Intrusion Inc. (INTZ) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Post-Annual Meeting and Business Update Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would like to now hand the conference over to your speaker today, Michael Paxton, Vice President and Chief Financial Officer. Please go ahead, sir.

Okay. Thank you. Welcome to this morning's call to update our business and discuss the appointment of Jack Blount as CEO. Also participating on the call today is Joe Head, Senior Vice President and Co-Founder; and of course, Jack Blount. We will be glad to answer any questions after our prepared remarks. We distributed the press release of the appointment of Jack at around 8:00 this morning. A replay of today's call will be available at approximately 3 p.m. today for a 1-week period. The replay conference call number is (855) 859-2056, conference ID number 4547798. In addition, a live and archived audio webcast of the call is available at our website, intrusion.com. Please be reminded that during this call, including the question-and-answer session, we may make forward-looking statements, which reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. Forward-looking statements involve a number of risks and uncertainties. Such statements include, without limitations, statements regarding expectations of future revenue, product orders from new and existing customers and profitability, and are qualified by the inherent difficulties in forecasting future sales caused by current economic conditions and spending patterns of and appropriations to U.S. government departments. Forward-looking statements also include the effects of sales and implementation cycles for our products on our quarterly results and difficulties in accurately estimating market growth, the unpredictability of government and corporate spending on information security products and the effects of the coronavirus pandemic as well as other statements. These statements are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements. These factors that could cause actual results to differ materially from expectations are detailed in the company's most recent reports on Form 10-K and Form 10-Q, particularly under the heading Risk Factors. Now I'll go ahead and turn the call over to Joe Head. Joe?

Thanks, Mike. As you all know, our company has core strengths in large data sets and security expertise. This call is about how to take these forward toward maximizing shareholder value. The new security product is proceeding well toward being ready to announce. Note with all of our excitement on the novel new product news, this does not signal a shift away from our base. It's a key to our strength. I've been writing patents for the last several weeks. There are a lot of new capabilities in the product that are novel and amazing. Most of the major parts of the products are implemented and functional already. This product is emerging at the perfect time and actually solve some unsolvable security problems. First news today, as Mike alluded -- first news today of -- today's call is to introduce our new CEO and President, Jack Blount. Back in 1983, 2 of us, Ward and I, chose to become partners and found the company. Jack and Mike Paxton have known each other a long time, and Jack knew Ward as well. I'm here to tell you that Jack is a perfect fit for our needs and that we're fortunate to have him as our new CEO. Just as Ward and I worked as great partners when we cofounded the company, both Jack and I are excited about what Intrusion will be able to accomplish under his leadership. I'm not going anywhere. He's going to be a pleasure to work with. Jack's history is successfully taking products to market, doing turnarounds. And his long history of doing pioneering work in security made him an easy choice. He'll accomplish far more -- we will accomplish far more and grow -- and we'll grow larger than we did even in the ODS days manufacturing land equipment because like I said, our product is emerging at the perfect time to actually solve some unsolvable security problems and perhaps most importantly, because Jack will lead our go-to-market strategy better than we would have done without him. So I'll turn the phone call over to Jack, so you can all see why I'm so excited that he's here. Jack?

