UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2025
For the quarterly period ended June 30, 2025
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-39608

INTRUSION INC.

(Exact name of registrant as specified in its charter)

Delaware	75-1911917
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

101 East Park Blvd, Suite 1200, Plano, Texas 75074

(Address of principal executive offices)

(Zip Code)

(888) 637-7770

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

* * * * * * * * * *

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	INTZ	Nasdaq Capital Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large, accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

The number of shares outstanding of the Registrant’s Common Stock, $0.01 par value, on ~~April~~August 2912, 2025, was 19,~~895~~900,~~095~~043.

INTRUSION INC.

INDEX

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets as of March 31, 2025 (unaudited), and December 31, 2024	3
Condensed Consolidated Balance Sheets as of June 30, 2025 (unaudited), and December 31, 2024	3
Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2025, and 2024	4
Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2025, and 2024	4
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three months ended March 31, 2025, and 2024	5
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2025, and 2024	5
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025, and 2024	6
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025, and 2024	6
Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1415
Item 3. Quantitative and Qualitative Disclosures About Market Risk	19
Item 4. Controls and Procedures	19
PART II – OTHER INFORMATION	20
Item 1. Legal Proceedings	20
Item 1A. Risk Factors	20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities	20
Item 3. Defaults Upon Senior Securities	20
Item 4. Mine Safety Disclosures	20
Item 5. Other Information	20
Item 6. Exhibits	21
Signature Page	22

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

INTRUSION INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

	March 31, 2025			December 31, 2024
	June 30, 2025			December 31, 2024
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	104,~~744~~689		$	4,851
Accounts receivable, net		130			169
Short-term investments		3,749			–
Prepaid expenses and other assets		1,202			514
Accounts receivable, net		103			169
Total current assets		12,076			5,534
Contract asset		1,214			8
Prepaid expenses and other assets		733			506
Total current assets		10,488			5,534
Noncurrent Assets:
Property and equipment:
Equipment		2,~~769~~864			2,690
Capitalized software development		4,~~319~~653			3,948
Leasehold improvements		18			18
Property and equipment, gross		7,~~106~~535			6,656
Accumulated depreciation and amortization		(3,~~175~~543	)		(2,809	)
Property and equipment, net		3,~~931~~992			3,847
Finance leases, right-of-use assets, net		~~319~~279			491
Operating leases, right-of-use assets, net		1,~~377~~310			1,356
Other assets		~~279~~287			281
Total noncurrent assets		5,~~906~~868			5,975
TOTAL ASSETS	$	1716,~~982~~356		$	11,509
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable, trade	$	~~1,275~~711		$	1,508
Accrued expenses		~~402~~265			291
Finance leases liabilities, current portion		313			405
Finance lease liabilities, current portion		207			405
Operating leases liabilities, current portion		137			209
Operating lease liabilities, current portion		89			209
Notes payable		–			529
Deferred revenue		~~918~~1,975			730
Total current liabilities		3,~~045~~247			3,672
Noncurrent Liabilities:
Finance lease liabilities, noncurrent portion		~~145~~109			172
Operating lease liabilities, noncurrent portion		1,~~391~~367			1,414
Total noncurrent liabilities		1,~~536~~476			1,586
Commitments and Contingencies – (See Note 5)		–			–
Stockholders’ Equity:
Preferred stock, $0.01 par value: Authorized shares – 5,000; Issued shares – 0 in 2025 and 4 in 2024		–			3,827
Common stock, $0.01 par value: Authorized shares – 80,000; Issued shares – 19,896 in 2025 and 15,591 in 2024; Outstanding shares – 19,895 in 2025 and 15,590 in 2024		199			156
Common stock, $0.01 par value: Authorized shares – 80,000; Issued shares – 19,901 in 2025 and 15,591 in 2024; Outstanding shares – 19,900 in 2025 and 15,590 in 2024		199			156
Common stock held in treasury, at cost – 1 share		(362	)		(362	)
Additional paid-in capital		133,~~712~~986			122,552
Stock subscription receivable		–			(1,872	)
Accumulated deficit		(~~120~~122,~~105~~147	)		(118,007	)
Accumulated other comprehensive loss		(43	)		(43	)
Total stockholders’ equity		1311,~~401~~633			6,251
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1716,~~982~~356		$	11,509

