INTRUSION INC
For the period ended Dec 31, 2025. Filed Mar 25, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 25, 2026
INTZ$0.65+4.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-02-27.
0001683168-25-001272
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-25.
0001683168-26-002196
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 79 previous paragraphs and 78 current paragraphs.
39 unchanged; 28 reworded; 9 added; 12 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
Revenue for the year ended December 31, 2025, totaled $7.1 million, representing an increase of $1.3 million or 22.9% from $5.8 million in 2024. Revenue growth in 2025 was primarily driven by work performed for the U.S. Department of Defense for the development and implementation of the Shield OT Defender in the Asia Pacific region which contributed to increases in both Shield and consulting revenues. Consulting revenues totaled $5.3 million in 2025 compared to $4.2 million in 2024. Shield revenues totaled $1.8 million, compared to $1.6 million in 2024.
Current report
We anticipate that the sale of our OT Defender solution to other departments of the U.S. government, as well as commercially, will continue to contribute to future growth. Additionally, during 2025, we partnered with Port Nexus to integrate our Shield technology into its My Flare Alert school safety solution. Although sales to Port Nexus did not materially impact 2025 revenues, the expanded pipeline for this offering is expected to support future Shield revenue growth.
Current report
Revenue in the fourth quarter of fiscal 2025 decreased 25% compared to the prior quarter and 12% compared to the prior year period, primarily reflecting the delayed timing of incremental funding under a major U.S. government contract. The timing of this funding was impacted by operational and administrative constraints associated with the U.S. government shutdown and continuing resolution, which limited agencies’ ability to initiate and process contract actions during the period. As a company that derives a significant portion of its revenue from U.S. government customers, our operating results are dependent on the timing of government funding authorizations, contract awards, and program execution. While we believe the impact of this delay is primarily timing-related, changes in federal budget priorities, including those related to defense and national security, may continue to influence the timing and allocation of future funding, which could affect our revenue and operating results in future periods.
Current report
Operating expenses for the year ended December 31, 2025, totaled $14.5 million, an increase of 13.0% when compared to $12.9 million for the year ended December 31, 2024. Factors contributing to the increase most notably related to one-time savings realized in 2024 from the negotiation or cancellation of existing contracts which contributed $0.5 million in savings in 2024, increased share-based compensation of $0.7 million from equity grants made in the first quarter of 2025 and cost of living and merit increases of $0.3 million.
Current report
Other Income (Expense), Net
Current report
Other income included interest income on cash and short-term investments of $0.2 million in 2025. Other income (expense) was negligible in 2024.
Current report
In June 2025, we terminated our At Market Sales Agreement with B. Riley Securities, Inc (“B. Riley”) and entered into a new ATM Offering Agreement with H.C. Wainwright & Co., LLC (“Wainwright”) to potentially sell up to $50.0 million of our common stock using a shelf registration statement on Form S-3/A (File No. 333-281565) which was filed in January 2025 and became effective in February 2025. Under the Sales Agreement, Wainwright may sell shares of our common stock by any method permitted by law deemed to be an “ATM offering” as defined in Rule 415(a)(4). We pay Wainwright a commission of up to 3.0% of the gross sales price of any shares sold through Wainwright under the Sales Agreement.
Current report
SEPA
Current report
In March 2022 we entered into a securities purchase agreement (“SPA”) with Streeterville pursuant to which Streeterville purchased two $5.4 million promissory notes for $9.3 net proceeds. Principal payments totaled $1.9 million through 2023. In the fourth quarter of 2023 and the first quarter 2024, we exchanged $0.8 million of principal for 146 thousand shares of common stock. In March 2024, the remaining $9.3 million principal was exchanged for 9,275 shares of Services A Preferred Stock (See Note 8). Following these transactions, $0.5 million principal remained on the first note. During 2024, no principal payments were made on the Streeterville notes following the first quarter debt-for equity-exchanges. In March 2025, we fully retired the remaining $0.5 million Streeterville note through issuance of 553 thousand shares of common stock pursuant to Section 3(a)(9) of the Securities Act. This transaction eliminated all the Streeterville debt with no material cash outflow during 2024 or 2025.