Thank you very much, Joe. And likewise, you are a pleasure to work with as well, my friend. I enjoy it very much. I am excited, tremendously excited to be here at Intrusion. I have known Mike for a long time. We used to be neighbors. Our sons played on junior high basketball team together. So it's -- and they're well underway to adulthood and their own families today. So it's been a long time Mike and I've known each other and have a great regard for each other. I really feel close to this company because I did meet Ward when I was working on my first turnaround start-up for a private equity firm, Sevin Rosen, here in Dallas back in the '80s and got to know Ward through the Chairman of my Board at Sevin Rosen. I was impressed with Ward then and what he was doing with the company and have been for many years. So normally, I get brought in by private equity firms to companies I know nothing about and have no history with just to fix them. But this has been a unique situation where it feels like family. When I got here, they're friends, and it's a technology that is closest and dearest to my heart. Cybersecurity is something that I've been working on since I was in college at SMU many, many years ago. The very first product I worked on when I got hired at IBM when I was still a student at SMU was a product called [ RACF ]. Many of you may have actually heard of it. It's been around for almost 50 years. And it was the first Internet secure -- well, the first security product for our mainframe, now cybersecurity product and is still being used today. So cybersecurity is where I started my roots, and I have worked in cybersecurity in some aspect or another throughout every company I've been around the world. I've watched the problem grow from annoyance to absolutely catastrophic. As you've probably seen, if not, you will see on our website when you get to our new website, which is launching today, we represent a document that the federal government put together in March that talks about the dangers of cybersecurity and the impact that it's having on the world. $3 trillion losses, $3 trillion in losses last year alone around the world from cybercrime. That is a lot more than an annoyance or a nuisance. It is a major catastrophe. It is the #1 issue that insurance companies now think about when you're figuring out on insurance policies for business. It creates the largest single risk any business in the world has today, a far cry from where we used to be. Speaking of where we used to be, it also reminds me my past. The very first product I worked on at IBM was called the 5110. It was the first desktop computer. It had a built-in keyboard, a 4-inch monochrome built-in monitor and 2 floppy disk drives, a total of 2.4 gig of storage on the disk and 64k of memory, sold for $24,000. Think about how that compares to the PCs we buy today with terabytes of storage for less than $2,000. We've come a long, long way. Likewise, as I say, you have to think about $3 trillion in losses last year from cybercrime. So to be here at Intrusion, right now at this time is the perfect time in the world, I think, to really change the entire landscape of cybersecurity. I believe that the world has been looking at the problem, what I call, upside down. I've been in business my whole life. I have one exception where I was asked by the President to come to work for the federal government. I actually felt when I had the phone call that it was a spoof by my friends. Turn to come out, it was actually President Obama on the phone. Anybody can recognize his voice. He wanted to tell me that they had just had a security breach that cost them $300 million, and he needed outside help. So I went in initially to work with big firms like Deloitte and Accenture, who had literally hundreds of people working on this project and felt a little bit overwhelmed at the maze that I was walking into but quickly realized how far behind our government was on understanding and dealing with cybersecurity. Over the next couple of years, I spent $20 million of the government's money putting in a 10-layer architecture to prevent cybersecurity for the federal government. $20 million seems like a lot of money to you and I, but compared to a $300 million loss, Obama didn't even think it was a rounding error. He didn't even blink when I asked him for the money. I worked at the government in an agency called the United States Department of Agriculture, which is the most misunderstood department in government. So I have to mention it just for a minute because when I got there, I really wondered why it was there. I thought about farmers, and I thought about red meat, which I eat a lot of, but I didn't know why they needed an IT expert or why they have been hacked for $300 million. Quickly found out after I got my security clearance in less than 12 hours, by the way, to top-level security that USDA does a lot more than most people think. So I'll just educate you for your own benefit as a citizen. They actually run the 10th largest bank in the United States for the federal government. They run the 12th largest health care system in the United States for the federal government. And lo and behold, they actually do payroll for every federal employee. I had no idea of these things before I got there. It quickly became obvious to me why the Chinese were after them so bad and constantly hammering trying to hack them. If they could shut down our bank, if they could shut down our health care, if they could shut down paychecks to employees, they could literally shut down the federal government. So I could see why they were being attacked the way they were being attacked, why they got hacked successfully, and why they didn't care about spending $20 million to stop the problem. The problem is far worse today. And American businesses or foreign businesses cannot spend $20 million putting in a solution. That's why when I got here, I was so excited to see the depth and richness of the database that this company has been using for many, many years to provide top-level security information to the federal government about cybercrime. I visualize that database used with a product that they had called Savant, which does real-time analysis of every packet of information going through the Internet. With what I have been spending the last 5 to 7 years in consulting on, which is artificial intelligence. When you put the 3 of those things together, you can create a real-time solution that is a true defense against cybercrime. It's a real-time solution. It's not just working off a white list or a black list. It's not analyzing packets a day, a week or a month later to find where you're breached and how to try and go fix it. It literally real-time stops anything that can harm you. So it looks at the problem completely differently. It looks at it real-time. It looks at it with AI. And I believe that we have a product that is going to be affordable to any business in America that any business in America tomorrow must have to operate. And it will let them, again, use the Internet safely to do work and to