Good evening my name is Crystal and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2, 2015 Financial Conference Call. [Operator Instructions]. Mr. Michael Paxton, you may begin your conference.

Welcome to this afternoon's call to review Intrusion's second quarter 2015 financial results and discuss of our business. Participating on the call today will be Ward Paxton, Chairman, Co-Founder, President and CEO; and Joe Head, Vice President and Co-Founder of the Company. Ward will give a business update. I will discuss financial results and Joe will give an update on projects. We'll be glad to answer any questions after our prepared remarks. We distributed the earnings release at approximately 3:05 p.m. today. A replay of today's call will be available at approximately 6:30 p.m. tonight for one-week period. The replay conference call number is 855-859-2056. At the replay prompt, enter the conference ID number 7223475. In addition, a live and archived audio webcast of the call is available on our website, intrusion.com. Please be reminded that during this call, including the question-and-answer session, we may make forward-looking statements with respect to financial results, business strategies, industry trends, and certain other matters. These statements are based on management’s current expectations and are subject to risk and uncertainties. We may be discussing our current based on our own internal projections for the current quarter and fiscal year 2015. Actual results may differ substantially from internal projections. Information in this conference call related to financial results, projections, forward-looking statements is based on current expectations and we expressly disclaim any responsibility to update forward-looking statements. Many factors could cause our projections not to be achieved, including the uncertainties and lack of visibility caused by current economic and market conditions and other factors which can be found in our most recent filings with the SEC, including our most recent Annual Report on Form 10-K filed March 2015 and previous 10Qs. Now I turn the call over to, CEO, President, Ward Paxton.

Thank you, Mike. Welcome to Intrusion’s second quarter 2015 conference call. It’s good to be with you today to discuss our second quarter results and our progress. We had a good second quarter and are making excellent strides in growing our business particularly noteworthy was revenue growth for our Savant product family, Savant is our advanced persistent threat detection product, Savant revenue reached $760,000 or 36% of total revenue for the quarter. $465,000 of this total was with a new major reseller, we’re optimistic that this relationship will grow in the future. Advanced persistent threats are the most wide spread breaches occurring today. Most of our Savant customers are large, non-government entities whereas most of our TraceCop customers are U.S. government entities. We expect this to division to continue. At this time TraceCop is our larger business and we expect Brad [ph] to continue near term, our TraceCop business has been relatively flat over the past two years as we have focused on starting our Savant business, in order to increased TraceCop business we have recently increased our selling activity for TraceCop and expect to see growth in this part of our business in addition to the expected growth of Savant. We will discuss our sales and products more a little later but now Mike Paxton, our Chief Financial Officer will review our second quarter 2015 financial results that we released a little over an hour ago. Mike?

Okay, the second quarter financials from press release. Revenue for the second quarter 2015 was $2.1 million compared to $1.8 million in the second quarter 2014 and up from 1.7 million for Q1 201. Gross profit margin was 62% in the second quarter compared to 66% in the second quarter last year and 63% for the first quarter of 2015. The margins can be greatly affected by sales product and deliverables and quarter. In general our goal was 65% but like this quarter can be inflexed due to product mix. Intrusion's second quarter 2015 operating expenses were $1.3 million compared to $1.2 million for the comparable quarter in 2014 and 1.3 million also for the first quarter of 2015. Net loss for the quarter was $4000 compared to a net loss of $22,000 for the second quarter of 2014 and a net loss of 0.3 million for the first quarter of 2014. Thank you. Now back to, Ward.

Thanks, Mike, good report. Now Joe Head my partner and co-founder and Senior Vice President will discuss our products market and sales activities. Joe?

Thanks, Ward. In the second quarter we showed some growth in Savant revenues with shipments rising to 760k or 36% of sales like Ward said of this 465k was through our second reseller. We have booked Savant business from five new customers in the second quarter, three were from our first reseller, one was direct and one was from our new second reseller. In the near term we have additional new customers who we expect to engage with new business. This quarter we expect to have about five new customers installing Savant through our original reseller. As I mentioned last quarter they changed their approach by pushing customers to engage with 90 day trials which are paid as 1/4th of the normal annual rate. With this approach their activity levels have increased, this was a good move for them as their activity levels have definitely increased this quarter. Next quarter the fourth we’re looking at seven new customers for Savant coming board with initial orders. Off these seven four are with a third new reseller partner, the other three are direct. As we have engaged with Savant sales our legacy TraceCop business has continued to be a steady source of revenue with old customers continuing to renew our existing projects as they come up for renewal. It hasn’t grown as Ward mentioned but it's remained flat for quite some time. Yes we have primarily focusing on chasing new Savant opportunities but that doesn’t mean that TraceCop opportunities are no longer viable this quarter we’re quoting one new TraceCop opportunity and have added another direct sales person to focus on this business, it started two weeks Monday. We’re excited about our hire and look forward to seeing new TraceCop business booked as we increase our efforts in this area. As I’ve mentioned last time it's also good that now we have a mix of customers which are direct and indirect for Savant so we can prototype new offerings and approaches without the inertia of a large partner using both approaches we can use our direct contracts to deploy new capabilities much quicker and then take those examples back to our partners to spur them to propose them, to propose us a to a bigger percentage of their customer base. Ward?