Removed paragraphs (12)
Previous report
During 2023 and 2024, our primary focus has been building out our sales reseller and channel platform and collaborating with those partners to 1) increase our sales pipeline and 2) progress customer prospects, leads and opportunities through the sales lifecycle. Gaining traction with ourShield solutions has taken longer than initially anticipated. We feel that the progress made with our reseller and channel community along with refining our product messaging will help to shorten the sales cycle and grow revenues in future periods.
Previous report
Revenue for the year ended December 31, 2024, totaled $5.8 million an increase of $0.2 million or 2.9% from $5.6 million in 2023. Revenues in the first half of 2024 were hampered by both the delay in the approval of a federal budget which impacted the timing of renewals and task orders received and the loss of a large earlyShield customer that had a non-standard custom implementation that was no longer supported. Revenues increased in the second half of 2024 as a result of new customers signed in recent quarters and, to a large degree, the new government awards for the combined use of both threat reporting and the use ofShield technology. Consulting revenues totaled $4.2 million in 2024 compared to $4.0 million in 2023.Shield revenues totaled $1.6 million in 2024 which is flat when compared to 2023. The loss of the large earlyShield customer which accounted for greater than 70% of the Shield revenue base has been fully offset by the expanded use ofShield from existing customers and new customers signed in 2024.
Previous report
We are beginning to see traction with ourShield products with multipleShield sales that, essentially, are paid proof of values which have the potential for significantShield sales growth beyond the initial engagement. On December 31, 2024, ourShield opportunities comprised a large percentage of our sales pipeline.
Previous report
Sales to the government present risks in addition to those involved in sales to commercial customers which could adversely affect our revenues, including, without limitation, potential disruption to appropriation and spending patterns and the government’s reservation of the right to cancel contracts and purchase orders for its convenience. Currently, we are not aware of any additional proposed cancellation or renegotiation of any of our existing arrangements with government entities and, historically, cancellations or renegotiated orders by government entities have not resulted in a material adverse effect on our business.
Previous report
Operating expenses for the year ended December 31, 2024, totaled $12.9 million, a decrease of 21.5% when compared to $16.4 million for the year ended December 31, 2023. Factors contributing to the decrease most notably related to a reduction in staffing and contract labor expenses, in addition to reduced spending on sales and marketing.
Previous report
In late March 2023 we implemented cost reduction measures that resulted in the reduction of sixteen permanent positions, the reduced use of contractors and renegotiated or replaced spend on certain sales support and marketing services with less costly programs. As a retention incentive, employees were granted equity awards in March 2023 with a one-year vesting. Reduced non-cash share-based compensation in 2024 in addition to one time negotiated contract savings, and an insurance settlement for legal defense costs associated with litigation matters that arose in 2021, contributed $1.4 million in savings over 2023. Many of the reductions were in Research and Development, which will impact the number and frequency of product releases. As we grow our customer base and increase our revenues, we may choose to accelerate our product development in future periods, which would result in increased spending. Employee headcount on December 31, 2024, totaled fifty compared to forty-nine on December 31, 2023.
Previous report
Other (Expense) Income, Net
Previous report
Interest and other income were negligible in 2024 and 2023.
Previous report
B. Riley Securities, Inc. acts as sales agent under our ATM program, which, using the shelf-registration statement on Form S-3 filed on August 5, 2021, allowed us to potentially sell up to $50.0 million of our common stock. On April 11, 2023, as a result of limitations under General Instruction I.B.6 of Form S-3, and in agreement with the terms of the sales agreement, the Company revised the aggregate offering price of shares of common stock that could be sold pursuant to the ATM program to $15.0 million. In December 2024, we completed the sale of $15 million in common stock. For the year ended December 31, 2024, we received $9.8 million, net of fees for sales of common stock pursuant to the program.
