INTRUSION INC

Intrusion Inc. (together with its consolidated subsidiaries, the “Company,” “Intrusion,” “Intrusion Inc.,” “we,” “us,” “our,” or similar terms) was organized in Texas in September 1983 and reincorporated in Delaware in October 1995. Our principal executive offices are located at 101 East Park Boulevard, Suite 1200, Plano, Texas 75074, and our telephone number is (888) 637-7770. Our website URL is www.intrusion.com.

The Company develops, sells, and supports products that protect any-sized company or government organization by fusing advanced threat intelligence with real-time mitigation to kill cyberattacks as they occur – including Zero-Days. The Company markets and distributes the Company’s solutions through value-added resellers, managed service providers and a direct sales force. The Company’s end-user customers include U.S. federal government entities, state and local government entities, and companies ranging in size from mid-market to large enterprises.

TraceCop (“TraceCop™”) andSavant (“Savant™”) are registered trademarks of Intrusion Inc. The Company has applied for trademark protection for the Company’s newINTRUSIONShield cybersecurity solution.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Item 10-01 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete financial statements. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of the results of operations for a full year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 27, 2025 (the “2024 Annual Report”). All significant intercompany balances and transactions have been eliminated in consolidation.

The Company calculates the fair value of its assets and liabilities which qualify as financial instruments and includes this additional information in the notes to unaudited condensed consolidated financial statements when the fair value is different from the carrying value of these financial instruments. The estimated fair value of short-term investments, accounts receivable, accounts payable and accrued expenses approximate their carrying amounts due to the relatively short maturity of these instruments. Notes payable and financing and operating leases approximate fair value as they bear market rates of interest. None of these instruments are held for trading purposes.

As of September 30, 2025, we had cash and investments in U.S. treasury securities totaling $4.5 million. On October 1, 2025, we received $3.0 million in cash related to the Department of Defense contract extension. We generated a net loss of $6.2 million and $5.8 million for the nine months ended September 30, 2025, and 2024, respectively. If our operations do not generate positive cash flow in the upcoming year, or if we are not able to obtain additional debt or equity financing on terms and conditions acceptable to us, we may be unable to implement our business plan, fund our liquidity needs or even continue our operations.

Reverse Stock Split

The Company effected a 1-for-20 reverse stock split on March 22, 2024. Unless otherwise stated, all share and per share amounts for all periods presented have been adjusted to reflect the reverse stock split.

Short-term Investments

Short-term investments consist of highly liquid, investment-grade fixed income securities, such as corporate bonds, asset-backed securities, municipal securities, U.S. Treasury and agency securities, and money market funds. These investments have maturities of greater than 90 days and less than one year from the balance sheet date and are intended to be available to meet current operational needs. As of September 30, 2025, the Company had $2.0 million in short-term investments. There wereno short-term investments at December 31, 2024.

The Company has operating and finance leases where it records the right-of-use (“ROU”) assets, and a related lease liability as required under the Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”) 842. The lease liabilities are determined by the net present value of total lease payments and amortized over the life of the lease. The Company’s leases are for the following types of assets:

In accordance with ASC 842, the Company has elected practical expedients to combine lease and non-lease components, which consist principally of common area maintenance charges, for all classes of underlying assets and to exclude leases with an initial term of 12 months or less.

As the implicit rate is not readily determinable for the Company's lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments.

For the three and nine months ended September 30, 2025, the Company made operating lease payments of $0.1 million and $0.3 million, respectively, compared to $0.1 million and $0.2 million for the same periods in 2024. For the same periods, finance lease payments were $0.1 million and $0.4 million in 2025, and $0.1 million and $0.4 million in 2024, respectively.

Schedule of Items Appearing on the Unaudited Condensed Consolidated Statements of Operations (in thousands):

Future minimum lease obligations consisted of the following as of September 30, 2025 (in thousands):

Security Purchase Agreement

On March 10, 2022, the Company entered into an unsecured loan agreement (“SPA”) with Streeterville Capital, LLC (“Streeterville”) pursuant to which the Company issued two separate promissory notes of $5.4 million each with an initial rate of 7%. Under this agreement, the Company received $4.6 million in net funds from the first tranche (Note 1) on March 10, 2022, and $4.7 million in net funds from the second tranche (Note 2) on June 29, 2022. Each note carried an 18-month maturity and had redemption provisions after six months in amounts up to $0.5 million per calendar month at the noteholder’s discretion.