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

INTRUSION INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

	Three Months Ended March 31,
	Three Months Ended						Six Months Ended
	2025			2024
	June 30, 2025			June 30, 2024			June 30, 2025			June 30, 2024
Revenue	$	1,~~775~~873		$	1,~~131~~460		$	3,648		$	2,591
Cost of revenue		~~432~~442			~~226~~350			874			576
Gross profit		1,~~343~~431			~~905~~1,110			2,774			2,015
Operating expenses:
Sales and marketing		1,~~184~~207			1,~~177~~158			2,391			2,335
Research and development		1,~~218~~332			1,~~019~~035			2,550			2,054
General and administrative		~~1,034~~978			~~1,181~~950			2,012			2,131
Operating loss		(2,~~093~~086	)		(2,~~472~~033	)		(4,179	)		(4,505	)
Interest expense		(2921	)		(~~228~~34	)		(50	)		(262	)
Interest accretion and amortization of debt issuance costs, net		–			~~990~~–			–			990
Other income (expense), net		24			(6	)
Other (expense) income, net		65			–			89			(6	)
Net loss	$	(2,~~098~~042	)	$	(12,~~716~~067	)	$	(4,140	)	$	(3,783	)
Net loss per share:
Basic	$	(0.1110	)	$	(0.9453	)	$	(0.21	)	$	(1.31	)
Diluted	$	(0.1110	)	$	(0.9453	)	$	(0.21	)	$	(1.31	)
Weighted average common shares outstanding:
Basic		19,~~216~~895			14,~~865~~327			19,557			3,099
Diluted		19,~~216~~895			14,~~865~~327			19,557			3,099

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

INTRUSION INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

	Series A Preferred Stock						Common Stock				Treasury Stock					Accumulated Other Comprehensive			Additional Paid-In			Stock Subscription			Accumulated
	Dollars			Shares			Dollars		Shares		Dollars			Shares		Loss			Capital			Receivable			Deficit			Total
Balance, December 31, 2024	$	3,827			4		$	156		15,591	$	(362	)		1	$	(43	)	$	122,552		$	(1,872	)	$	(118,007	)	$	6,251
Stock-based compensation expense		–			–			–		–		–			–		–			222			–			–			222
Registered direct offering, net of fees		–			–			24		2,459		–			–		–			7,002			–			–			7,026
Issuance of common stock to reduce note payable		–			–			6		553		–			–		–			531			–			–			537
Exchange of Series A preferred stock for common stock		(3,946	)		(4	)		13		1,293		–			–		–			3,933			–			–			–
Redemption of preferred stock		(187	)		–			–		–		–			–		–			–			–						(187	)
Issuance of preferred stock for payment of preferred return		2			–			–		–		–			–		–			(2	)		–			–			–
Amortization of preferred stock exchange premium		304			–			–		–		–			–		–			(304	)		–			–			–
At-the-market (“ATM”) offering fees		–			–			–		–		–			–		–			(79	)		–			–			(79	)
Standby purchase agreement proceeds, net of fees		–			–			–		–		–			–		–			(143	)		1,872			–			1,729
Net loss		–			–			–		–		–			–		–			–			–			(2,098	)		(2,098	)
Balance, March 31, 2025	$	–			–		$	199		19,896	$	(362	)		1	$	(43	)	$	133,712		$	–		$	(120,105	)	$	13,401
Stock-based compensation expense		–			–			–		–		–			–		–			282			–			–			282
Issuance of common stock through employee stock purchase plan		–			–			–		5		–			–		–			10			–			–			10
At-the-market (“ATM”) offering fees		–			–			–		–		–			–		–			(18	)		–			–			(18	)
Net loss		–			–			–		–		–			–		–			–			–			(2,042	)		(2,042	)
Balance, June 30, 2025	$	–			–		$	199		19,901	$	(362	)		1	$	(43	)	$	133,986		$	–		$	(122,147	)	$	11,633

