INTRUSION INC

5. ROU Assets and Leasing Liabilities

The Company has operating and finance leases and records ROA assets and related lease liabilities as required under ASC Topic 842. The lease liabilities are determined by the net present value of the total lease payments and amortized over the life of the lease. The Company leases are for the following types of assets:

Lease balances are recorded on the Consolidated Balance Sheets as follows (dollars in thousands):

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.

If the implicit rate is not readily determinable for the Company’s lease agreement, the Company uses an estimated incremental borrowing rate available at the lease commencement to determine the initial present value of lease payments.

Certain lease agreements have options to extend the lease after the expiration of the initial term. The Company recognizes the cost of a lease over the expected total term of the lease, including optional renewal periods that the Company can reasonably expect to exercise. The Company does not have material obligations whereby the Company guarantees a residual value on assets the Company leases, nor do the Company’s lease agreements impose restrictions or covenants that could affect the Company’s ability to make distributions.

Schedule of Items Appearing in the Statement of Operations (in thousands):

Other supplemental information related to the Company’s leases is as follows (in thousands):

Future minimum lease obligations consisted of the following as of December 31, 2025 (in thousands):

6. Notes Payable

Security Purchase Agreement

In March 2022, the Company entered into a SPA with 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 Note 1 in March 2022, and $4.7 million in net funds from Note 2 in June 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.

In January 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 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 in the consolidated balance sheets by $0.4 million.

In August 2023, the Company entered into a Forbearance Agreement with Streeterville which was subsequently amended later that month. The Forbearance Agreement and amendment extended the maturity dates for each Note by 12 months to September and December 2024. In consideration of the extension of the maturity dates, the Company entered into a Security Agreement with Streeterville, in August 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. 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 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 in January 2025. In March 2025, the Company entered into three separate agreements with Streeterville to exchange an aggregate $0.5 million in principal for 553 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 years ended December 31, 2025 and 2024, the Company recorded simple interest related to Note 1 and Note 2 of $8 thousand and $171 thousand, respectively, in the accompanying Consolidated Statement of Operations.

Streeterville Notes Payable

In September 2024, the Company 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 was non-interest bearing and was repaid in November 2024.

Scott Notes Payable

In January 2024, the Company entered into a note purchase agreement with the Company’s CEO. 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 in June 2024. Interest accrued on the balance of the note at 7% per annum compounding daily. During the period ended March 31, 2024, the Company made $0.2 million in principal payments on the first note payable.

In March 2024, 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, the Company reduced the principal balance due under the note by $0.1 million which reflected the amount due from Scott for the exercise of common stock purchase warrants.

In April 2024, Scott entered into a private placement subscription agreement to convert the remaining 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 for the first Scott note totaling $20 thousand and amortization of debt issuance costs of $83 thousand in the accompanying consolidated statement of operations in 2024.

7. Commitments and Contingencies

Change of Control and Severance Agreements

Certain members of the Company’s management are parties to severance and change of control agreements with the Company. The severance and change in control agreements provide those individuals with severance payments in certain circumstances and prohibit such individuals from, among other things, competing with the Company during his or her employment. In addition, the severance and change of control agreements prohibit subject individuals from, among other things, disclosing confidential information about the Company and its products or interfering with a client or customer of the Company, in each case during his or her employment and for certain periods (including indefinite periods) following the termination of such person’s employment.

Legal Proceedings

Stockholder Derivative Claim

In June 2022, a verified stockholder derivative complaint was filed in U.S. District Court, District of Delaware by the Plaintiff Stockholder on behalf of Intrusion against certain of the Company’s Defendants. Plaintiff alleges that Defendants through various actions breached their fiduciary duties, wasted corporate assets, and unjustly enriched Defendants by (a) incurring costs and expenses in connection with the ongoing SEC investigation, (b) incurring costs and expenses to defend the Company with respect to the consolidated class action, (c) settling class-wide liability with respect to the consolidated class action, as well as ancillary claims regarding sales of the Company’s common stock by certain of the Defendants. In September 2023, the Company agreed to settle the claim. In October 2023, public notice of the settlement was given. The settlement agreement provides in part for (i) an amendment to the Company’s Bylaws, committee Charters, and other applicable corporate policies to implement certain measures set forth more fully therein, to remain in effect for no less than three years; (ii) attorneys’ fees and expenses to plaintiff’s counsel of $0.3 million; and (iii) the dismissal of all claims against the Defendants, including the Company, in connection with the action. In April 2024, the Court approved the settlement. The $0.3 million settlement payment was paid by the Company’s insurance provider under its insurance policy since the Company’s $0.5 million retention was previously exhausted.

In addition to these legal proceedings, the Company is subject to various other claims that may arise in the ordinary course of business. The Company does not believe that any claims exist where the outcome of such matters would have a material adverse effect on the Company’s consolidated financial position, operating results, or cash flows. However, there can be no assurance such legal proceedings will not have a material impact on the Company’s future results.