On January 11, 2023, the Company amended the promissory notes issued pursuant to the unsecured loan agreement with Streeterville whereby the noteholder agreed to waive their redemption rights through March 31, 2023, in exchange for a fee equal to 3.75% of the outstanding principal balance which increased the outstanding indebtedness due at maturity with Streeterville and increased the associated debt issuance costs recorded on the unaudited condensed consolidated balance sheets by $0.4 million.

On August 2, 2023, the Company entered into a Forbearance Agreement with Streeterville which was subsequently amended on August 7, 2023. The Forbearance Agreement and amendment extended the maturity dates for each Note by 12 months to September 2024 and December 2024. In consideration of the extension of the maturity dates, the Company entered into a Security Agreement with Streeterville, dated August 2, 2023 (the “Security Agreement”), under which Streeterville was granted a first-position security interest in all assets of the Company.

In March 2024, the Company entered into an agreement with Streeterville to exchange $0.2 million in principal for 52.2 thousand shares of common stock. Also in March 2024, the Company exchanged $9.3 million in Streeterville debt for 9.3 thousand shares of newly created Series A preferred stock. The issuance of both common and preferred shares was made pursuant to the exemption from the registration requirements afforded by the Securities Act of 1933, as amended (the “Securities Act”). Following the exchanges as noted herein, the remaining balance on Note 1 was $0.5 million, Note 2 was paid in full, the interest accretion associated with the ability to stock-settle principal redemptions was reversed and the Company wrote off the balance of unamortized debt issuance costs.

The maturity date for Note 1 was September 10, 2024; however, the preferences for Series A preferred stock precluded repayment of Note 1 so long as any shares of Series A preferred stock were outstanding. The Series A preferred stock was fully redeemed on January 3, 2025. In March 2025, the Company entered into three separate agreements with Streeterville to exchange an aggregate $0.5 million in principal for 552.3 thousand shares of common stock, thereby retiring the remainder of Note 1 in full. The issuance of both common and preferred shares was made pursuant to the exemption from the registration requirements afforded by the Securities Act.

For the nine months ended September 30, 2025, and 2024, the Company recorded simple interest of $8 thousand and $274 thousand, respectively. In March 2024, as a result of exchanging $9.5 million principal in aggregate for equity, the Company reversed the interest accretion associated with the ability to stock-settle principal redemptions and wrote off the balance of unamortized debt issuance costs resulting in a credit of $1.0 million to interest expense in the unaudited condensed consolidated statement of operations for the nine months ended September 30, 2024.

Scott Notes Payable

In 2024, the Company entered into two separate note purchase agreements with Anthony Scott, the Company’s President and Chief Executive Officer and member of the Company’s Board of Directors. On January 2, 2024, Mr. Scott purchased a note payable in the principal amount of $1.1 million in exchange for $1.0 million in cash. The note called forweekly payments of $40 thousand until maturity on June 15, 2024. Interest accrued on the balance of the note at 7% per annum compounding daily. During the period ended September 30, 2024, the Company made $0.2 million in principal payments on the first note payable.

On March 20, 2024, Mr. Scott purchased a second note payable in the principal amount of $343 thousand in exchange for $340 thousand in cash. The note was non-interest bearing and matured on April 19, 2024. On April 2, 2024, the Company reduced the principal balance due under the note by $101 thousand, which reflected the amount due from Mr. Scott for the exercise of common stock purchase warrants.

On April 19, 2024, Mr. Scott entered into a private placement subscription agreement to convert the aggregate outstanding balance of $1.1 million for both notes in exchange for common stock and common stock purchase warrants.

The Company recorded interest expense of $20 thousand for both notes in the accompanying condensed consolidated statement of operations for the nine months ended September 30, 2024. For the nine months ended September 30, 2024, $83 thousand in amortization of debt issuance cost was recorded.