	Series A Preferred Stock					Common Stock				Treasury Stock					Accumulated Other Comprehensive			Additional Paid-In			Stock Subscription			Accumulated
															Accumulated
	Dollars			Shares		Dollars		Shares		Dollars			Shares		Loss			Capital			Receivable			Deficit			Total
															Other			Additional
Balance, December 31, 2023	$	–			–	$	18		1,791	$	(362	)		1	$	(43	)	$	101,049		$	–		$	(110,217	)	$	(9,555	)
	Series A														Comprehensive			Paid-In
Stock-based compensation expense		–			–		–		–		–			–		–			142			–			–			142
	Preferred Stock					Common Stock				Treasury Stock					Loss			Capital			Accumulated
Public stock offering, net of fees		–			–		1		115		–			–		–			484			–			–			485
	Dollars			Shares		Dollars		Shares		Dollars			Shares		Dollars			Dollars			Deficit			Total
Issuance of preferred stock to reduce note payable		9,275			9,275		–		–		–			–		–			–			–			–			9,275
Balance, December 31, 2023	$	–			–	$	18		1,848	$	(362	)		1	$	(43	)	$	101,049		$	(110,217	)	$	(9,555	)
Issuance of common stock to reduce notes payable		–			–		–		52		–			–		–			200			–			–			200
Stock-based compensation expense		–			–		–		–		–			–		–			142			–			142
Net loss		–			–		–		–		–			–		–			–			–			(1,716	)		(1,716	)
Issuance of preferred stock to reduce note payable		9,275			9		–		–		–			–		–			–			–			9,275
Balance, March 31, 2024	$	9,275			9,275	$	19		1,958	$	(362	)		1	$	(43	)	$	101,875		$	–		$	(111,933	)	$	(1,169	)
Public stock offering, net of fees		–			–		1		115		–			–		–			484			–			485
Issuance of common stock to reduce note payable		–			–		–		52		–			–		–			200			–			200
Net loss		–			–		–		–		–			–		–			–			(1,716	)		(1,716	)
Balance, March 31, 2024	$	9,275			9	$	19		2,015	$	(362	)		1	$	(43	)	$	101,875		$	(111,933	)	$	(1,169	)
Stock-based compensation expense		–			–		–		–		–			–		–			67			–			67
Public stock offering, net of fees		–			–		15		1,466		–			–		–			2,816			–			2,831
Issuance of common stock and warrants associated with warrant inducements		–			–		2		186		–			–		–			565			–			567
Issuance of common stock and warrants, net of fees		–			–		13		1,349		–			–		–			2,606			–			2,619
Exchange of Series A preferred stock for common stock		(609	)		–		4		366		–			–		–			605			–			–
Preferred shares issued in conjunction with preferred return		290			–		–		–		–			–		–			(290	)		–			–
Issuance of common stock in conjunction with obtaining minority interest in company		–			–		1		59		–			–		–			99			–			100
Net loss		–			–		–		–		–			–		–			–			(2,067	)		(2,067	)
Balance, June 30, 2024	$	8,956			9	$	54		5,441	$	(362	)		1	$	(43	)	$	108,343		$	(114,000	)	$	2,948

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

INTRUSION INC. AND SUBSIDIARIES ~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)~~

	Three Months Ended March 31,
	2025			2024
Operating Activities:
Net loss	$	(2,098	)	$	(1,716	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		540			438
Stock-based compensation		222			142
Non-cash lease costs		11			83
Note 1 and 2 interest accretion up to the redemption common stock settlement amount and debt issuance costs		–			(990	)
Other amortization of debt issuance costs		–			64
Other non-cash interest		8			162
Changes in operating assets and liabilities:
Accounts receivable		39			108
Prepaid expenses and other assets		(688	)		250
Accounts payable and accrued expenses		215			(126	)
Operating lease liability		(127	)		(5	)
Deferred revenue		188			476
Net cash used in operating activities		(1,690	)		(1,114	)
Investing Activities:
Purchases of property and equipment		(392	)		(64	)
Capitalized software development		(395	)		(363	)
Net cash used in investing activities		(787	)		(427	)
Financing Activities:
Proceeds from notes payable		–			1,340
Principal payments on notes payable		–			(200	)
Proceeds from public stock offering net of fees		(79	)		485
Proceeds from registered direct offering, net of fees		7,026			–
Proceeds from stock subscription receivable		1,542			–
Reduction of finance lease liabilities		(119	)		(101	)
Net cash provided by financing activities		8,370			1,524
Net increase (decrease) in cash and cash equivalents		5,893			(17	)
Cash and cash equivalents at beginning of period		4,851			139
Cash and cash equivalents at end of period	$	10,744		$	122
SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES:
Cash paid for interest	$	3		$	3
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capitalized asset and capitalized software included in accounts payable	$	337		$	62
Preferred stock issued to reduce notes payable	$	–		$	9,275
Common stock issued to reduce notes payable	$	537		$	200
Preferred return on preferred stock	$	2		$	–
Exchanges of preferred stock for common stock	$	3,946		$	–
Amortization of preferred stock exchange premium	$	304		$	–

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Six Months Ended June 30,
	2025			2024
Operating Activities:
Net loss	$	(4,140	)	$	(3,783	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		931			826
Stock-based compensation		504			209
Non-cash lease costs		109			135
Note 1 and 2 interest accretion up to the redemption common stock settlement amount and debt issuance costs		–			(990	)
Other amortization of debt issuance costs		–			83
Other non-cash interest		9			173
Changes in operating assets and liabilities:
Accounts receivable		66			(344	)
Contract assets		(1,206	)		(293	)
Prepaid expenses and other assets		(236	)		492
Accounts payable and accrued expenses		(302	)		(646	)
Operating lease liabilities		(230	)		(37	)
Deferred revenue		1,245			139
Net cash used in operating activities		(3,250	)		(4,036	)

Investing Activities:
Purchases of United States (“U.S.”) treasury securities		(3,749	)		–
Purchases of property and equipment		(725	)		(33	)
Capitalized software development		(676	)		(664	)
Net cash used in investing activities		(5,150	)		(697	)

