Please standby, we’re about to begin. Welcome to the Intrusion Inc. First Quarter 2022 Earnings Conference Call and Webcast. At this time, all participant lines are in a listen-only mode. For those of each participating in the conference call, there will be an opportunity for your questions at the end of today's prepared comments. Please note, that this conference is being recorded, an audio replay of the conference call will be available on the company's website within a few hours after this call. Now, I’d like to turn the call over to Mr. Sam Cohen with Alpha IR, Investor Relations. Please go ahead, sir.

Thank you and welcome. Joining me today are Tony Scott, Chief Executive Officer; and Franklin Byrd, Chief Financial Officer. The call is being webcast and will be archived on the Investor Relations section of our website. Before I turn the call over to Tony, I'd like to remind everyone that statements made during this conference call relating to the company's expected future performance, future business prospects, or future events or plans may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Please refer to our SEC filings for more information within risk factors that could cause our actual results to differ materially from the projections described in today's conference call. Any forward-looking statements that we make on this call are based upon information that we believe as today, and we undertake no obligation to update these statements as a result of new information or future events. In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to Generally Accepted Accounting Principles. During the call, we may use non-GAAP measures as we believe it is useful to investors, or we believe it will help investors better understand our performance and business trends. With that, let me turn the call over to Tony for a few opening remarks.

Thank you, Sam. Good afternoon, and thank you all for joining us today. As you'll recall from our previous calls, I outlined several operational and strategic initiatives we have undertaken that are critical to the long-term success of Intrusion. Those initiatives included expanding and strengthening our product offerings, realigning our sales and marketing resources, as well as focusing on the channel-enabled sales model, and strengthening our strategic partnerships. And finally, improving our financial discipline, including making sure we have sufficient operating capital to support our research and development, marketing, and operating needs for FY 2022 and beyond. And by executing on these initiatives, we believe that we can, and will, create a bright future for Intrusion, its customers and its shareholders. I want to take this opportunity to provide an update on each of those initiatives. Starting with our products; we are on-schedule with our plan to unveil new innovative INTRUSION Shield branded products that meet the ever-changing cybersecurity challenges that the world faces. During our last call, we talked a bit about the current market for the INTRUSION Shield appliance. We spent much of the last quarter making product improvements, including performance enhancements, and adding several customer requested features and capabilities. For Shield Cloud, our product development efforts remain on-track. And I'm pleased to announce that the cloud-based shield product will be available for demo in the next few weeks, and full general availability release of the product remains on-schedule for the second half of 2022. I also briefly mentioned the second new product, INTRUSION Shield Endpoint. Again, our product development efforts are on-track, and like INTRUSION Shield Cloud, we expect to have customer demo capabilities in a few weeks, with GA in the second half of the year as well. This product will support Windows, iOS, and Android…

Thanks, Tony. Revenue for the first quarter of 2022 was $1.8 million, which is in line with the first quarter of 2021. As you would have expected, 2022 first quarter revenue for INTRUSION Shield was significantly higher than the first quarter of 2021. However, Shield revenue increases were offset by lower revenues from our legacy consulting business, largely due to the timing of the continuing resolution, which expired March 11 of this year. With the continuing resolution behind this, we are already seeing benefits in both, new contracts and increased contract. First quarter operating expenses were $5.2 million, which are also in line with the first quarter of 2021 results. In the first quarter of 2022, we experienced large decreases in sales and marketing expenses, compared to the prior year quarter that resulted from previously announced headcount reductions and fewer trade shows. However, these decreases were offset by increased R&D and higher than normal G&A expenses from both, legal and professional services. Net loss for the first quarter was $4.1 million or minus $0.21 per share, compared to a net loss of $3.99 or minus $0.22 a share for the first quarter of 2021. As of March 31 2022, working capital was $1.39 million, down from $2.1 million in the prior quarter. Turning to the balance sheet. As of March 31, 2022, we had cash and cash equivalents of $6.1 million, up from $4.1 million in the prior quarter. This includes approximately $4.7 million in net proceeds received from the first note with Streeterville Capital [ph], which was put in place in March. We are expecting to close a second round of financing with Streeterville Capital [ph] to provide additional net proceeds of approximately $4.7 million to the company. As we've mentioned previously, the closing of the second note is contingent on certain conditions being met, one of which is being voted on at our annual shareholders meeting later this month. Additionally, our ATM or aftermarket sales program, remains in place and we will utilize it in the future to finance operational activities, invest in Shield, as well as for potential note repayments, which may depend on current market prices. Lastly, we are continuing to work on additional financing transaction to meet our previously announced capital raise goal of $15 million to $20 million this year. As this transaction develops, and we have meaningful information, we'll be sure to report it. With that financial overview, I'd like to turn the call back over to Tony for a few closing comments. Tony?

Thanks, Franklin. In conclusion, we're moving forward with a clearer vision for our future. And we're focused on transforming that vision into action through compelling products and innovative strategies that position us to capitalize on the robust opportunities in our evolving cybersecurity marketplace. We look forward to sharing that journey with all of you, and we thank our investors for your continued support and your patience as we execute our strategy. And as a reminder, we'll be holding our Annual General Meeting on Tuesday, May 24 at 9:00 o'clock A.M. Central Time in Plano, Texas. We encourage all shareholders to participate and vote on their proxy. As a reminder, our proxy was filed with the SEC on April 18, and can be found on our Investor Relations website. That concludes our prepared remarks. And now, I'll turn the call over to the operator for Q&A.

Thank you very much, Mr. Scott. [Operator Instructions]. We'll take our first question Zach Cummins at B. Riley Securities.