The Company is periodically involved in various litigation claims asserted in the normal course of its business. The Company believes these actions are routine and incidental to the business. While the outcome of these actions cannot be predicted with certainty, the Company does not believe that any will have a material adverse impact on the Company’s business.

ATM Offering

On June 11, 2025, the Company terminated its At Market Sales Agreement with B. Riley Securities, Inc. (the “Riley ATM Agreement”). On June 12, 2025, the Company entered into a new At The Market Offering Agreement with H.C. Wainwright & Co., LLC to potentially sell up to $50.0 million of the Company’s common stock using a shelf registration statement on Form S-3/A (File No. 333-281565) which was filed on January 31, 2025 and became effective on February 10, 2025. For the period ended September 30, 2025, no sales of common stock were made under the ATM utilizing the shelf registration. For the period ended September 30, 2024, the Company received proceeds of approximately $4.8 million net of fees from the sale of common stock pursuant to the Riley ATM Agreement.

Standby Equity Purchase Agreement

On July 3, 2024, the Company entered into a $10 million Standby Equity Purchase Agreement (“SEPA”) with Streeterville pursuant to which the Company has the right to direct Streeterville during the 24-month term of the agreement to purchase common stock subject to certain limitations and conditions set forth in the SEPA. During the year ended December 31, 2024, 1.2 million shares of common stock were purchased pursuant to the SEPA resulting in aggregate net proceeds of $1.8 million of which $0.1 million was received in 2024. The remaining proceeds due were recorded as a stock subscription receivable in the consolidated balance sheet on December 31, 2024, and received in January 2025. During the nine months ended September 30, 2025, no purchases were made pursuant to the SEPA.

Series A Preferred Stock

On March 15, 2024, the Company filed the Amended and Restated Certificate of Incorporation (the “A&R Certificate”) to eliminate the Series 1, Series 2, and Series 3 preferred shares and filed a Certificate of Designations creating a new Series A preferred stock, $0.01 par value per share (the “Series A preferred stock”). Pursuant to the terms of the Series A Certificate,20 thousand shares of Series A preferred stock are authorized, and each share of Series A preferred stock has a stated value of $1,100, accrues a rate of return on the stated value of 10% per year, is compounded annually and is payable quarterly in cash or additional shares of Series A preferred stock.

On March 15, 2024, the Company entered into an Exchange Agreement with Streeterville Capital that exchanged $9.3 million in debt for 9,275 shares of Series A preferred stock.

On April 3, 2024, and continuing through December 31, 2024, in nine separate exchange transactions, the Company exchanged an aggregate of 6,123 shares of Series A preferred stock for 2,637.7 thousand shares of common stock. All the exchanges were made pursuant to the exemption from the registration requirements afforded by Section 3(a)(9) of the Securities Act. Also in 2024, the Company redeemed 17 shares of Series A preferred stock in conjunction with the sale of common stock under the SEPA and redeemed 90 shares of Series A preferred stock in conjunction with entering into a separate financing agreement with Streeterville as more fully described in the 2024 Annual Report.

On January 2 and 3, 2025, in two separate exchange transactions, the Company exchanged an aggregate of 3,587 shares of Series A preferred stock for 1,293 thousand shares of common stock. Both exchanges were made pursuant to the exemption from the registration requirements afforded by Section 3(a)(9) of the Securities Act. Also in January 2025, the Company redeemed 170 shares of Series A preferred stock in conjunction with the receipt of proceeds from the sale of common stock under the SEPA. As of September 30, 2025, there were no remaining shares of Series A preferred stock outstanding.

Registered Direct Offering

On January 6, 2025, the Company sold to a single institutional investor 653 thousand shares of the Company’s common stock at a purchase price of $3.05 per share and 1,806 thousand prefunded warrants to purchase up to 1,806 thousand shares of common stock at a purchase price of $3.0499 for aggregate gross proceeds of $7.5 million. The prefunded warrants were exercisable immediately at an exercise price of $0.0001 per share subject to the purchaser not being deemed a beneficial owner of greater than 4.99%. All of the pre-funded warrants were exercised in January 2025.