Financing Activities:
Proceeds from notes payable		–			1,340
Principal payments on notes payable		–			(1,443	)
Proceeds from public stock offering net of fees		(97	)		3,316
Proceeds from warrant inducements		–			567
Proceeds from sales of common stock and warrants, net of fees		–			2,619
Proceeds from registered direct offering, net of fees		7,026			–
Proceeds from stock subscription receivable		1,542			–
Reduction of finance lease liabilities		(243	)		(299	)
Proceeds related to the issuance of common stock under stock purchase plan		10			–
Net cash provided by financing activities		8,238			6,100

Net (decrease) increase in cash and cash equivalents		(162	)		1,367
Cash and cash equivalents at beginning of period		4,851			139
Cash and cash equivalents at end of period	$	4,689		$	1,506

SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES:
Cash paid for interest	$	5		$	87

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capitalized assets and capitalized software included in accounts payable	$	89		$	37
Accounts payable on capitalized assets settled with vendor	$	–		$	116
Preferred stock issued to reduce notes payable	$	–		$	9,275
Common stock issued to reduce notes payable	$	537		$	200
Common stock used for minority investment in company	$	–		$	100
Modification of right-of-use finance lease	$	(18	)	$	34

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

INTRUSION INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	Description of Business

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 ~~United States (“~~U.S.”) federal government entities, state and local government entities, and companies ranging in size from mid-market to large enterprises.

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

2.	Basis of Presentation

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~~ the fair value of its assets and liabilities which qualify as financial instruments and includes this additional information in the ~~notes~~ 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~~ 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.

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 June 30, 2025, the Company had $3.7 million in short-term investments.

3.	Right-of-use Asset and Leasing Liabilities

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:

	·	Computer hardware and copy machines- The Company’s finance lease right-of-use assets consist of computer hardware and copy machines. These leases have two and three year lives and are in various stages of completion.
	·	Office space - The Company’s operating lease right-of-use assets include its rental agreements for its offices in Plano, Texas, and a data service center in Allen, Texas. The Plano offices operating lease expires on April 30, 2035. The data service center operating lease liability has a life of ~~six~~four months as of ~~March~~June 3130, 2025.

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 ~~months~~and ~~ended~~six months ~~March~~ended 31June 30, 2025 ~~and 2024~~, the Company ~~had~~made operating lease payments of $~~127~~0.1 ~~thousand~~million and $50.2 ~~thousand~~million, respectively, compared to $32 thousand and $37 thousand for the same periods in ~~lease~~2024. ~~payments~~For ~~related~~the tosame ~~operating~~periods, ~~leases~~finance ~~and had~~lease payments were $~~119~~0.1 ~~thousand~~million and $~~101~~0.2 ~~thousand,~~million ~~respectively~~in 2025, and in$0.2 ~~lease~~million ~~payments~~and ~~related~~$0.3 tomillion ~~financing~~in ~~leases~~2024, respectively.

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

Schedule of lease cost
	Three Months Ended
	Three Months Ended June 30,				Six Months Ended June 30,
	March 31, 2025		March 31, 2024
	2025		2024		2025		2024
Operating expense:
Amortization Expense – Finance ROU	$	172	$	166
Amortization expense – Finance ROU	$	22	$	163	$	194	$	329
Lease expense – Operating ROU	$	1198	$	83118	$	109	$	201
Other expense:
Interest Expense – Finance ROU	$	20	$	–
Interest expense – Finance ROU	$	17	$	–	$	37	$	–
Total Lease Expense	$	203	$	249
Total lease expense	$	137	$	281	$	340	$	530

Future minimum lease obligations consisted of the following as of ~~March~~June 3130, 2025 (in thousands):

Schedule of future minimum lease obligations
	Operating			Finance
Year ending December 31,	ROU Leases			ROU Leases			Total
Remaining 2025	$	~~205~~103		$	~~348~~174		$	~~553~~277
2026		214			~~187~~200			~~401~~414
2027		146			4			150
2028		223			3			226
2029		228			–			228
Thereafter		1,308			–			1,308
	$	2,~~324~~222		$	~~542~~381		$	2,~~866~~603
Less Interest*		(796	)		(84	)
Less interest*		(766	)		(65	)
	$	1,~~528~~456		$	~~458~~316

*	Interest is imputed for operating ROU leases and classified as lease expense and is included in operating expenses in the accompanying unaudited condensed consolidated statements of operations.

4.	Notes Payable

Security Purchase Agreement

On March 10, 2022, ~~Intrusion~~ ~~Inc.~~the Company entered into an unsecured loan agreement (“SPA”) with Streeterville Capital, LLC (“Streeterville”) ~~whereby~~pursuant to which the Company issued two separate promissory notes of $5.4 million each with an initial rate of 7%. OnUnder ~~March~~this 10agreement, ~~2022,~~ the Company received $4.6 million in net funds from the first tranche (Note 1) ~~pursuant~~on toMarch ~~a promissory note executed contemporaneously with the execution of the loan agreement. On June 29~~10, 2022, ~~the~~and ~~Company received an additional~~ $4.7 million in net funds from the second tranche (Note 2) ~~pursuant~~on toJune a29, ~~promissory note~~2022. Each note ~~has~~carried an 18-month maturity, ~~may be prepaid subject to varying prepayment premiums,~~ and ~~may~~had beredemption ~~redeemed~~provisions ~~at any time~~ after six months ~~into the term of such note~~ in amounts up to $0.5 million per calendar month ~~upon~~at the noteholder’s ~~election~~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, 2024, 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, 2024, the Company entered into a Forbearance Agreement with Streeterville which was subsequently amended on August 7, 2024. 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, 2024 (the “Security Agreement”), under which Streeterville was granted a first-position security interest in all assets of the Company.