grow their business the way they've always wanted to grow their businesses. So I have been doing technology my whole life. I'm actually a math major, still pride myself on the fact that I'm pretty sophisticated at math, and I use it a lot in what I do. For those of you who don't know a lot about AI, let me just tell you very simply, it's all about math algorithms. That's all AI is. So I have a great appreciation for it and an understanding of how we can use it to fundamentally change the way things are done. As Joe said, I do have a lot of experience in sales and marketing as well. I've actually done business in 42 different countries around the world, feet on the street, signing contracts, supporting customers with great success. I've done presentations at almost every technology conference in every country around the world. I extensively did business in the Middle East, which a lot of people don't like to do; South America, which people don't like to think about. I spent months in Russia, over a dozen trips to China. Interestingly, the only reason I went to China was to sell them software solutions. I had very large government agencies that were my customers at one of my companies that signed millions of dollars of checks to buy technology to support their needs in the China Peninsula, which is why I was there, a very, very interesting place, but not a place I would ever want to live for sure and not a place I ever bought technology from. I actually sold it to them. So as you can tell, I have a great depth of experience in technology, in sales and marketing, in the geographical marketplace that the world is flat that we do business in today. There are 34 million U.S. businesses that are our potential marketplace for this new product that we are about to launch. If you look at the worldwide market, there's 190 million businesses that need this product. This is the most unlimited market I have ever serviced in any company I've worked at by far. There literally is no business that doesn't need what we're going to launch. And there's no business that can't afford it. This is not a product like many that you pay $5 million for or $10 million for, which some cybersecurity products cost you today and still don't solve your problem. One of the most interesting things I found at the government was that everybody believes firewalls stop cybersecurity. Every company in the world has a firewall. That is their mainstream first line of defense to deal with cybercrime is a firewall. Fundamentally, it's the wrong way of thinking because it wasn't designed for that problem. One thing that every cybercrime has in common that I've been able to find through extensive research in this country, in Canada, in Europe, in Russia, in China, every company that's been breached in the last 5 years had one thing in common, they all had a firewall, and they got breached anyway. So we are not launching a firewall. We work with a firewall. We are actually a passive device. We are a real-time device, literally working at the millisecond to analyze, evaluate, use our databases that are unique and valuable. I've literally never seen an Internet database that is as rich as we have at intrusion. We have 20 years of Internet traffic that we have analyzed, put metadata on, captured metadata. We've indexed it. We know about the country it's from. We know every aspect of that Internet. That's what gives us the ability to build this unique product and literally block, on the fly, incoming sessions, outgoing sessions and even internally, lateral sessions. So it is a very, very unique problem; a very, very unique solution; and it's not a firewall. It doesn't attempt to do all the great things that firewalls do. It is a complement and a supplement to firewalls that adds the most needed value that every business has. It stops cybercrime in its tracks. So I feel very, very, very passionate about being at this company, working with friends, working on what I think is one of the most important technologies in the marketplace today and fundamentally critical for existence, $3 trillion in losses last year, put thousands of companies literally out of business. The FBI says that 60% of businesses in America last year that got hit by ransomware went out of business within months. This is serious, serious stuff, and it's getting worse. It's forecast to be $6 trillion in losses by 2021. The world simply cannot afford that. We must launch a new defense, a new technology, a new approach that real-time makes it safe to use the Internet for business. I've said a lot. I've talked quite a bit. I've touched on some of my past. A lot of my past I haven't touched on because it was in the press release. I also want to talk to you about the fact that I brought in a new VP of Marketing, a very talented lady, who comes out of a very large company in the industry. Her name is Julia Kramer. She will be assisting me in our efforts to use the channel, and maybe it's worth mentioning just a little bit since she don't know me. When I left IBM, which felt they could do everything themselves, sales, marketing, development, manufacturing, distribution, IBM in the '70s and '80s was the computing world, and they did do everything. But when I went to Novell, a start-up out of Provo, Utah, they were trying to act like IBM. They were trying to do everything themselves, from building computers from the ground-up to building network cards to writing and developing a network operating system. I quickly identified the real value they had was their network operating system. The 4% margins they were making on their hardware wasn't going to keep the lights on and wasn't going to stay competitive with foreign powers. So I got them out of the hardware business, network cards and computers, focused strictly on the software. And instead of trying to hire more salespeople, I started utilizing, growing, maturing the channel. When I started, we had 0 channel partners. When I left 7 years later, we had 42,000 partners in the channel that sold the net wear product for us. When I started, all of our sales were in the U.S. When I resigned and moved on, 62% of our sales were from foreign countries. The channel is the most powerful distribution unit in the world. It is what we will use to get our product into the hands of businesses all around the world as quickly as possible. Today, the channel is mature, savvy, intelligent, trained and huge. There's over 18,000 channel partners that we can go to and use to sell our product today. So I'm not here to build a huge sales force. I'm here to work and leverage the channel sales force that exists and already has relationships with customers to get our hands into the hands of the customer that needs it at the right time and in the right manner. With that, I'll open it up and then try and answer your questions. I hope I've given you enough information about myself, my passion for the space that this company's in and my passion for the fact that I think we can generally and completely change the landscape of cybercrime. With that, I'll open it up to your questions.