Common Stock Warrants

On September 30, 2025, the Company had 3,198,085 warrants outstanding to purchase common stock at an average exercise price of $3.26 per share and average remaining term of 3.6 years.

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation, which requires that compensation related to all stock-based awards be recognized in the condensed consolidated financial statements. Stock-based compensation cost is valued at fair value at the date of grant, and the grant date fair value is recognized as expense over each award’s requisite service period with a corresponding increase to equity or liability based on the terms of each award and the appropriate accounting treatment under ASC 718.

The Company had two stock-based compensation plans as of September 30, 2025, and December 31, 2024, the 2021 Omnibus Incentive Plan and the 2015 Stock Incentive Plan. All awards outstanding under the 2005 Stock Incentive Plan expired during the nine months ended 2025.

The Company grants stock from the 2021 Omnibus Incentive Plan. This plan provides a means through which the Company may attract and retain key personnel and to provide a means whereby directors, officers, employees, consultants and advisors of the Company can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of common stock, thereby strengthening their commitment to the welfare of the Company and aligning their interests with those of the Company’s stockholders.

During the nine months ended September 30, 2025, the Company granted 545.7 thousand restricted stock units and 15 thousand stock option awards. During the nine months ended September 30, 2024, the Company granted 253.6 thousand restricted stock awards and 100 stock options.

The Company recognized compensation expense of $0.3 million and $0.8 million for the three and nine months ended September 30, 2025, respectively, compared to $0.1 million and $0.3 million for the three and nine months ended September 30, 2024, respectively.

The Company recognizes product revenue upon shipment or after meeting certain performance obligations. These products can include hardware, software subscriptions and consulting services. The Company also offers software on a subscription basis subject to software as a service (“SaaS”). Warranty costs have not been material.

The Company recognizes sales of the Company’s datasets in accordance with FASB ASC Topic 606 whereby revenue from contracts with customers are recognized once the criteria under the five steps below have been met:

Consulting services include reporting and are typically done monthly, and revenue is matched accordingly.

Normal payment terms offered to customers, distributors and resellers are net 30 days domestically. The Company does not offer payment terms that extend beyond one year and rarely does it extend payment terms beyond its normal terms. If certain customers do not meet the Company’s credit standards, the Company typically requires payment in advance to limit its credit exposure.

With the Company’s newest product,INTRUSIONShield, the Company began offering software on a subscription basis.INTRUSIONShield is a hosted arrangement subject to SaaS guidance under ASC 606. SaaS arrangements are accounted for as subscription services, not arrangements that transfer a license of intellectual property.

The Company utilizes the five-step process mentioned above, per FASB ASC Topic 606 to recognize sales and will follow that directive, also, to define revenue items as individual and distinct.INTRUSIONShield services provided to its customers for a fixed monthly subscription fee include:

INTRUSIONShield contracts provide no other services, and the Company’s customers have no rebates or return rights, nor are any such rights anticipated to be offered as part of this service.

The Company satisfies its performance obligation when theINTRUSIONShield solution is available to detect and prevent unauthorized access to a client’s information networks. Revenue is recognized monthly over the term of the contract. The Company’s standard initial contract terms automatically renew unless notice is given 30 days before renewal. Upfront payment of fees is deferred and amortized into income over the period covered by the contract.

For the three and nine months ended September 30, 2025, revenues to various U.S. government entities totaled $1.9 million from four government customers and $5.3 million from four government customers, representing 96.7% and 94.7% of total revenues, respectively. For the three and nine months ended September 30, 2025, the Company’s three top customers comprised 57.3%,23.0% and 16.2% of total revenues and 53.6%,23.9% and 17.0% of total revenues, respectively. In comparison, for the same periods in 2024, revenues totaled $1.3 million from six government customers and $3.3 million from seven government customers, representing 85.9% and 79.5% of total revenues, respectively. For the three and nine months ended September 30, 2024, the Company’s three top customers comprised 33.6%,29.1% and 20.7% of total revenues and 23.3%,29.0% and 22.9% of total revenues, respectively.