Previous report
Standby Equity Purchase Agreement
Previous report
We entered into a securities purchase agreement (“SPA”) with Streeterville on March 10, 2022, pursuant to which Streeterville purchased two promissory notes with substantively identical terms. Streeterville purchased the first note on March 10, 2022, and the second note on June 29, 2022, each note with an aggregate principal amount of $5.4 million in exchange for $5.0 million less certain expenses. We received an aggregate of approximately $9.3 million, net of transaction expenses, in connection with these issuances.
Previous report
In 2023 and 2022 we made $0.4 million and $1.5 million in principal payments, respectively. In the fourth quarter 2023 through 3 separate transactions, we exchanged $0.6 million in aggregate principal on the First Note for 93.6 thousand shares of our common stock. In March 2024, we exchanged $0.2 million in principal for 52.2 thousand shares of common stock. Also in March 2024, we exchanged $9.3 million in principle for 9,275 shares of our 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 Section 3(a)(9) of the Securities Act. The Series A preferred stock has a stated value of $1,100 per share and is subject to the preferences and designations as more fully described in our Amended and Restated Articles of Incorporation filed on March 15, 2024. Following the exchanges noted herein, the remaining balance on the first note was $0.5 million. The maturity date for the first note was September 2024, we are in discussions with Streeterville to redeem or amend this note.
Reworded paragraphs (28)
Previous wording
The following discussion and analysis include information management believes is relevant to understand and assess our consolidated financial condition and results of operations. This section should be read in conjunction with our Consolidated Financial Statements, accompanying notes and the risk factors contained in this report.
Current wording
The following discussion and analysis include information management believes is relevant to understanding and assessing our consolidated financial condition and results of operations. This section should be read in conjunction with our Consolidated Financial Statements, accompanying notes and the risk factors contained in this report.
Previous wording
Revenues from sales to various U.S. government entities totaled $4.8 million, or 83.8% of revenues, for the year ended December 31, 2024, compared to $2.6 million, or 46.2% of revenues, for the same period in 2023. In 2024 we had three government entities that individually accounted for over 10% of our revenues compared to two in 2023. Sales to commercial customers totaled $0.9 million or 16.2% of total revenue for the year ended December 31, 2024, compared to $3.0 million or 53.8% of total revenue for the same period in 2023. Two commercial customers individually accounted for over 10% of total revenues in 2023. No commercial customers accounted for 10% or greater of total revenues in 2024. Over 2024, we have expanded the number of Shield resellers and referral partners. We anticipate our concentration of revenues will vary among customers in future periods depending upon the timing of certain sales. We anticipate that sales to government customers, while comprising a significant portion of our revenues in future periods, will represent a lower percentage of our revenue base as we gain traction selling ourShield products into commercial markets.
Current wording
Revenues from sales to various U.S. government entities totaled $6.7 million, or 94.6% of revenues, for the year ended December 31, 2025, compared to $4.8 million, or 83.8% of revenues, for the same period in 2024. In both 2025 and 2024 three government entities each individually accounted for over 10% of our revenues.
Previous wording
Gross profit for the 12-months ended December 31, 2024, and 2023 totaled $4.4 million or 76.8% and $4.4 million or 77.6%, respectively. The gross profit margin remained relatively flat year-over-year as Shield revenues represented 26% and 28% of revenues in each of 2024 and 2023, respectively. To the extentShield revenues become a larger percentage of revenues, we anticipate we will see favorable growth in gross profit margins.
Current wording
Gross profit for the 12-months ended December 31, 2025 and 2024 totaled $5.4 million or 75.8% and $4.4 million or 76.8%, respectively. The gross profit margin remained relatively flat year-over-year as Shield revenues represented 25% and 26% of revenues in each of 2025 and 2024, respectively. To the extentShield revenues become a larger percentage of revenues, we anticipate we will see favorable growth in gross profit margins.
Previous wording
Sales and marketing expenses decreased to $4.7 million in 2024, compared to $5.7 million in 2023. The 2024 period included approximately $0.2 million in one-time negotiated contract savings. Certain discretionary marketing spends inclusive of participation in trade shows, utilization of third-party contractors for content and product messaging and travel, are likely to vary over time based on savings initiatives that may be necessary.