Yes. Operator, can you remind the participants how to queue up for questions?

[Operator Instructions] The first question comes from the line of [ Howard Brous ].

Jack, first of all, congratulations. I've known Ward, Joe and Mike for, gosh, almost a dozen years. So they are good people to work with and certainly have read your CV and very impressed. So first, most important, congratulations on joining the firm.

Thank you very much. I'm excited to be here.

Welcome. It certainly sounds that way. Can you discuss with some granularity how you plan to introduce to these 18,000 channel partners the software that you have or will have shortly?

Sure. Again, this is -- I really helped create the channel. So I can talk with a lot of confidence about the channel because every business I've been in, I have used the channel. I've never gone in and tried to hire more salespeople. I've always gone in and tried to leverage the channel. So not just at Novell, but at every company I've worked at, and I've been the CEO of 7 companies, done 7 turnarounds. So I have quite a bit of experience at doing this. I leverage the channel, and there's 2 ways that you really -- well, 3. There's 3 ways that you leverage the channel. Number one and foremost today, which we didn't have back in the Novell days in the '80s is you have the Internet. We are launching today a new website for the company with a new logo, with a new tag line. We talk about protect everything, trust nothing. And that is really the focus of our product, our company, our strength. So we would use the Internet and use it very, very effectively to make people aware of our product, its uniqueness, how to get it, how to use it. And that's why we're launching a new, exciting, easy-to-use, lots of motion, video, mobile devices. It's going to be not a website like you've seen out of this company before, it's going to be a state-of-the-art industry website. Second is really to use e-mail. I have been working with the channel. Again, I helped create the channel. I have distribution list of channel partners that I've worked with at many companies literally around the world, but certainly, we're going to focus first here in the U.S. that I will be sending e-mail blast starting today from me telling them that I'm here at Intrusion now. This is my latest focus and passion and that we have a product that their customers need and why they need it. So I'll send them a quick tutorial. There's 2 things that you need to understand about the channel. Number one is, they're not a huge machine. They're a bunch of small individual businesses. So you have to think what drives those businesses if you want them to help you, and what drives them is keeping their employees working. They're fundamentally consulting companies that work for businesses, providing IT expertise that businesses don't have. And so they have to have a bench of IT people ready to solve customers' problems. The problem that faces is if they don't keep that bench active, they're actually losing money because their overhead goes up. So when I go out to the channel, I will go out with a very simple explanation, a data sheet and a white paper that tells them how we're going to fundamentally change the life of their customers, the revenue they can make on it, the role they play in it, the ongoing monthly activity that they can do to make additional revenues. So I give them a game strategy, a play strategy of how to make money with our product so they can put it to work the day they get it instead of putting it on the shelf and say, "I have another offering." So that's part of it. The other part fundamentally is distributors. Distributors have become very, very large and very, very mature and very, very sophisticated. Ingram Micro and Tech Data are 2 companies that were infants when I started working with them at Novell. Today, they are multibillion-dollar corporations. They sell thousands of products. They have thousands of resellers that are exclusive to them. So I will go out and meet with. I have my first meeting scheduled with Ingram Micro in a couple of weeks on the West Coast. So I will meet with executives at Ingram Micro, people that I've worked with before, again, to explain to them what is so unique about our products offering, how we are turning Internet security on its head and doing it real-time with AI so that it can actually protect you. So it's really a 3-pronged approach of how we'll do that. And my past experience tells me we will be very successful with that. Hope that answers your question.

It certainly does. What impact -- if I look at 2021 just on to set up everything, what kind of an impact do you think this will have on the company in terms of, say, gross sales?

Well, Mike gave you warnings about this. And again, this isn't my first rodeo. I've been the CEO of both...

That's why I'm asking the question.

Watch out, Howard.

Both public and private companies. So I dance this dance all the time. Obviously, I'm here because I believe we have something that's unique and needed and valuable. I just explained to you how dramatic cybercrime is and how rapidly it's going and how dangerous it is and therefore, how much people need a solution. When we have the most unique, one-of-a-kind product offering in the marketplace, I believe it is the only real-time data-driven, AI, cybersecurity defense that will be shipping and affordable. So I do believe it will have a very, very impact on the revenues of this company. The way to think about it, might be easiest is to think about where is this company's revenues been coming from. The company's revenues have been coming from consulting to agencies on a one-on-one basis. That is about the hardest way in technology to make money. It's profitable. They've been profitable for 20 years doing it, but it is a very, very tough business that's very hard to grow. It's very hard to service more than a dozen or 2 dozen customers. I'm looking at the market that I just told you in America alone has 34 million potential customers and that I'm going to use the channel to get to those customers. So I believe we will exceed our current revenues with our new product offering. That's about as specific as I can be. Does that help you?

Yes. That's what I was looking for.

Thank you.

Let's remind [ we can use it ] as well as use it.

We all know that. Yes, again, congratulations.

Some use out of it. That is all...

My pleasure. My pleasure.

Thanks, Howard.

Your next question comes from the participant's line, whose information was unable to be gathered. Callers who's queued up for questions, please clearly state your first and last name.

Is this me?

How are you doing today? [ Walt ], are you there?

Oh, I'm sorry. I started saying, is this me. I mumbled when I gave the start. Now I'm here. I apologize. I can't go anyplace. I'm stuck here. Congratulate Jack for finding a job that's down the road since it's not that far, straight down 75.

Absolutely. Close to my ranch.

Just to make sure I understand, what you are doing is largely independent of and separate from what Joe and the company have been doing historically, which you correctly pointed out is dealing with a limited number of agencies, high end, TraceCop Savant and some combination thereof. That business will continue, hopefully, to grow and get new contracts and your customers, but that is not what you and your new marketing person are going to be addressing, correct?