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~~preferred stock precluded repayment of Note 1 so long as any shares of ~~Series~~ Series A preferred stock ~~was~~were outstanding. The Series A preferred stock was repaid in full on January 3, 2025. In March 2025, the Company ~~entered~~ 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 ~~three~~six months ended ~~March~~June 3130, 2025, and 2024, the Company recorded simple interest of $8 thousand and $~~144~~153 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 ~~three~~six months ended ~~March~~June 3130, 2024.

Scott Notes Payable

~~During~~In ~~the three months ended~~ March ~~31,~~ 2024, the Company entered into two separate note purchase agreements with Anthony Scott, the Company’s President and Chief ~~Executive~~ Executive Officer, ~~Anthony~~and ~~Scott~~member ~~(“Scott”)~~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 for weekly 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 ~~three~~period ~~months~~ ended ~~March~~June 3130, 2024, the Company made $0.2 million in principal payments on the first note payable.

On March 20, 2024, ~~Scott~~ 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 March 31, 2024, the balance outstanding under both notes was $1.2 million. The Company recorded interest of $16 thousand for both notes in the accompanying unaudited condensed consolidated statement of operations for the three months ended March 31, 2024. For the three months ended March 31, 2024, $64 thousand in amortization of debt issuance cost was recorded.

On April 19, 2024, 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.

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 six months ended June 30, 2024. For the six months ended June 30, 2024, $83 thousand in amortization of debt issuance cost was recorded.

5.	Commitments and Contingencies

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.

6.	Stockholders’ Equity

ATM Offering

On June 11, 2025, the Company terminated its At Market Sales Agreement with B. Riley Securities, Inc. ~~acts~~(the as“Riley ~~sales~~ATM ~~agent~~Agreement”). ~~for~~On ~~the~~June 12, 2025, the Company’s ~~ATM~~entered ~~program~~into ~~which~~a ~~allows~~new ~~the~~At ~~Company~~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 ~~three~~period ~~months~~ ended ~~March~~June 3130, 2025, no sales of common stock were made under the ATM utilizing the shelf registration. For the ~~three~~period ~~months~~ ended ~~March~~June 3130, 2024, the Company received proceeds of approximately $03.5 3 million net of fees from the sale of common stock pursuant to the ~~program~~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~~stock ~~Subscription~~subscription ~~Receivable~~receivable in the consolidated balance sheet on December 31, 2024, and received in January 2025. During the ~~three~~six months ended ~~March~~June 3130, 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 our 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 March 31, 2025, there were no remaining shares of Series A preferred stock outstanding.

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 June 30, 2025, there were no remaining shares of Series A preferred stock outstanding.

Registered Direct Offering

On January 6, 2025, the ~~Company~~ 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~~purchaser not being deemed a beneficial owner of greater than 4.99%. AsAll of ~~March 31, 2025, all~~ the pre-funded warrants ~~have~~were ~~been~~ exercised in January 2025.

Common Stock Warrants

On ~~March~~June 3130, 2025, the Company had 3,198,085 warrants to purchase ~~one share of~~ common stock at an average exercise price of $3.26 per share and average remaining term of 43.19 years.

7.	Stock-Based Compensation

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 ~~has~~had three stock-based compensation plans as of ~~March~~June 3130, 2025, and December 31, 2024., ~~These plans include~~ the 2021 Omnibus Incentive Plan, the 2015 Stock Incentive Plan and the 2005 Stock Incentive Plan. ~~These plans are discussed in detail in the Company’s Annual Report for the year ended December 31, 2024, filed with the SEC.~~

The Company grants stock from both the 2021 Omnibus Incentive Plan and the 2015 Stock Incentive Plan. These plans provide 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 ~~three~~six months ended ~~March~~June 3130, 2025, the Company granted 383.9 thousand restricted stock units (“RSUs”). No other grants were made during ~~either~~the period.

The Company recognized compensation expense of $0.23 million, and $0.5 million for the three and six months ended ~~March~~June 3130, 2025, respectively, compared to $0.1 million and $0.2 million for the three and six months ended ~~March~~June 3130, 2024, respectively.

