INTZ

• Strategic Acquisition: Vigil Agent

  • Completed the transformative acquisition of Vigil Agent, an AI-native managed security service provider (MSSP), to advance Intrusion's long-term growth strategy of building a diversified, recurring-revenue focused cybersecurity platform. The acquisition immediately adds $3.5 million in annual recurring revenue, expands access to new commercial customers and channel partners, brings complementary AI-powered threat detection capabilities, and adds experienced cybersecurity personnel. Within weeks of closing, the combined business secured over $350,000 in annualized new commercial business and customer renewals, signed new strategic MSP partners with total potential ARR of over $1 million, and identified $3 million in annualized cross-synergies from operational efficiencies and integration. Post-acquisition, the firm has re-segmented go-to-market: Intrusion retains focus on U.S. federal, state, and large institutional government clients requiring customized tailored solutions and consulting, while Vigil Agent operates as a dedicated commercial business unit that sells integrated offerings to commercial customers. Technical teams have already begun developing new combined capabilities to detect and remediate AI-driven insider and external threats, identified as the highest-priority emerging cybersecurity battle space.

• Government Contract Updates

  • The previously disclosed DOW contract extension remains delayed due to unpredictable U.S. federal government procurement and funding processes, compounded by ongoing fluid geopolitical tensions related to the Iran conflict. Management notes the opportunity has shifted in timing rather than size, expects revenue recognition once the situation normalizes, and sees potential for additional expansion across DOW locations. In the interim, Intrusion has secured small support and maintenance contracts with local agencies to cover ongoing operating costs for already deployed infrastructure. The firm secured a new $4 million annual contract for cyber threat intelligence and critical infrastructure protection with the State of Texas, with revenue recognition starting in Q2 2026 and extending into FY2027. Additional cross-sell opportunities for consulting and technology services have been identified in Texas, and the firm is replicating this engagement framework to pursue contracts in other U.S. states and territories. The firm is actively engaging with U.S. utility agencies following recent nation-state attacks on water and utility infrastructure, as Intrusion's solution is purpose-built to protect these critical facilities.

• Public Safety Partnership (Posse Program with Port Nexus)

  • The Posse public safety alert solution, delivered via partnership with Port Nexus, gained strong market traction and positive reception at multiple law enforcement trade shows in Q2 2026, with a large pipeline of qualified leads generated from events in Iowa and Texas. As of Q2 2026, the solution is deployed across 5 Texas counties, 2 Iowa counties, and 1 Missouri county. Port Nexus recently announced a new integration partnership with a widely used computer-aided dispatch solution already installed at hundreds of Midwest law enforcement agencies, which will simplify deployment and expand addressable market for the Posse solution. Management classifies the program as a high-margin long-term growth channel for the public safety market, with meaningful revenue contribution expected to build over coming quarters.

• Shareholder Meeting

  • Intrusion's 2026 annual shareholder meeting will be held on August 27. The board of directors unanimously recommends approval of all proposals, including Proposal 3 to authorize issuance of common stock above the NASDAQ 19.9% threshold required for the Vigil Agent acquisition. Management urges all shareholders of record as of June 30 to submit their proxies and vote early.

• Management maintains its long-term target of achieving full company profitability and positive cash flow in calendar 2027, with the CEO targeting positive cash flow by Q1 2027 (previously targeted a cash flow positive run rate by Q4 2026, but no longer expects full Q4 2026 cash flow positivity).
• Management projects continued sequential revenue improvement through the remainder of 2026, driven by new critical infrastructure contract wins with U.S. government agencies, expansion of the Port Nexus partnership, ongoing revenue recognition from the State of Texas contract, the addition of Vigil Agent recurring revenue, growing commercial subscription revenue from new channel partners, and expansion into other U.S. states with established funded cyber commands.
• The Posse program with Port Nexus is expected to begin contributing meaningful revenue in 2027.
• Future growth will come from a combination of organic expansion and targeted inorganic acquisitions, particularly in the fast-consolidating AI-native MSSP market.