Well, yes, but let me just caveat that just a little bit. Again, I spent 4 years as a CIO in the federal government. I know an awful lot of people in D.C. I have an awful lot of connection, mostly on the civilian side of government. So where Joe and his team have really worked on the DoD side of government, I really believe there are significant opportunities in government to grow our current business in consulting with civilian agencies. And I will do that, and I will use my network of contacts. I have a trip to D.C. already planned. I was talking to our salespeople in D.C. just last Friday, arranging some of those meetings. So I will continue to focus on that and help that. At the same time, yes, what I am launching and we'll work on probably more than the consulting business is this new product, and this product will not only be for businesses. I probably said that a little bit too strongly in the early presentation. This product will be sold to civilian government agencies as well? Absolutely. Any entity any organization that is using the Internet in a massive way. USDA, for example, 110,000 federal employees work every day on the Internet. That's why they have a huge IT department. I had 3,000 IT professionals. They spend $3 billion a year on IT just at USDA. So keeping them safe and functioning and working is critical. They need our new product to be able to do that. So I will be selling to the government, to businesses a new product that is a hands-free, works by itself, uses AI, keeps them safe. And one of the things I didn't mention that, I guess, I can talk about is this product gives you a real-time report of what it's doing beneficial for you. Now it also produces what most CFOs will look at, a monthly report of all the IP addresses around the world that have tried to contact you that are dangerous, nefarious, evil, harmful that it found and stopped. That's approximately 2.7 billion IP addresses we will be looking for and blocking. Nobody in the world has a database of 2.7 billion evil IP addresses, except Intrusion, which is why our product is so unique and will make such a difference. So I will be focused on getting this product in the hands of every business and every agency, federal, state and local. There was just a report out, I think, last week or maybe earlier this week about the millions of dollars that the federal government is allocating for cybersecurity for state and local governments so as well as the federal need. I think everybody is aware of how severe the problem has become and how much it has to be addressed.

And just to get into some more details, you are -- and it may vary by who the customer is. The customer is buying a license, he's buying a monthly service. It's going to be SaaS-based. It's going to be how -- just to use an example you just brought up, which is the U.S. Department of Agriculture, as you approach them or someone -- one of your channel partners approaches them, it is sold on a per-desk basis, per-location basis, per-agency basis, all of the above, and some sense as to dollars for a school system, just make one up, or for a corporation or for something big, how they'll be charged?

Sure. Fundamentally, again, at this stage, let me answer the question probably this way. It is software as a service. However, it is hardware as well. We call it a SaaS, software as a service. But it does have a network appliance that comes with it. But it is sold as a monthly service. It's a buy it, try it, you'll like it. It's kind of like the Gillette razors that you see advertised on TV. You buy it, you like it, you use it. You don't like it, you throw it out. It doesn't cost you anything. So you're not committing to a 3-year contract or a 5-year contract or buying hardware that you have to rationalize payment of for the next 3 years. It's a service. We believe you will see tremendous value out of that service every month, and therefore, year 1 is keep paying part. It's charged on a per-seat basis. So whether you're large or small, it's affordable because you're only paying for the number of seats you're using. So if you're a smaller company, your service fee a month is much smaller. If you're a very large entity like USDA with 110,000 employees, you're going to pay a lot more money. But as I said, they have a $3 billion annual IT budget. They've got a lot more money to spend on it. What they're spending on other cybersecurity products today, I can tell you because I used to write those checks and sign those contracts, there's a whole lot more than we're going to be asking them for. We are going to have the most affordable cybersecurity defense. Let me say that it will be in the neighborhood of $20 a seat, for example. So it's a very, very affordable solution. Does that help you?

It does. And then lastly, maybe I want to follow-up afterward. Mike will give you some history of my history with the company since I'm the guy, although not this year, who -- the only one who showed up for annual meetings for the last decade. But...

Yes. We missed you on Friday, [ Walter ].

Yes. Well, actually, I would have been there if I was able to get there. We just sat in the lobby while you guys had your meeting. From your standpoint, how much staffing or what do you need when you approach Ingram Micro as an example or you approach a large entity in getting them set up and getting them started? Is this something where they buy it, and it doesn't take a lot of that resources on your end? Would you need a reasonable staff to walk them through, it's a plug-and-play or your channel partners will be able to do that? Or you're going to need a meaningful staff, more than 2 of you?

Well, let me be honest. I anticipate we will need more than 2 of us eventually. We don't need more than 2 of us to get started. We don't need more than 2 of us to be successful having sales in 2020. So I don't anticipate any significant growth in 2020. I do anticipate sales driving the need for additional people to support that in 2021. However, it is, as you say, very much a turnkey solution. At the very low end for small businesses, we literally ship them an appliance, they plug it into their network. They put in the e-mail address of where they want the monthly financial report sent that says what they got protected, and it does everything else. It starts working and does everything else for you. So at the low end, there is no IT involved. Today, the world has a shortage of about 1 million cybersecurity IT professionals. It's forecasted it will grow to 3.5 million by 2023. So I did not want to design and configure until a product that requires the kind of IT professionals that I had working for me in the United States government, 3,000 of them. You can't afford that. You can't find them. They don't exist. That's why we put in the AI component. AI is actually like having a team of IT engineers on your staff working 24/7 for you. Without IT, nobody could do that. Without our database, you couldn't have this product without our technology for a real-time appliance that can look real-time at every packet of information moving, you couldn't do this. So it utilizes the assets this company has developed, has expertise in, adds a little bit of AI to us and makes it so that it is easy to install and configure and does not require a significant overhead or headcount.

Last assets that's out there, we'll be able to install it with the expertise they already have.

