Intrusion Inc.

Good afternoon and welcome to the first quarter 2021 results financial conference call. At this time, all participants are in listen only mode. At the conclusion of today's conference call, instructions will be given for the question and answer session. Today's conference call is being recorded for replay purposes. I would now like to turn the call over to Joel Akramasic of Shelton Group Investor Relations. Joel, please go ahead.

Good afternoon and welcome to Intrusion's first quarter 2021 earnings conference call. I'm Joel Akramowitz, Managing Director of Shelton Group, Intrusion's investor relations firm. Joining me are Jack Blunt, Intrusion's President and CEO, and Franklin Byrd, Intrusion's CFO. Now, before we begin the call, I want to remind you that today's conference call may contain forward-looking statements regarding future events, including but not limited to Expectations for Intrusion's future business, financial performance and goals, customer and industry adoption of Shield technology, successfully bringing to market Intrusion's design pipeline, and executing on its business plan. These forward-looking statements are based on estimates, judgments, current trends, and market conditions, and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. We encourage you to review the company's SEC filings, including the 2020 Form 10-K filed with the SEC on March 9, 2021, and other SEC filings made from time to time, in which we may discuss risk factors associated with attesting an intrusion. All forward-looking statements are made as of the date of this call, Tuesday, May 4, 2021, and except as required by law, we do not intend to update this information. This conference call will be available for audio replay for at least 90 days in the Investor Relations section of Intrusion's website at www.intrusion.com. Now, we'll start the call off with a review of the financial results by Franklin, and then Jack will review Intrusion's recent operating developments, progress with Shield, and the company's key objectives going forward. Then we'll be happy to take the questions. With that, I'd like to turn the call over now to Intrusion's CFO, Okay, Franklin Bird. Franklin, please go ahead.

Franklin Bird Well, thanks, Joel, and thanks to everyone who's joined us today. So for the first quarter, 2021 revenue was $1.9 million compared to $1.6 million in the fourth quarter of 2020 and $1.8 million in the first quarter of 2020. Revenue for the first quarter continued to reflect the impact of extended government shutdowns related to the pandemic, but we're hoping to see positive signs of a recovery as Washington begins to reopen and a more normal ordering patterns return throughout the course of the year. Gross margin in the first quarter was 66% compared with 58% last year and 58% in the first quarter of 2020. First quarter operating expenses were $5.1 million compared to $4.8 million last quarter, which included a $1.1 million non-cash write-off related to a prior office lease arrangement. This compares to operating expenses of $1.5 million in the same quarter a year ago. As mentioned in the last quarter, the increase of operating expenses is due to the additional hiring we've had to expand our sales and leadership team, combined with increased marketing focus on the development and launch of SHIELD. To drill down a little further on the additional employees, since the first quarter of last year, 2020, the company has hired 38 additional employees across the board for the development and launch of SHIELD. The breakdown of these new employees were as follows. 26 in sales and marketing, eight in research and development, and four in general administrative areas. In addition, hired employees, we've also increased our use of contract consultants for both research and development and our legacy consulting business. As I previously stated, we have continued to step up our marketing efforts in 2021, focusing on the launch of Shield. Additionally, we've experienced general expense increases, which you would normally expect when employee headcount increases. Net loss for the first quarter of 2021 was 3.9 million, or minus 22 cents per share, on 17.6 million weighted average shares, compared to a net loss of the same, 3.9 million, or minus 23 cents per share, in the prior quarter, and a net loss of 0.5 million, or minus 4 cents per share, in the first quarter of 2020. Cash and cash equivalents as of March 31st, 2021, with $13.1 million compared to $16.7 million in the prior quarter. And working capital was $12.4 million and total outstanding debt at the end of the quarter was $635,000, including the current portion. In terms of guidance, we have continued our current policy of not providing quarterly guidance at this time due to the fact that we are still in the early stages of ramping orders on SHIELD As we stated previously, it's very difficult at this stage to accurately predict the exact nature and timing of the revenue ramp, but we'll continue to reevaluate this on the quarters ahead. With that, I'm pleased to pass the call over to Jack to review recent business developments with Shield and several other activities across the company.