Thank you, Joe. We have a lot of new activity in both product areas and expect this to continue to grow. The new prospects are exciting, it's important that we keep the momentum going during the last half of the year and we are dedicated to achieving this goal. We thank you for joining our call today and look forward to our communications in the future. Mike?

Okay. I will get the operator to remind everyone how to queue to ask questions.

[Operator Instructions]. And your first question comes from the line of Walter Schenker.

On the -- I may come back to Savant, it's really why I queue on. TraceCop actually fell off sequentially and year-over-year, did you just lose a customer, you generally said that those people have been renewing with all the [indiscernible] problems and securities and the efforts to trace intrusions, I would have thought that the historic customers for TraceCop would be maintained at least.

We haven't any lost any customers, we do from quarter to quarter see ups and downs due to just the patterns that our existing customer base places our orders and changes the amount of activity that they purchase from us but we haven't lost anything, we haven't gained any significant areas and it is the reasons we made the decision to increase our selling activity to take advantage of what we think have some opportunity there.

So just for Joe, you in the past initiated that you’re optimistic that that could be a $2 million not a $1.25 million business which you want in the quarter, you’re just not getting the project -- it's really small numbers but still seems to be disappointing on this quarter.

What we noticed Walter was that our existing sales guy has been running that area, he is fully consumed, he is going and see it and keeping existing customers with face time and as I put more and more of my efforts on Savant we just didn’t have any extra bandwidth to go talk to the new ones that’s when we brought on a new sales person who is quite good.

And how much that you think you will add one customer, we will see that in the September quarter or by the end of the September quarter?

Correct, we’re quoting one now that we think could come in this quarter certainly by the fourth and then we have got additional opportunities we’re chasing as well but I think those tend to take some time to get into the budget cycle so those are typically not quick hit but they are substantive as you know and they are typically 500k, 800k per year is an average one and I would expect to see those start filtering in early next year.

So moving on to Savant which is really hopefully more relevant driver going forward, was your original partner was still unnamed, you still have the two original full year people?

Let me think about that, some of those have not renewed, some have. So we have had a spur of new ones coming on and old ones that try and move along. Let me think about the original ones, I’ve to think about that [indiscernible] Walter.

Okay, but as of the end of the June quarter how many distinct companies were you providing Savant to through the original partner?

I would have to add it up but I think it was counting this next five, that aren't all in place yet.

Just go back, I just want to understand what generated $760,000.

I don’t know the number, it's in the 7 or 8 range if I remember correctly.

Again Walter, as Joe indicated a big chunk of that was the new partner.

I'm just trying to understand what the activity from the original partner is doing. So if the original partner [indiscernible] at the beginning of your presentation but if the original partner then we will be getting where you’ve sold directly with your new partner was 4 or 5 [ph] in the June quarter?

It's probably closer to 3.

It was 3 in the June quarter, [indiscernible]. One was direct and one was for a new one, for a new reseller.

Okay, and therefore in this quarter you have already gotten commitments for how many additional?

I know we will have five from them by the end of the quarter and I don’t think any of those orders are actually in yet.

And you’re expecting or they believe that that will continue to increase going through the fourth quarter?

Correct. And then the seven in the fourth quarter I don’t have any forecast from them yet because they typically tell us during the quarter so it may have some upside there.

I'm sorry, so how do you come to seven?

Seven is basically just from direct and other resell partners do we don’t have visibility from our original one in the fourth quarter yet so we may have a little bit of upside there.

So you had two resellers plus yourself at this point as you look forward?

Two that have already placed orders and the third one that we expect to see orders in the fourth quarter.

Okay, is there a reason and those resellers are selling it as Savant?

One, the original ones sells it as their own, the second one sells it as Savant, the third one will sell it as Savant.

So is the reason you can't tell us who they are just selling it to Savant, since Savant is you?

No I just had a range of release yet.

It would be strongly appreciated if you let us know the names of who they are because it will truly add hopefully some substance to the names of the people you’re working with if we found out they happen to be in material in a large entities.

Okay, sounds good. I will work that, I have not worked it yet, it's a new relationship.

Okay. And within the new external people the new one who you did one time track for in the quarter just ended has indicated they expect to add more as told you they are going to add more? One guy is still doing that for--

Yes.

I would expect that new original partners have additional projects here this quarter.