Current wording
Sales and marketing expenses totaled $5.3 million, an increase of $0.5 million from $4.7 million in 2024. The increased Sales and Marketing spend related primarily to increased participation in trade shows and increased spend to create more brand awareness and concise product messaging which was partially offset by increased allocations out of operating expenses to cost of sales for resources dedicated to increased consulting work in 2025 and one-time negotiated savings included in the 2024 period of approximately $0.2 million. Certain discretionary marketing spends inclusive of participation in trade shows, utilization of third-party contractors for content and product messaging and travel, are likely to vary over time based on savings initiatives that may be necessary.
Previous wording
Research and development expenses decreased to $4.4 million in 2024 compared to $5.6 million in 2023. The savings in 2024 are a result of cost reduction measures implemented in late March 2023 which included the reduction of 13 FTEs and the reduced use of contractors. Research and development costs may vary over time as we determine the frequency of new releases, improved functionality and enhancements needed to be competitive with our product offering.
Current wording
Research and development expenses totaled $5.2 million for the year ended December 31, 2025, representing an increase of $0.7 million when compared to the prior year. The increase was primarily due to increased depreciation of $0.2 million on infrastructure hardware purchases and internally developed software and increases in compensation related to the addition of a Sales Engineer and Software Engineer, merit increases and equity awards made in the first quarter of 2025. Research and development costs may vary over time as we determine the frequency of new releases, improved functionality and enhancements needed to be competitive with our product offering.
Previous wording
General and administrative expenses totaled $3.7 million in 2024 compared to $5.2 million in 2023. The $1.5 million reduction in the 2024 period relates principally to the elimination of two positions, reduced share-based compensation, and one-time negotiated cost savings of $0.5 million.
Current wording
General and administrative expenses totaled $4.1 million in 2025 compared to $3.7 million in 2024. The $0.4 million increase in 2025 was primarily due to one-time negotiated savings of $0.2 million included in the 2024 period and increased share-based compensation related to equity grants made in the first quarter of 2025.
Previous wording
Interest expense for the twelve months ended December 31, 2024, was $328 thousand consisting principally of the stated interest related to the Streeterville and Scott notes, and finance leases. Interest expense for the year ended December 31, 2023, was $958 thousand. The decreased interest expense resulted principally from the $9.5 million aggregate exchange of the Streeterville debt to both common and preferred stock. As of December 31, 2024, $529 thousand of the Streeterville Note One remained outstanding. Interest expenses will vary in the future based on our cash flow and borrowing needs.
Current wording
Interest expense for the twelve months ended December 31, 2025, was $81 thousand which related primarily to imputed interest on finance leases. Interest expense for the 2024 period totaled $328 thousand consisting principally of interest on finance leases and the stated interest related to the Streeterville Capital, LLC (“Streeterville”) and Scott notes, both of which have been fully repaid. Interest expenses will vary in the future based on our cash flow and borrowing needs.
Previous wording
Interest Accretion and Amortization of Debt Issuance Costs
Current wording
Interest Accretion and Amortization of Debt Issuance Costs, Net
Previous wording
During March 2024, the Company entered into exchange agreements to convert $9.5 million in Streeterville debt to $9.3 million of Series A preferred stock and $0.2 million to common stock and, as a result, the Company reversed the interest accretion associated with the ability to stock-settle principal redemptions and wrote-off the remaining deferred debt issue costs resulting in a net credit to interest expense of $1.0 million. For the year ended December 31, 2023, the interest accretion and amortization of debt issuance costs totaled $0.9 million in expense.
Current wording
During March 2024, the Company entered into exchange agreements to convert $9.5 million in Streeterville debt to $9.3 million of Series A preferred stock and $0.2 million to common stock and, as a result, the Company reversed the interest accretion associated with the ability to stock-settle principal redemptions and wrote-off the remaining deferred debt issue costs resulting in a net credit to interest expense of $1.0 million.
Previous wording
Net cash used in operations for the year ended December 31, 2023, was ($7.8) million due to a net loss of ($13.9) million, offset by 1) adjustments for non-cash items of $4.7 million which are mostly comprised of depreciation, stock-based compensation, and interest related to Streeterville notes and 2) $1.4 million provided from working capital principally relating to the cash receipt of amounts due relating to ERC.