Yes. I mean, Joe is absolutely right again. I believe infinitely in the channel. They have people that are clearly smart enough. Joe and a couple of the guys here are writing up a white paper on the configuration of larger installations, where you may have multiple appliances, you may change your router configuration, you may change other things about your network configuration to optimize it to the best. And our reseller channel already has the knowledge to do that with a simple document. Plus, there will be information online. So we really believe this is very, very -- about as close as you can get to a hands-free solution.

Okay.

And also, Howard, so a few more words for you. So...

[ Walter ].

I'm sorry, [ Walter ]. When you look at the walking in the door to a place that's basically defenseless because they have no staff, it will help those guys. But then when you go to the medium and large campuses, you could say, well, have I surplus or made redundant all their wizards that they own, they're suddenly going to have a lot richer data about what's going on in their network than they've had in the past. They can actually work on more meaningful goals because they've got better visibility than they ever had before.

So this could be used at some of the high-end, larger corporate campuses and data centers as well as smaller businesses?

Correct. Absolutely. I actually started my career out at IBM selling only to Fortune 500 and above. I have years and years of experience in working in the enterprise market. I don't know of an enterprise company that doesn't need this product and don't want to buy multiple ones because of simply the size of their corporation. Again, this is a value-add add-on to everything you already have for cybersecurity, but it does something that you're not getting today. It blocks billions of bad attempts to connect to you that nobody else can block. Almost all other cybersecurity tools are tools that you analyze where you got breached, when you got breached and how you got breached to try and figure out how to stop it next time. This product stops it before you get breached.

And Jack had 3 elements to what he said before, and we've short-sheeted one of them. So outside in is what I've really fueled for years, which is, are you getting a new breach? Inside out means you've already bought your -- you bought a computer that was manufactured in China, which is all of them, and everything they wanted on that platform was there when they made it. And so calling out can be either a human spy or spyware or spy hardware. But then the third piece that's wrong with the world is that once you get inside the old joke about candy that's hard on the outside and soft on the inside. And once you get into an enclave or into an internal of a corporation, you can spread laterally like crazy with no limitations. And that's the place we're spinning the lead talking about because that's where all our patents are getting written up.

I'm sorry, Joe. Because of our patents, I'm going to caution, Joe, because he's in a territory I'm not really comfortable what he's been talking about. That is a very highly patented area of the product that's very unique. And we really can't say much about that, certainly not any more than he's already said. But that is a very unique aspect. It is a huge part of the danger of networking that people generally don't think about and know what the product looks at. Every product I'm aware of looks at incoming and maybe outgoing, but not internal traffic. Internal traffic is how ransomware spreads and works. It's how most viruses spread and work. It's how most cybercrime works. Again, at the government, where we were hit by over 40,000 attacks a day, we saw everything. We analyzed everything. We looked at everything. And everything bad happens once it finds a way to get in, and it may lay dormant inside of your network for a month, a year. We've seen it lie dormant for 2 years before they get infested enough, depending on the size of your network and your corporation, to actually trigger what they came to do in the first place. So being able to look at that internal traffic is absolutely critical. And again, we have several patents in that area that are pending, so we can't really say much more about it right now.

When you guys see the new website, they'll read the government report site because it's got a very clear picture of just how, I mean, this is like [ ducks against -- maybe ducks ] against the terminator. When you look at defenders against the offense that the world presents, we're defenseless. And so when you look at what's required to get there, that report lays it out well. The other thing to remember and reflect on is that more than half of breaches today are what they call malware free, which means they didn't need malware at any part of the step of the process. They already had your password, they already had other kind of access. They're just leveraging something that was easy. An effective product like we're defining here fixes all of the above.

Your next question comes from the line of [ Ross Taylor ].

It's clear the market's more than a little confused about this play because you guys are as excited as I've ever heard you about something in the markets, traded the stock down pretty hard. Not uncommon, I think your shareholder base. The marginal shareholder tends to not have a good understanding of what he owns. But talk to me, you gave some idea on a back and it's a per seat license monthly basis. What do you think the adoption cycle is going to be for this product? How rapidly do you think we start to see sales?

Well, you'll certainly see sales this year, and the product hasn't even shipped yet, and we lose most of November and December. So we have a fairly small window to selling this year, but you will see sales this year, and I'm sure you will see reference customers come out this year. Again, I think what we are -- I've been doing this for 45 years. I've -- one of this product, I spent $20 million to the government trying to make up a product that can do what this product does. We literally do everything the technology I bought and put in place in the government was capable of doing without spending $20 million. We have really boiled this down to a very unique offering. So I think it will grow very, very rapidly. I think it will grow by word of mouth. I think it will grow because of the reseller channel. I think it will grow because of the monthly reporting. I think every CFO, I mean, quite honestly, I'm not focusing on your normal IT sale, which can be 9 to 18 months almost all these because they have to analyze everything to death forever. They want to buy 3 companion products and test them for 6 months. It's just the way they approach the problem. Our primary target that we are going to be focusing on through our resellers, but also through our own website and direct mailing, is the CFO, the guy who's most worried about risk in his company and has the dollars to spend and is most aware of how pennies on the dollar of savings our product is going to cost him in the long run. So we will be focused on the CFO and we'll be focused on giving him this report every month that says we just blocked 40,000 or 2 million IP addresses from connecting to your website in the last 30 days. Do you want to keep paying? He's going to write that check.