8.	Revenue Recognition

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:

	(i)	identification of the contract with a customer;

	(ii)	identification of the performance obligations in the contract;

	(iii)	determination of the transaction price;

	(iv)	allocation of the transaction price to the separate performance obligations; and

	(v)	recognize revenue upon satisfaction of a performance obligation.

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, INTRUSION Shield, the Company began offering software on a subscription basis. INTRUSION Shield 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. INTRUSION Shield services provided to its customers for a fixed monthly subscription fee include:

	·	access to Intrusion’s proprietary software and database to detect and prevent unauthorized access to its clients’ information networks;
	·	use of all software, associated media, printed materials, data, files, online documentation, and any equipment that Intrusion provides for customers to access the INTRUSION Shield; and
	·	tech support, post contract customer support (PCS) includes daily program releases or corrections provided by Intrusion without additional charge.

INTRUSION Shield 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 the INTRUSION Shield 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.

~~The~~For ~~Company’s accounts~~the ~~receivable~~three ~~represents~~and ~~unconditional~~six ~~contract~~months ended ~~billings~~June ~~for~~30, ~~sales~~2025, ~~per~~revenues ~~contracts~~to ~~with~~various ~~customers~~U.S. ~~and~~government ~~are~~entities ~~classified~~totaled ~~as current assets~~$1.8 million Asfrom of4 ~~March~~government ~~31,~~customers ~~2025~~ and ~~December~~$3.4 million ~~31,~~from ~~2024,~~4 ~~the~~government ~~Company~~customers, ~~had~~representing ~~accounts receivable balances of $0~~95.15% ~~million~~ and $093.26% ~~million~~of total revenues, respectively. AtIn ~~the~~comparison, ~~three~~for ~~months~~the ~~ended~~same ~~March~~periods 31in 2024, ~~2025~~revenues ~~and~~totaled ~~the~~$1.3 million ~~year~~from ~~ended~~5 ~~December~~government ~~31,~~customers ~~2024,~~and ~~the~~$2.0 million ~~Company~~from ~~had~~6 angovernment ~~allowance for~~customers, ~~credit~~representing ~~losses~~89.0% and 75.7% of $0total revenues, respectively.~~1 million.~~

The Company’s ~~classifies~~accounts ~~its~~receivable ~~contract~~represents ~~assets~~unconditional ascontract ~~other~~billings ~~current~~for ~~assets~~sales ~~because~~per ~~the~~contracts ~~Company~~with ~~generally~~customers ~~has~~and anare ~~unconditional~~classified ~~right~~as tocurrent ~~payment~~assets. ~~for the~~As ~~Company’s~~of ~~sales~~June or30, ~~services~~2025, ~~performed~~and atDecember 31, 2024, the ~~end~~Company had accounts receivable balances of ~~the~~$0.1 ~~reporting~~million ~~period~~and $0.2 million, respectively. As of ~~March~~June 3130, 2025, and December 31, 2024, the Company had ~~contract~~an ~~assets~~allowance ~~balances~~for ofcredit ~~627 thousand~~losses ~~and~~of ~~8 thousand,~~$0.1 ~~respectively~~million.

Contract assets are recognized when the Company has transferred services to a customer earning the right to consideration.

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 ~~table presents~~tables presents changes in the Company’s contract ~~liability~~assets and contract liabilities during the ~~three~~six months ended ~~March~~June 3130, 2025, and the year ended ~~December~~ December 31, 2024 (in thousands):

Schedule of contract liability
Schedule of contract assets and liability
	March 31, 2025			December 31, 2024
Contract Assets
	June 30, 2025			December 31, 2024
Balance at beginning of period	$	8		$	304
Additions		1,646			505
Reclassification to receivables		(440	)		(801	)
Balance at end of period	$	1,214		$	8
Contract Liabilities
	June 30, 2025			December 31, 2024
Balance at beginning of period	$	730		$	439
Additions		13,~~430~~509			3,914
Revenue recognized		(12,~~242~~264	)		(3,623	)
Balance at end of period	$	~~918~~1,975		$	730

9.	Capitalized Software Development

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.

10.

Net Loss Per Share

The Company reports two ~~separate~~ 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 ~~March 31,~~June 30, 2025, and 2024 totaled 23.4 8 million and 03.2 1 million shares, respectively. The aggregate number of common stock equivalents excluded from the diluted loss per share calculation for the six months ended June 30, 2025, and 2024 totaled 3.8 million and 1.7 million shares, respectively. Since the Company is in a net loss position for the ~~month~~ periods ended ~~March 31~~June 30, 2025 , and 2024, basic and dilutive net loss per share is the same.

11.

Related Party Transactions

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~~ the aggregate amount of $0.2 million. On March 20, 2024, the Company entered into an additional invoice financing arrangement pursuant to to a note purchase agreement with Mr. Scott, according to which, among other things, Mr. Scott purchased from the Company a second Promissory ~~Note~~ 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~~ aggregate outstanding balance of $1.1 million for both notes in exchange for common stock and common stock purchase warrants.