We’re engaging at a second place with them right now.

Third, again number three retailer will kick in the fourth quarter?

Correct. We have already being on customer calls to about 4 or 5 places with them and we expect most of those will turn the business.

And historically we had a sense of what a Savant customer or was not as it turns out with the original white label partner these are $0.5 million contracts, $150,000 contracts, I realize I'm generalizing I'm just trying to put an order back to when they bring in, with one data center, with multiple data centers.

Yes so Walter, with the new push on 90 day trials, what used to be a bigger number is a fourth of that, so it varies from about a 100k to 400k for a quarter for a 90 day trial but the average of them is about 200k some are a bunch smaller than that, some are single sensor for 60k or something like that.

But 400k, even 200k is multiple sensors?

Right. We’re in [indiscernible] for a quarter over a longer period determines that as well as how big the scope is in terms of the number of sensors.

Okay and just a couple of more just to tie this up. You had your own selling group, group meaning more than just Joe, selling direct have sold yourself not through one of these resellers, at this point how many customers?

We have I believe three that are direct.

Okay, which no one else had anything to do with it?

Correct.

And those would have somewhat higher margin because you’re not sharing the revenue with a resell?

That varies a lot, sometimes the reseller is able to resell in a higher price that we would sell direct and so you can't tell for sure whether it affects our margin or not. It's been our experience that it doesn’t affect our margins that much that we see reasonably the same margin whether we’re selling direct or through a partner.

Last question which usually isn't for me but we will the last for some on one call [ph], I can follow-up, therefore your current expectation between two resellers, the original reseller and yourself would be, that might be end of the year not all producing during the fourth quarter but by the end of the year if I add up everything we just put together you will expect round numbers 20 different entities would be paying for Savant usage?

We will probably have 7 to 10 and the fourth and five in the third and four, yes close to 20. We don’t know what the renewal rates are yet Walter, so--

No I understand it's end of the year, five months away so I'm just trying to put on the record. So your sense that in order numbers it's between 15 and 25 how is that?

Walter, one of the things that it's certainly different today than it was at the end of the last quarter is that the number of these different projects that’s actually in place before we had several work, now we have got several end place and they are getting installed with a much closer to delivery time than we have had before. So that’s a significant step up.

And therefore in the third quarter, you forced me to do this, that’s why this third quarter you will have more people paying you revenue than you had in second quarters?

Well we hope so but we don’t know that yet.

I just want to know your install.

No it's five and five.

But 10 to 30, we would expect that more people paying you and you’ve pretty good feel for that in the middle of the quarter than you had in June.

I think we always expect.

Your next question comes from [indiscernible].

This maybe my ignorance but I'm a little confused between what these numbers mean in terms of a trial or an actual system, an order for system and also what the annualized rate is of any of these things? Or all of these things put together.

The trials are really a short term purchase, everything there is fully up and it's just our partner decides that they can do some good by selling a three month deal because of good prospects and in those cases it's estimated that it will turn into a four timer or a full year deal at the end of this first quarter deal.

So the five that you did this in this last quarter, three by the original reseller, one by you and one by this new reseller who you’re going to announce very shortly. Those five may or may not [indiscernible].

That’s correct.

Three from the first reseller were 90 day trials, the one direct was a year. It was 90 day as well and then the second reseller was just 90 day.

And then the five that you expect will all be trials or?

Correct, they all will be 90 trials which is a fourth of the year.

All right, so by the end of the fourth quarter some of them maybe over and renew or over and over--

We expect it to be a continuous plan so at the end of the night we expect the customer to negotiate a further run of either another 90 days or year or terminate, so you won't just drag along.

If you can announce the reseller and you can announce then can you also announce when you actually make the sale like many companies do.

I mean we make sales we just haven't announced the name of the reseller yet because we need their permission.

Can you make any announcements ever about who you’re selling to?

Well it would be help to be able to but we have to get--

Like a normal company.

We won't be able to -- I mean we don’t have that authority right now.

Talk about anyone of them, any of them. Every single client that you sell to says I do want you to disclose the -- I bought the stuff.

We don’t like to talk about being comprised in their networks.

They just take their simply precautionary measure. The one or two the direct ones I expect will be friendly about letting us announce as time goes forward which is one reason to have some direct ones.

Because I’ve done a study of other security companies but I would say even before looking I would guess that all of those things, in some cases not in all cases are announced.

Right, some are, some are.

Yes some are, some are, in our case, none are. So if we change that some are, some are we will be like others you know regular public companies.

Correct. We try it.

Okay, operator at this time we will like to wrap up the call. Thank you for participating in today's call. If you need a copy of the press release or if you’ve further questions, you can call me at 972-301-3658, our email mpaxton@intrusion.com. Thanks again.

This does conclude today's conference call. Thank you for your participation. You may now disconnect.