we don't discuss this anymore, because we've mentioned it in so many other calls. We book revenue according to the ASC 606 standard. And the way that's done is that has the effect typically of more back ending loading the revenue into the latter part of the project. Now because the company has become more efficient in deploying projects and our time to execution is faster now, the impact isn't as great as it might have been a year or two ago. But that does have the impact that if you start a project late in a quarter, you might book some revenue from that but you will book very minimal margin, because the cost of sale is almost the same as the revenue in that early stage. That then kind of self-results as you get to the latter stage of the project. So what happens is then as you go into the following period, reporting period, the revenue is a much higher percentage. So you can get these effects between quarters. And I've spoken about this before whereby the gross margin will look outsized one way, and may look smaller on the other one. The best way to analyze our financials is probably on - would normally outside of the current pandemics that we're in, we will be normally probably on about a six-month basis. Everything is kind of slowed up right now. So, what happens is you are going to get some outsized effect. But if you look at our annual results, typically we get to or close to a 50% gross margin on aggregate. And the other thing is that as Gianni mentioned a couple of the contracts, there is some of those that are both more on the recurring revenue side and more on the licensing and service and maintenance side. So you will see a general effect where our gross margins will generally be moving higher. But as a general rule, the Company aims to hit about a 50% gross margin across all of our businesses on aggregate. And so, you should probably not pay too much attention in the period-to-period variances. So Nelson, I hope that answers your question.

No, it does. And I said 300, but it is an increase of 337%.

Correct, correct. Okay.

Okay. Wonderful. Yes, that makes a lot of sense. And I appreciate it, thanks.

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

Thanks, operator, and thank you all for joining us on today's call. I especially want to thank Duos's shareholders, employees, customers and partners, who have supported the company over the years. I'd like to close by saying, it has been an honor to lead this organization over the years. The company is well positioned for its next stage of growth. And I look forward to our future success in the years ahead. Operator, please.

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 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 Inc'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 second quarter earnings conference call. You may now disconnect.