Intrusion Inc. reports total Q2 2026 revenue of $1.5 million, representing a 64% sequential increase from Q1 2026 and a 22% year-over-year decrease from Q2 2025. The year-over-year decline is fully attributed to continued delays in Department of War (DOW) contract funding, while the sequential improvement comes from the newly secured State of Texas contract. Gross profit margin for Q2 2026 was 66%, down from 76% in Q2 2025, with the decrease driven by shifts in product and revenue mix. Operating expenses totaled $3.4 million, a $0.8 million sequential decrease and a $0.1 million year-over-year increase: the sequential decline stems from audit fee timing, cost reallocation to cost of sales for the Texas contract, and higher software development costs, while the year-over-year increase reflects stepped-up investment in sales personnel, trade shows, and marketing. Net loss for the quarter was $2.6 million ($0.13 per diluted share), up from a $2 million net loss ($0.10 per diluted share) in Q2 2025, driven by the DOW contract-related revenue decline. The recently acquired Vigil Agent segment contributes $3.5 million in annual recurring revenue (ARR) from a diversified base of multi-year commercial customer contracts, and secured over $350,000 in annualized new business and customer renewals within weeks of close. The traditional Intrusion government segment holds the delayed DOW contract and the $4 million annual State of Texas contract, with revenue from the Texas contract starting to be recognized in Q2 2026. The Posse program (public safety safety partnership with Port Nexus) did not generate material revenue in Q2 2026.

• The DOW contract extension timing and revenue recognition remain uncertain, dependent on unpredictable federal government procurement and funding processes and fluid geopolitical conditions in the Middle East. There is no guarantee the contract will be awarded or that expected revenue will materialize in future periods.
• As of June 30, 2026, Intrusion only held $0.2 million in cash and cash equivalents. The firm recently raised $3.3 million in net proceeds via two note purchase agreements to address short-term liquidity needs stemming from DOW contract delays and delayed customer payments, but will need to pursue additional public or private capital (including use of the firm's at-the-market offering program) to fund ongoing operations and growth.
• The Posse public safety solution has a long, complex sales cycle that requires coordinated approval from both school districts and local law enforcement agencies, which may slow revenue ramp despite strong lead generation.
• Post-acquisition integration of Vigil Agent carries execution risk, and the planned strategic transformation requires sustained disciplined execution to deliver expected synergies and growth.

Q: The analyst asks how complete the Vigil Agent integration is, whether Intrusion had a prior relationship with Vigil Agent, and if future M&A can be expected. / A: The commercial integration is already sufficiently complete that the firm can offer combined Intrusion Shield and Vigil Agent offerings to customers, which has already helped close new business and renew existing contracts. The firm will maintain a clear segmentation: Vigil Agent leads commercial go-to-market, while Intrusion's legacy sales team serves large custom government contracts. Intrusion had not worked with Vigil Agent prior to acquisition, but was drawn to its native AI-focused approach, which provides meaningful strategic advantages. Future acquisitions are a core part of the firm's growth strategy, particularly in the consolidating MSSP market, alongside organic growth.

Q: The analyst asks for an update on the Port Nexus partnership, its current deployment status, and expected 2027 revenue contribution. / A: As of Q2 2026, the Posse solution is deployed across 5 Texas counties, 2 Iowa counties, and 1 Missouri county. Multiple trade shows generated extremely high attendee enthusiasm and a large pipeline of qualified leads, including significant exposure to half of Iowa's sheriff departments and school districts. A recent integration partnership with a widely used computer-aided dispatch platform for Midwest law enforcement will simplify deployment and accelerate growth, addressing the prior challenge of building market access from scratch. While exact revenue cannot be projected due to the fragmented decision-making process, management expects Posse to begin contributing meaningful revenue in 2027.

Q: A private investor asks how the firm will track ARR contributions from the legacy Intrusion business versus Vigil Agent, especially for combined offerings, and when Vigil Agent shareholder shares will be eligible for sale. / A: Both businesses operate on recurring subscription models, so tracking separate contributions is straightforward. For combined embedded offerings, the firm will use simple internal transfer pricing to attribute revenue, which poses no material operational challenge. Vigil Agent shareholder unregistered shares will be eligible for resale under Section 144 after a mandatory 6-month holding period, with no additional internal restrictions on sales.

Q: A private investor asks for clarification on the firm's target for quarterly cash flow positivity, updating prior guidance. / A: Management maintains the full-year 2027 target for cash flow positivity, and the CEO's personal goal is to achieve cash flow positivity in Q1 2027. The prior target of a cash flow positive run rate by Q4 2026 still stands, but full Q4 2026 will not be cash flow positive, and management declines to commit to an exact quarter beyond the stated 2027 target with Q1 as the goal.