Yes, thanks. Good afternoon. Hi, Tony. Hi, Franklin. Thanks for taking my questions. Tony, just first off, can you talk about some of the incremental progress you've seen on the sales and marketing side here in Q2? And what are some of the key drivers to get not only the better conversion, but also more shots on goal with a larger pipeline?

Sure. Well, I think I mentioned, when I compared to where we ended Q1. In Q2, we currently in the quarter isn't over yet, obviously, we're seeing 3x, the pipeline that we had at the end of Q1, which to me, and this is qualified pipeline. So, these are sort of important metrics to know where, where you're headed. And then we've also, as I mentioned, sign double into terms of revenue, the deals that we did in Q1, and already, we're not even, we're halfway through the second quarter. So to me, both of those are positive indicators of where we're headed. And when we actually release the new products, you'll see, increased levels of marketing and demand gen, and, and all of that. So I'm pretty excited about where this is all headed. And the response from our current customers has been really good to the improvements that we made in the existing products. I'll also tell you just one anecdote, we had a managed service provider, start with us this quarter, and that customer deployed to one of their customers. And in the first week, we stopped a major attack that got past their existing firewall and, and shields stopped it. And we got a very enthusiastic call from both the customer and from the managed service provider, telling us how much they liked and appreciated shield. And that felt really good that we could have that kind of impact that quickly on a brand-new customer. And it's pretty typical of what we're experiencing now as we get more product out into the marketplace. So I'm pleased with the direction obviously, the volume needs to ramp up pretty significantly, which we think it will with, with the new products in particular honors.

Understood that's great to hear. And since you've mentioned the new products, have you had other customers test both the cloud and the endpoint product in its beta form right now? Or is that going to be put on hold until the demo here in the coming weeks? And then second question around that is once both of these are generally available, what sort of additional training or sound like incremental marketing programs are you planning to really drive faster adoption for these new products?

We haven't tested with customers. at any scale, we have a couple of insight the 10 customers that, know where we're going with this and who understand what we're doing for from a technology standpoint. They're pretty excited about getting their hands on it. But we've not done any general deployment yet. That will happen in Q2 here, as we have demo capability, and the products just a little bit more baked than they are currently at the moment. So I mentioned on the call, I've been using the endpoint internally here. And I have shown that to a couple of customers, and their enthusiasm was pretty high on that one. In particular, as we've demoed that, so I have high hopes for both of these as we get them into the marketplace. And so I'm sorry, what was your second question? I?

Yes. Second question is really around. Once we move closer to general availability, I mean, what sort of additional training is going to be required for your channel partners, and also, it seems like you're going to put some incremental dollars that works to marketing programs for this.

Sure. So during Q1, we spent a lot of effort to get the channel ready for the existing product and understanding what our technology is and how it works. So there will be some incremental training required for both of the new products, but it's not a 100%, read duplicative effort. It'll be incremental to what they already do and know. And in particular, one of the things that we're focused on is making both of these new products much easier to demo, much easier to try and do a POC. And then ultimately, much easier to buy once the customer makes a buying decision. Today, as we've talked before, you know, deploying a hardware appliance behind the firewall requires usually some heavy lifting, that we hope to avoid, at least for demo and POC purposes going forward. So we think that this should speed up the sales cycle and enlighten the load in terms of POCs going forward.

Understand, well, thanks for taking my questions. And best of luck with the rest of you, too.

Thanks.

Thank you. [Operator Instructions] We go next now to Ed Woo at Ascendiant Capital.

Yes, congratulations on the quarter. Know what the supply chain issues, inflation and worker shortages? Has that been impacting your product development at all or your sales cycles?

Not that I can see at the moment. We've been very fortunate in terms of the stability in our staffing and from that perspective, not have not seen any impact currently. Only the supply chain issues, as I mentioned, briefly on the call really only are impacting this high throughput failover solution that we've had under development, and it's unclear at this particular point, we're trying to get more clarity from our suppliers on if they're impacted and what that impact might be. But at this point, we just don't have an answer to that question. So stay tuned, we'll let you know and when we know, but so far, you know knock wood, I think we're in better shape than many others, apparently are on both runs.

Great. And my last question is, obviously, cybersecurity and hacking is you know, gaining a lot of press, have you noticed any change of competition if either new entrants are coming into the market.

Not so much new entrants, what we have seen quite frankly, is a lot more inbound activity. Whenever you have international news and these topics in the press to the degree that they have been certainly over the last two months or so. It creates an environment that is conducive and positive for us in terms of how we can help organizations. So, we have seen an increase in an inbound interest and I do find that people are taking these kinds of conversation's far more seriously than they might have, you know, without that external stimulus. So I believe that in the long run, and even in the short run that translates to positive things for Intrusion.

Great. Well, thanks for answering my questions. And I wish you guys good luck. Thank you.

Thank you.

[Indiscernible] gentleman appears we have no further questions this afternoon. Mr. Scott, I'll turn things back to you for any closing comments.

Well, thank you. Hey, I really appreciate the questions today and the interest in Intrusion. I know this has been a long journey for some of our shareholders. And we all certainly would hope that the share price was significantly higher than it is today. I know that frustrates everyone and especially our long-term shareholders. That said, I think we are poised to renew interest in Intrusion. And I think we're on the doorstep of a bright new era for Intrusion going forward. I look forward to sharing our second quarter results with you. And I do appreciate your patience and your perseverance with us so far. And I hope that that can be rewarded in the future. I'm very excited about where we're going. And I appreciate everybody. Everybody's interest and sharing your questions with us today. Thanks.

Thanks, Mr. Scott. Ladies and gentlemen, that would conclude Intruder’s Incorporated First Quarter 2022 Earnings Conference Call. With that, thank you all so much for joining us and wish you all a great afternoon. Good bye.