Current wording
Net cash used in operations for the year ended December 31, 2025, was ($6.8) million due to a net loss of ($9.1) million, offset by (i) adjustments for non-cash items of $3.2 million which are mostly comprised of depreciation and stock-based compensation, and (ii) ($0.9) million used for working capital.
Previous wording
Net cash used in operations for the year ended December 31, 2024, was ($6.3) million due to a net loss of ($7.8) million, offset by 1) adjustments for non-cash items of $1.7 million which are mostly comprised of depreciation, stock-based compensation, and interest related to Streeterville notes and 2) ($0.2) million used for working capital.
Current wording
Net cash used in operations for the year ended December 31, 2024, was ($6.3) million due to a net loss of ($7.8) million, offset by (i) adjustments for non-cash items of $1.7 million which are mostly comprised of depreciation, stock-based compensation, and interest related to Streeterville notes, and (ii) $(0.2) million used for working capital.
Previous wording
For the year ended December 31, 2023, net cash used in investing activities was ($1.4) million, which was principally the capitalization of internally developed software.
Current wording
For the year ended December 31, 2025, net cash used in investing activities was ($2.5) million, of which $1.8 million was the capitalization of internally developed software, and $0.8 million was the purchase of equipment.
Previous wording
For the year ended December 31, 2023, net cash provided by financing activities was $6.3 million which consisted principally of proceeds from sales of common stock using our ATM program of $4.7 million and a private placement in November 2023 of $2.3 million offset partially by a $0.4 million paydown on the Streeterville notes.
Current wording
For the year ended December 31, 2025, net cash provided by financing activities was $8.1 million, which consisted principally of net proceeds from a registered direct offering of $7.0 million and the receipt of $1.5 million in proceeds from the sale of common stock pursuant to the SEPA, which was recorded as a stock subscription receivable at December 31, 2024, offset partially by principal payments on equipment finance leases of $0.4 million.
Previous wording
As of December 31, 2024, we had cash and cash equivalents of $4.9 million and $1.9 million in working capital.
Current wording
As of December 31, 2025, we had cash and cash equivalents of $3.6 million and $2.4 million in working capital. Our primary source of cash for funding operations in 2025 has come from net proceeds received from a registered direct offering of $7.0 million and $1.5 million in proceeds from the sale of common stock pursuant to a SEPA, recorded as a receivable at December 31, 2024. Our independent registered public accounting firm’s report on our audited financial statements for the fiscal year ended December 31, 2025 includes an explanatory paragraph stating that our historically recurring losses from operations, negative cash flows from operations, and dependence on equity and debt financings raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to raise additional funds through public or private financings, including the utilization of our ATM program. We can provide no assurances that we will be able to raise additional funds through any future equity or debt financings, and the terms of those financings, if available at all, may be on terms, which are not favorable to us and, in the case of equity financings, will result in dilution to our stockholders. The inclusion of a going concern explanatory paragraph may also make it more difficult for us to secure additional financing or enter into strategic partnerships, as it signals a high degree of financial risk to potential investors and creditors. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Previous wording
Our principal sources of cash for funding operations in 2024 have been net proceeds received from sales of common stock using our ATM program of $9.8 million, a private placement offering completed in April 2024 of $2.6 million, and $0.8 million from the exercise of warrants. Our principal source of cash for funding operations in 2023 was $4.7 million from sales of common stock utilizing the ATM program, a private placement offering completed in November 2023 of $2.3 million and net funds through changes in working capital which included the receipt of the remaining ERC refund of $1.4 million.
Current wording
Our principal sources of cash for funding operations in 2024 were net proceeds received from sales of common stock using our ATM program of $9.8 million, a private placement offering completed in April 2024 of $2.6 million, and $0.8 million from the exercise of warrants.