Okay. Now this is a radical change for this company. And I think that's some of what people are going to struggle to kind of get their hands around because this is really a direct go to market, go to the end market approach. While you'll be using resellers and others, you really are -- this is a product that, in many ways, sounds like you think should largely sell itself.

Yes, I absolutely do. Of all the products I've ever worked on, of all the markets I've ever worked in, I think this product will sell itself. It is. Again, I can purchase it, install it as a CEO of a company without any knowledge of technical expertise, and it can start making them safe. And I get a report at the end of the day or at the end of the week or the end of the month that says, it's making me safe. It's the only product I'm aware of that actually tells you every day what it just protected you from. So it is extremely unique in the fact that it will sell itself. Again, though, what makes this product what it is, certainly, the AI is unique and different. The database that we have, that we've collected over 20 years that we're collecting every day of the week from here on out is the unique asset that it's using to make most of its decisions on. So I will continue to grow our federal business, our large corporation business and consulting because when we're asked to come in and consult with these people, we'll come -- they bring us in on the hardest problems they can't find or deal with. And they really want our help to be able to focus on that problem. So by doing that, that's where we get the expertise that we build into the AI that makes this product work. So we will continue to grow, focus and make our consulting business critically important for this company, just as been in the past. But yes, we are augmenting our marketplace, our go-to-market strategy by having a self-service product that makes every business safer.

Okay. On the last call, it was talked about the fact that the new salesmen at the federal level should be able to bring in, basically, what, $12 million -- I think, $12 million to $16 million, which would double or more than double the size of the company. You're talking about a product here that you see redefining Internet security. And we have in our investment pool a number of large internet security companies, companies have traded in the many billions of dollars of valuation generate, in some cases, billions of dollars of revenues. And you indicated that you thought you could double the revenue base. I have to say that for a product that's supposed to change the world on a Internet security basis, that seems to me like -- I don't know if you ever watched Monty Python, but it seems to me like you're trying to hurdle matchbooks there. I mean, isn't the -- what do you really think the opportunity here is if every -- does every company in America end up meeting, is there nothing -- there's nothing like this. It seems that it basically is almost a below-the-line item expense for most companies. So why wouldn't you expect a triple, quadruple, quintuple or more your revenue base? I mean, $100 million in cybersecurity isn't really all that big a deal.

No. But it is a big deal to get into the hands of just thousands of customers, much less million. Again, I've grown products from the ground up before. I launched a brand-new product at a brand-new start-up company. I'm not just on turnarounds. I did a start-up once called MobileWare. I know the pain that it takes, no matter how good your technology is to rapidly grow penetration of a new product. So I'm being realistic about the fact that, that's the buying nature of the market. And then more importantly, probably I'm being realistic about what this company can afford to spend in sales and marketing. If you look at what Apple spends in sales and marketing, you find the number is in the billions of dollars. Marketing is what sells products, generally not technology. Let me use Apple as an example today. I have to use an Apple phone. I've got one right here in front of me. So it's not that I don't like Apple. I have an Apple computer on my desktop. I'm actually a huge Apple fan. But if I feature for feature, as an engineer, did a comparison between the state-of-the-art Samsung phone and the state-of-the-art iPhone, the Samsung wins in every single category. And yet the Apple phone is outselling the Samsung phone 2:1 because of marketing. We are not equipped today to go out and spend millions of dollars on marketing. If I could spend $10 million on marketing between now and Christmas, then I would give you a very different forecast for 2021. That's reaching eyeballs faster. I can't spend that kind of money to reach eyeballs that fast. So I have to depend on word of mouth. I have to depend on more limited access. I think over time, as I've said, there's not a business that doesn't need this product. And so I think the sales will continue to grow and grow more rapidly every year than it did the year before. But it just still takes time. Some of the greatest products in the world have still generally taken 7 years to meet their peak. It's just not mathematically possible to grow as fast as you might want to grow.

Why did you choose not to pick a partner who could bring you to market more rapidly, get you in front of more eyeballs more rapidly and lever the product? If the pricing, quite honestly, is at such a low level that you could bring someone in and pay them -- you could jack the price $3, $4 a seat and pay them $3 or $4 a seat or more to get you in front of people and get you placements? Why did you choose not to go that way?

Well, again, the marketplace is a complex piece, in my opinion. I've been hands on looking at technology, repositioning technology, selling and marketing technology for 45 years. I have a lot of experience I draw from and what I believe can be done and can't be done. The type partners that I think you're generally talking about that I know that I could go to that could get us to market much faster, we want far more than what you're referring that they deliver. And I don't want to give them that piece of the product, and I don't want to do that because I believe so much in the product and where it's going to go on its own. I'm willing to be patient. I'm willing to be patient and watch this product take off like a rocket ship and as I said, change the landscape of cybercrime versus trying to get it all in 2021.

Plus, we just started this. I mean, so if someone wants to partner with us, making contact...