The Company’s accounts receivable represents unconditional contract billings for sales per contracts with customers and are classified as current assets. As of September 30, 2025, and December 31, 2024, the Company had accounts receivable balances of $2.4 million and $0.2 million, respectively. As of September 30, 2025, and December 31, 2024, the Company had an allowance for credit losses of $0.1 million.

The Company classifies its contract assets as other current assets because the Company generally has an unconditional right to payment for the Company’s sales or services performed at the end of the reporting period. As of September 30, 2025 and December 31, 2024, the Company had contract assets balances of $5 thousand and $8 thousand, respectively.

Contract liabilities consist of cash payments in advance of the Company satisfying performance obligations and recognizing revenue. The Company currently classifies deferred revenue as a contract liability.

The following tables presents changes in the Company’s contract liabilities during the nine months ended September 30, 2025, and the year ended December 31, 2024 (in thousands):

The Company capitalizes internally developed software using the Agile software development methodology which allows the Company to accurately track, and record costs associated with new software development and enhancements.

Pursuant to ASC Topic 350-40 Internal Use Software Accounting Capitalization, certain development costs related to the Company’s products during the application development stage are capitalized as part of property and equipment. Costs incurred in the preliminary stages of development are expensed as incurred. The preliminary stage includes activities such as conceptual formulation of alternatives, evaluation of alternatives, determination of existence of needed technology, and the final selection of alternatives. Once the application development stage is reached, internal and external costs are capitalized until the software is complete and ready for its intended use. Capitalized internal use software is amortized on a straight-line basis over its estimated useful life, which is generally three years.

The Company reports two separate net loss per share numbers, basic and diluted. Basic net loss attributable to common stockholders per share is computed by dividing net loss attributable to common stockholders for the period by the weighted average number of common shares outstanding for the period. Diluted net loss attributable to common stockholders per share is computed by dividing the net loss attributable to common stockholders for the period by the weighted average number of common shares and dilutive common stock equivalents outstanding for the period. The common stock equivalents include all common stock issuable upon exercise of outstanding warrants, options and vesting of restricted stock awards. The aggregate number of common stock equivalents excluded from the diluted loss per share calculation for the three months ended September 30, 2025, and 2024 totaled 3.8 million and 3.3 million shares, respectively. The aggregate number of common stock equivalents excluded from the diluted loss per share calculation for the nine months ended September 30, 2025, and 2024 totaled 3.8 million and 2.1 million shares, respectively. Since the Company is in a net loss position for the periods ended September 30, 2025, and 2024, basic and dilutive net loss per share is the same.

On January 2, 2024, the Company entered into an invoice financing arrangement pursuant to a note purchase agreement with Mr. Scott, President, and Chief Executive Officer of the Company and a member of the Board, according to which, among other things, Mr. Scott purchased from the Company a promissory note (the “Promissory Note”) in the aggregate principal amount of $1.1 million in exchange for $1.0 million to the Company. Interest accrued at a rate of 7.0% per annum, compounded daily. Under the Promissory Note, the Company made principal payments to Mr. Scott in the aggregate amount of $0.2 million. On March 20, 2024, the Company entered into an additional invoice financing arrangement pursuant to a note purchase agreement with Mr. Scott, according to which, among other things, Mr. Scott purchased from the Company a second Promissory Note 2 in the aggregate principal amount of $343 thousand in exchange for $340 thousand to the Company. Promissory Note 2 was non-interest bearing and matured on April 19, 2024.

On April 2, 2024, the Company reduced the principal balance due under the Promissory Note by $0.1 million which reflected the amount due from Mr. Scott for the exercise of common stock purchase warrants. On April 19, 2024, Mr. Scott entered into a private placement subscription agreement to convert the aggregate outstanding balance of $1.1 million for both notes in exchange for common stock and common stock purchase warrants.

The Company recorded interest expense of $20 thousand for both notes in the accompanying consolidated statement of operations for the nine months ended September 30, 2024. For the nine months ended September 30, 2024, $l 83 thousand in amortization of debt issuance cost was recorded.

There wereno related party transactions for the three or nine months ended September 30, 2025.

None.