Business Context and Reporting Period
Company: Intrusion Inc. (INTZ)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2026
Business Overview: Intrusion Inc. develops cybersecurity products (TraceCop, Savant, and INTRUSION Shield) that fuse threat intelligence with real-time mitigation. The company serves U.S. federal, state, and local government entities, as well as commercial enterprises. It operates as a single segment.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenue | $0.9 million | $1.8 million |
| Gross Profit | $0.7 million | $1.3 million |
| Gross Margin | 74.2% | 75.7% |
| Operating Loss | $(3.6) million | $(2.1) million |
| Net Loss | $(3.6) million | $(2.1) million |
| Net Loss Per Share (Basic/Diluted) | $(0.18) | $(0.11) |
| Cash and Cash Equivalents (End of Period) | $1.4 million | $10.7 million |
| Net Working Capital | $(0.9) million | $2.4 million (Dec 31, 2025) |
| Net Cash Used in Operating Activities | $(1.8) million | $(1.7) million |
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased 50.0% to $0.9 million, driven by a delay in the contract extension for a long-standing U.S. Department of War contract. Consulting revenue dropped from $1.4 million to $0.8 million, and INTRUSION Shield revenue fell from $0.4 million to $0.1 million.
- Increased Operating Expenses: Total operating expenses rose 19.1% to $4.2 million. Sales and marketing expenses increased 37.8% due to investments in personnel and trade shows, despite underutilization of the government sales team. R&D expenses increased 19.1% due to continued investment in INTRUSION Shield features.
- Liquidity Deterioration: Cash and cash equivalents decreased by $2.3 million to $1.4 million. Net working capital turned negative to $(0.9) million, compared to positive $2.4 million at year-end 2025.
- Customer Concentration: Revenue concentration remains high. Two customers accounted for 87.3% of total revenue in Q1 2026, compared to three customers accounting for 91.4% in Q1 2025. Government entities represented 87.8% of total revenue.
Outlook, Risks, and Subsequent Events
- Going Concern Warning: The filing explicitly states that conditions raise substantial doubt about the Company's ability to continue as a going concern within one year due to recurring losses, negative cash flows, and dependence on financing.
- Recent Financing: On April 6, 2026, the Company issued a secured promissory note for $3.2 million principal, receiving $3.0 million in cash proceeds. The note bears 7% interest and is secured by a first-priority lien on substantially all assets.
- NASDAQ Compliance: On May 7, 2026, the Company received notice of non-compliance with the $1.00 minimum bid price requirement for continued listing on the NASDAQ Capital Market.
- New Contract: On May 13, 2026, the Company entered into a $3.9 million subcontractor agreement with a state government agency for cybersecurity services, with revenue to be recognized over time starting May 2026.
- Financing Strategy: The Company plans to fund operations through public or private financings, including its At-The-Market (ATM) program, though no sales were made under the ATM in Q1 2026.
Investor Verification Checklist
- Liquidity Runway: Verify the sufficiency of the $1.4 million cash balance plus the $3.0 million recent note proceeds against the current burn rate of approximately $1.8 million per quarter.
- Government Contract Status: Confirm the timeline for the delayed U.S. Department of War contract extension, which is the primary driver of the revenue decline.
- NASDAQ Compliance Plan: Review the Company's specific strategy to regain compliance with the $1.00 minimum bid price requirement to avoid delisting.
- Debt Covenants: Examine the covenants and redemption rights associated with the new $3.2 million secured promissory note issued in April 2026.
- Customer Diversification: Assess the risk associated with 87.3% of revenue coming from just two customers and the potential impact of government funding cycles.