It's making contact. Mike's right. I'm not out looking for those partnerships because I don't think that's the best route for us to go.

Yes. We don't need to be out.

I have in other companies. I've gone out immediately and done OEM deals and brought the biggest names. I did a partnership at one of my start-ups with IBM. IBM sold $300 million in my product in 12 months after signing a contract that took me 14 months to negotiate with them. So probably if I wanted IBM to market this for me, it would take me 12 to 18 months to get a contract signed. And yes, the first year, they'd probably sell $500 million. But I'd spent 18 months getting there. So it's all in how you want to skin the cat and how much you believe in your product. I believe our product is that unique and that valuable that I want to keep ownership of it and use what I think is a very, very powerful channel to get this product out there.

Okay. Well, good luck, and obviously, it's important to remember that there's still the other leg to this stool, and that other leg is growing the business, has the ability to grow the business rapidly. And so this is an adjunct, in addition, not a replacement of what the company has been doing.

That's absolutely correct.

All our current business will continue and grow, hopefully, too.

Your next question comes from the line of [ Maj Sudan ].

[ Maj Sudan with June Investment ]. I have a quick question. It might be a simple question because I don't know the industry too well. I've been a shareholder for 3, 4 years now. So not quite as long as [ Walter ] and Howard there. But -- so you talk -- now you're talking about, I guess, leveraging the current database of INTZ and Savant, TraceCop to be able to help maybe make this product work somewhat if I understand that correctly. And number two, are you also kind of identifying new threats also just meaning on the database that they've created over time or continue to create?

Sure. I mean, I'm not sure I understood the second half of your question. Yes, we are using the rich database that this company has developed and maintained over the years in a new way. So fundamentally today, we have this incredible database, and we use it with research analysts on a personal level doing the SQL queries and extensive research to draw the conclusions and define the results they want. There's only -- I mean, again, this database has trillions of records in it. The best SQL query in the world is only going to get you so much of the real information. AI can look at all those trillions of records almost simultaneously in multiple different ways and come up with much richer answers much faster. So it is reusing an asset we have in a new way and then serving into the market in a new way that lets the entire market needed to use it.

The other way to put to your question, [ Maj ], is the -- if you just take the sum total of what we've had in the past, that gives us a heck of a foundation, but that's not all the magic. So one of the things we do in our consulting practice is we look for things that don't make sense. And so when you start factoring AI into that equation, we're going to be heavily into the -- it's not white list. It's not black list. It's hinky behavior that just shouldn't be. And so we know a great deal about how things have to work and can't or should never work. And so you're going to have a lot of, I tell them, listless rules in this new product as well. It's -- you'll hear more about that as we can talk more about it later. So certainly, we've given you hints of the magic, but not a thorough description of it at this point.

Okay. All right. So basically, it is -- is it continually working with TraceCop and Savant, I guess? Are you timing your databases, I'm sorry? Is it depending on the database?

Yes. It's real-time using the entire database to make decisions. Yes.

So if there's a threat that comes into your potential customers, [ eWisdom ] and it's not in your database. I'm asking the right question now. What happens there? Are you interpreting that better or differently now that it will be in the database? Or it will...

It will be having it. You constantly learn.

I mean, again, the database is always helpful in a number of ways. One, you can create white list with it, and that's great. But a white list is always only going to be a list, no matter how rich it is. You have to have intelligence, rules, ways of evaluating traffic to make the decisions on things that aren't in a list. And that's what the AI does, that is addition and when it finds something that, to use Joe's word, it thinks is hinky and blocks it, it automatically puts it in the database. So every other customer around the world gets it. The primary reason this is a service is it's updated real-time as it learns. It calls back to the mothership and updates the mothership, and that pushes back those updates out to all of the customers so they get a new updated database every second of every day.

And you're saying that competition isn't really doing this? Or was trying to do that badly?

I don't know anybody who's actually doing it good or badly to tell you the truth. But if they're doing it, they're certainly doing it badly.

Yes. The whole world is really in the signature space, not in the flow. I mean, the region for the human -- the huge hemorrhage of intellectual property out of the West is that nobody is looking outward, they're looking outside in rather than inside out. And we've talked about that for years.

Well, I mean, I think Joe just said something we didn't mention earlier. I mean, basically, the world looks at cybercrime today is signatures. And signatures are like a list. They get you so far. But if you really look at cybercrime and again, when I was in the government, it's such a large agency with so much resources, we saw firsthand how unique every attack is. Most, I would say, most cybercrime attacks today are actually written and operating with AI themselves. So they're not going to have a signature because they've come at you slightly different every time they come at you. That's what AI can do. It removes the whole concept of signature and makes every connection look unique. And that is how cybercrime is attacking the world today, and it's why the losses were $3 trillion last year.

There are no further questions at this time. I will turn the call back over to the presenters.

Okay. Great. Operator, everyone, thank you for participating on the call today. We'll wrap up the call at this time. If you have further questions, you can reach my direct numbers, (972) 301-3658. My e-mail's [email protected]. We look forward to talking with you in the future. Thanks a lot.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.