Previous wording
We filed a replacement shelf registration on Form S-3 on January 30, 2025 with an effective date of February 10, 2025, pursuant to which we can sell up to $50.0 million of our common stock. As of February 25, 2025, our public float calculated in accordance with General Instruction I.B.1 of Form S-3,was $112.9 million based on 19,342,776 shares of common stock outstanding of which 17,861,513 shares are held by non-affiliates, and a per share price of $6.32 based on the average of the bid and asked prices of our common stock on the Nasdaq Capital Market on December 30, 2024.
Current wording
We filed a replacement shelf registration on Form S-3 in January 2025, with an effective date of February 2025, pursuant to which we can sell up to $50.0 million of our common stock. As of February 25, 2025, our public float calculated in accordance with General Instruction I.B.1 of Form S-3, was $112.9 million based on 19,342,776 shares of common stock outstanding of which 17,861,513 shares are held by non-affiliates, and a per share price of $6.32 based on the average of the bid and asked prices of our common stock on the Nasdaq on December 30, 2024.
Previous wording
On July 3, 2024, we entered into a $10 million Standby Equity Purchase Agreement (“SEPA”) with Streeterville Capital, LLC (“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.
Current wording
In July 2024, we entered into a $10 million SEPA with Streeterville pursuant to which the Company has the right, during the 24-month term of the agreement and subject to certain limitations and conditions to direct Streeterville to purchase shares of our common stock.
Previous wording
The shares of common stock purchased pursuant to SEPA will be at a purchase price equal to 95% of the lowest daily VWAP of the shares of Common Stock during the three consecutive trading days commencing on the date of the delivery of an advance notice. “VWAP” is defined as the daily volume weighted average price of the shares of Common Stock for such trading day on the Nasdaq Stock Market during regular trading hours as reported by Bloomberg L.P. The Company will use 10% of the proceeds associated with each Advance to redeem the outstanding Series A Preferred Stock held by Streeterville.
Current wording
Shares of common stock issued pursuant to SEPA will be purchased at a price equal to 95% of the lowest daily volume-weighted average price of our common on the Nasdaq Stock Market during the three consecutive trading days during regular trading hours, as reported by Bloomberg L.P. beginning on the date we deliver an advance notice. We are required to use 10% of the proceeds from each advance to redeem outstanding shares of Series A Preferred Stock held by Streeterville.
Previous wording
During 2024, pursuant to the SEPA, Streeterville purchased 1.2 million shares of common stock resulting in aggregate net proceeds of $1.8 million of which $0.1 million was received in 2024 and the remaining $1.7 million was received on January 2 nd and 3 rd, 2025.
Current wording
During 2024, pursuant to the SEPA, Streeterville purchased 1.2 million shares of common stock resulting in aggregate net proceeds of $1.8 million of which $0.1 million was received in 2024 and the remaining proceeds of $1.7 million were received in January 2025. No draws on the SEPA were made in 2025.
Previous wording
In September 2024, we entered into a note purchase agreement with Streeterville where Streeterville purchased a note payable in the principal amount of $0.6 million in exchange for $0.5 million in cash after redemption of $0.1 million of Series A preferred stock. The note called for weekly payments of $25 thousand until the maturity on November 18, 2024. In the event the note was not repaid on the maturity date, weekly payments would increase to $50 thousand. The note bore no interest. This note was repaid in full in December 2024.
Current wording
In September 2024, we entered into a note purchase agreement with Streeterville where Streeterville purchased a note payable in the principal amount of $0.6 million in exchange for $0.5 million in cash after redemption of $0.1 million of Series A preferred stock. The note called for weekly payments of $25 thousand until the maturity in November 2024. In the event the note was not repaid on the maturity date, weekly payments would increase to $50 thousand. The note bore no interest. This note was repaid in full in November 2024.
Previous wording
During 2024, we entered into two separate note purchase agreements with our Chief Executive Officer, Anthony Scott. On January 2, 2024, Scott purchased a note payable in the principal amount of $1.1 million in exchange for $1.0 million in cash. The note called for weekly payments of $40,000 until maturity on June 15, 2024. Interest accrued on the balance of the note at 7% per annum compounding daily. During the quarter ended March 31, 2024, we made $200 thousand in principal payments. On March 20, 2024, 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, we reduced the principal balance due under the note by $101 thousand which reflected the amount due from Scott for the exercise of common stock purchase warrants. On April 19, 2024, Scott entered into a private placement subscription agreement to convert the aggregate remaining outstanding balance of $1.1 million for both notes in exchange for common stock and common stock purchase warrants.
