Business Context and Reporting Period
Company: Intrusion Inc. (INTZ)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2026
Business Overview: Intrusion Inc. develops cybersecurity products and services, including the INTRUSION Shield solution and TraceCop/Savant platforms, primarily serving U.S. government entities and commercial enterprises. The company operates as a single segment.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 |
|---|---|---|
| Revenue | $1.45 million | $2.34 million |
| Gross Profit | $0.97 million (66.4% margin) | $1.62 million (69.4% margin) |
| Operating Loss | $(2.49) million | $(6.07) million |
| Net Loss (Attributable to Intrusion) | $(2.59) million | $(6.15) million |
| Cash and Cash Equivalents | $0.18 million (as of June 30, 2026) | N/A |
| Notes Payable (Current + Noncurrent) | $3.27 million | N/A |
| Net Cash Used in Operating Activities | N/A | $(5.41) million |
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased 22% year-over-year for the quarter and 36% for the six-month period. This was primarily driven by delays in the U.S. Department of War contract extension and a reduction in INTRUSION Shield subscription revenue.
- Margin Compression: Gross margin percentage dropped from 76.4% to 66.4% for the quarter, attributed to a shift in product mix toward lower-margin consulting work and a decrease in high-margin INTRUSION Shield sales.
- Increased Operating Loss: Operating loss widened by 20% for the quarter and 45% for the six-month period compared to 2025, due to revenue declines and increased sales and marketing investments.
- Debt Financing: The company secured $3.2 million in new debt financing in April 2026 and $0.4 million in June 2026, replacing previous equity-heavy financing seen in 2025.
- Acquisition: On June 29, 2026, the company acquired 60% of VigilAigent (OW Cyber, LLC) for $2.0 million (cash and stock), with an option to acquire the remaining 40% contingent on regulatory approvals.
Outlook, Risks, and Management Commentary
- Going Concern Warning: Management explicitly states that conditions raise "substantial doubt" about the company's ability to continue as a going concern within one year. Cash on hand is only $0.18 million, and the company relies on continued equity or debt financing to fund operations.
- Debt Covenants and Terms: The new $3.2 million note with Streeterville Capital carries a 7% interest rate, a monitoring fee that increases the principal balance by ~17.65% after 90 days, and potential trigger events that could add 5% or 15% to the principal. It is secured by all company assets and IP.
- Customer Concentration: Revenue remains heavily concentrated in government contracts, which accounted for 91-94% of total revenue in the first half of 2026. Three customers accounted for 91% of revenue in the six-month period.
- Acquisition Milestones: The VigilAigent acquisition includes up to $6.9 million in contingent consideration (earn-out) based on future ARR and cash flow milestones, payable in stock.
- Financing Strategy: The company plans to utilize its At-The-Market (ATM) program and seek additional private or public financings, though no sales were made under the ATM program in the first half of 2026.
Investor Verification Checklist
- Liquidity Runway: Verify the sufficiency of the $0.18 million cash balance against the weekly debt payments ($8k) and operating burn rate of ~$5.4 million per six months.
- Debt Trigger Events: Review the specific "trigger events" in the Streeterville Note Purchase Agreement that could increase the principal balance by 5% or 15%.
- Government Contract Status: Confirm the status of the delayed U.S. Department of War contract extension and the new state agency contract signed in May 2026.
- Acquisition Closing: Monitor the August 30, 2026 deadline for the second closing of the VigilAigent acquisition and the associated regulatory approvals.
- Stock Dilution: Assess the impact of the 2.4 million shares issued for the VigilAigent acquisition and potential future equity raises required to service debt.