The Company recorded ~~interest~~ interest expense of $~~0.1 million~~20 thousand for both notes in the accompanying consolidated statement of operations for the ~~three~~six months ended ~~March~~June 3130, 2024. For the six months ended June 30, 2024, $83 thousand in amortization of debt issuance cost was recorded.

There ~~are~~were no related party transactions for the three or six months ended ~~March~~June 3130, 2025.

12.

Subsequent Events

None.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including, without limitation, the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which statements involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our financial position; our ability to continue our business as a going concern; our business, sales, and marketing strategies and plans; our ability to successfully market, sell, and deliver our INTRUSION Shield commercial product and solutions to an expanding customer base; and our ability to secure additional financing; are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, such statements.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q and our most recent Annual Report on Form 10-K, as the same may be amended or updated from time to time.

In addition, statements such as "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that such information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements do not indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.

Overview

We offer businesses of all sizes and industries products and services that leverage our exclusive threat intelligence database of over 8.5 billion IP addresses and domain names. After many years of gathering intelligence and providing our INTRUSION TraceCop and Savant solutions exclusively to government entities, we released our first commercial product in 2021, the INTRUSION Shield. INTRUSION Shield was designed to allow businesses to incorporate a Zero Trust, reputation-based security solution into their existing infrastructure to observe traffic flow and instantly block known malicious or unknown connections from both entering or exiting a network, making it an ideal solution for protecting from Zero-Day and ransomware attacks.

Results of Operations

Comparison of the Periods Ended ~~March~~June 3130, 2025, and ~~March~~June 3130, 2024

	Three Months Ended March 31,						Change
	Three Months Ended June 30,											Six Months Ended June 30,
(in thousands)	2025			2024			Dollar			Percentage
(Dollars in thousands)	2025			2024			Change					2025			2024			Change
Revenue	$	1,~~775~~873		$	1,~~131~~460		$	~~644~~413			~~56.9~~28%	$	3,648		$	2,591		$	1,057		41%
Cost of Revenue		432			226			206			91.2%
Cost of revenue		442			350			92			26%		874			576			298		52%
Gross Profit		1,343			905			438			48.4%
Gross profit		1,431			1,110			321			29%		2,774			2,015			759		38%
Operating Expenses:
Gross profit percentage		76.4%			76.0%								76.0%			77.8%
Sales and marketing		1,184			1,177			7			0.6%
Operating expenses:
Research and development		1,218			1,019			199			19.5%
Sales and marketing		1,207			1,158			49			4%		2,391			2,335			56		2%
General and administrative		1,034			1,181			(147	)		-12.4%
Research and development		1,332			1,035			297			29%		2,550			2,054			496		24%
Operating Loss		(2,093	)		(2,472	)		379			-15.3%
General and administrative		978			950			28			3%		2,012			2,131			(119	)	-6%
Interest Expense		(29	)		(228	)		199			-87.3%
Total operating expenses		3,517			3,143			374			12%		6,953			6,520			433		7%
Interest Accretion and Debt Issuance Costs, Net		–			990			(990	)		-100.0%
Operating loss		(2,086	)		(2,033	)		(53	)		3%		(4,179	)		(4,505	)		326		-7%
Other Income (Expense), Net		24			(6	)		30			-500.0%
Interest expense		(21	)		(34	)		13			-38%		(50	)		(262	)		212		-81%
Net Loss	$	(2,098	)	$	(1,716	)	$	(382	)		22.3%
Interest accretion and amortization of debt issuance costs, net		–			–			–			0%		–			990			(990	)	-100%
Other income (expense), net		65			–			65			100%		89			(6	)		95		-1,583%
Net loss	$	(2,042	)	$	(2,067	)	$	25			-1%	$	(4,140	)	$	(3,783	)	$	(357	)	9%