Current wording
During 2024, we entered into two separate note purchase agreements with Mr. Scott, our President, CEO and member of our Board. In January 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 for weekly payments of $40 thousand until maturity in June 2024. Interest accrued on the balance of the note at 7% per annum compounding daily. During the quarter ended March 31, 2024, we made $0.2 million in principal payments. In March 2024, Mr. Scott purchased a second note payable in the principal amount of $0.3 million in exchange for $0.3 million in cash. The note was non-interest bearing and matured in April 2024. In April 2024, we reduced the principal balance due under the note by $0.1 million, which reflected the amount due from Mr. Scott for the exercise of common stock purchase warrants. In April 2024, Mr. Scott entered into a private placement subscription agreement to convert the aggregate remaining outstanding balance of $1.1 million for both notes in exchange for common stock and common stock purchase warrants.
Previous wording
Management’s discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to credit losses, income taxes, warranty obligations, maintenance contracts and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Current wording
Management’s discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to credit losses, income taxes, warranty obligations, maintenance contracts, and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Previous wording
Pursuant to ASC Topic 350-40 Internal Use Software Accounting Capitalization, certain development costs related to our 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.
Current wording
Pursuant to the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 350-40 Internal Use Software Accounting Capitalization, certain development costs related to our 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.
Previous wording
We recognize sales of its consulting services in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606 whereby revenue from contracts with customers are recognized once the criteria under the five steps below are met:
Current wording
We recognize sales of its consulting services in accordance with the ASC Topic 606 whereby revenue from contracts with customers are recognized once the criteria under the five steps below are met:
Previous wording
Consulting services, including reporting, are typically done monthly, and revenue is matched accordingly. Product sales may include maintenance and customer support allocated revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy using the relative selling price method. All product offering and service offering market values are readily determined based on current and prior stand-alone sales. We defer and recognize maintenance, updates, and support revenue over the term of the contract period, which is generally one year.
Current wording
Consulting services, including reporting are typically performed on a monthly basis, and the related revenue is recognized as the services are rendered to the customer. Product sales may include maintenance and customer support elements, with consideration allocated to each performance obligation based on the estimated selling prices of the delivered goods and services based on a selling price hierarchy using the relative selling price method. All product offering and service offering market values are readily determined based on current and prior stand-alone sales. The Company defers and recognizes maintenance, updates, and support revenue over the term of the contract period, which is generally one year.
Previous wording
We utilize the five-step process mentioned above, per ASC Topic 606, to recognize sales and will follow that directive, also, to define revenue items as individual and distinct.INTRUSIONShield services provided to our customers for a fixed monthly subscription fee include:
Current wording
We utilize the five-step process mentioned above, to recognize sales and will follow that directive, also, to define revenue items as individual and distinct.INTRUSIONShield services provided to our customers for a fixed monthly subscription fee include:
Previous wording
We satisfy our performance obligation when ourINTRUSIONShield 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.
Current wording
We satisfy our performance obligation when ourINTRUSIONShield 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 are automatically renewed 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.
Previous wording
See Note 2 to the Consolidated Financial Statements (Part II, Item 8 of this Form 10-K).
Current wording
See Note 2 to the Consolidated Financial Statements (Part II, Item 8 of this Annual Report on Form 10-K).
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Sales to commercial customers totaled $0.4 million or 5.4% of total revenue for the year ended December 31, 2025, compared to $0.9 million or 16.2% of total revenue for the same period in 2024.
Current report — wording carried from elsewhere
During 2025, we expanded the number ofShield resellers and referral partners. We anticipate our concentration of revenues will vary among customers in future periods depending upon the timing of certain sales. We anticipate that sales to government customers, while comprising a significant portion of our revenues in future periods, will represent a lower percentage of our revenue base as we gain traction selling ourShield products into commercial markets.