~~Revenues~~Revenue. Revenue ~~for~~ for the three ~~month~~and ~~period~~six months ended ~~March~~June 3130, 2025, was $1.89 million and $3.6 million, respectively, compared to $1.15 million and $2.6 million for the same ~~period~~periods in 2024. ~~Revenue~~Consulting ~~from~~revenue ~~consulting services~~ totaled $1.4 million and $2.7 million for the three ~~month~~and ~~period~~six months ended ~~March~~June 3130, 2025, up ~~compared~~from to$1.2 million and $01.79 million for the ~~three~~corresponding ~~month~~periods ~~period~~in ~~ended~~2024. The increase in consulting revenue in 2025 primarily reflects ~~March~~work ~~31,~~performed under a Department of Defense contract awarded in the second half of 2024. ~~The~~In contrast, consulting revenue for the six months ended June 30, 2024, was negatively impacted by a continuing resolution and ~~delay~~delays in the approval of athe federal budget. ~~for~~The ~~the~~budget was not passed until March 22, 2024, ~~year~~which ~~impacted~~affected the timing of contract renewals and task orders ~~received~~ ~~for~~and ~~long-standing~~led ~~contracts~~to ~~which~~lower ~~resulted~~consulting revenues in athe ~~decline~~first inhalf ~~consulting~~of ~~revenues~~2024. INTRUSION Shield ~~revenues~~revenue ~~were~~ was $0.45 million ~~for~~and ~~both~~$0.9 million for the three ~~month~~and ~~period~~six months ended ~~March~~June 3130, 2025, compared to $0.3 million and $0.7 million for the same periods in 2024. On March 31, 2024, we lost a ~~large~~major INTRUSION Shield customer ~~that~~who ~~was~~used ~~utilizing~~ a highly customized ~~and~~product ~~non-standard~~ configuration ~~of the product~~. ~~The~~This ~~loss of revenues from this~~ customer~~, which~~ ~~represented~~accounted for 78% of INTRUSION Shield revenues,; this loss has been fully ~~backfilled~~offset ~~with~~by ~~the addition of~~ new customers, inclusive of the Department of Defense contract awarded in ~~the~~late ~~second half of~~ 2024.

WeConcentration ~~believe~~of ~~that~~Revenues. For the ~~recent INTRUSION~~three ~~Shield~~and ~~transactions~~six ~~booked~~months inended ~~the~~June ~~fourth~~30, ~~quarter~~2025, ofrevenues ~~2024~~from sales to various U.S. government entities totaled $1.8 million and $3.4 ~~during~~million, ~~the~~comprising ~~first~~95.5% ~~quarter~~and 93.7% of ~~2025~~total revenues, respectively. This compares to $1.3 million and ~~the~~$2.0 ~~transactions~~million, or 89.0% and ~~that~~75.7% weof ~~anticipate~~total ~~will~~revenues, ~~close~~for the same periods in ~~the~~2024. ~~second~~The ~~quarter~~shift ofin ~~this~~revenue ~~year~~mix ~~will~~was ~~help~~primarily ~~drive~~due ~~INTRUSION~~to the loss of a significant Shield customer, ~~revenue~~as ~~growth~~previously noted, and the addition of a Department of Defense contract in ~~2025~~the second half of 2024.

~~Concentration~~We ofexpect ~~Revenues. Revenues~~our from sales to various U.S. government entities totaled $1.6 million, or 91.6% of revenues, for the quarter ended March 31, 2025, compared to $0.7 million, or 58.6% of revenues, for the same period in 2024. The change in revenue ~~mix primarily resulted from the~~concentration ~~loss~~among ofcustomers ~~the large INTRUSION Shield customer mentioned above, and the addition of the Department of Defense contract award in the second half of 2024. Although we expect our concentration of revenues~~ to ~~vary~~fluctuate ~~among customers~~ in future periods, depending ~~upon~~on the timing of ~~certain~~ sales; however, we anticipate that sales to government customers will continue to ~~account~~represent ~~for~~ a significant portion of our revenues ~~in future periods~~. Sales to ~~the~~ government ~~present~~entities ~~risks~~involve incertain ~~addition~~risks tobeyond those ~~involved~~associated with ~~in sales to~~ commercial customers ~~which could adversely affect our revenues~~, including, ~~without limitation,~~ potential ~~disruption~~disruptions toin ~~appropriation~~appropriations and spending, ~~patterns~~ and the government’'s ~~reservation~~ ~~of the~~ right to cancel contracts and purchase orders ~~for~~at its convenience. ~~Although~~While we do not currently anticipate ~~contracts~~renegotiations ~~with~~or ~~government customers~~cancellations ~~will~~of begovernment ~~renegotiated or cancelled~~contracts, the loss of government orders could ~~have~~materially aaffect ~~material adverse effect on~~ our financial results. We ~~had~~Given ~~three~~the ~~customers~~increased ~~accounting~~percentage ~~for 91.4%~~ of ~~total~~sales ~~revenue~~to ~~for~~U.S. ~~the~~government entities ~~three~~in ~~months~~2025, ~~ended~~no ~~March~~individual ~~31,~~commercial ~~2025.~~customer Weaccounted ~~had~~for ~~three~~more ~~customers~~than in10% ~~the first~~of ~~quarter~~total ofrevenues, ~~2024~~compared ~~that~~to ~~accounted~~one ~~for~~such ~~85.2%~~customer ofin ~~total~~the prior ~~revenue~~year. Our ~~similar~~ product and service offerings are not ~~viewed~~managed as ~~individual~~ separate segments, as ~~our~~ management ~~analyzes~~evaluates the business as a whole and does ~~expenses are~~ not ~~allocated~~allocate toexpenses ~~each~~by product ~~offering~~.

Gross Profit. Gross profit was $1.4 and $2.8 million or 76.4% and 76.0% of revenues for the three and six month periods ended June 30, 2025, compared to $1.1 and $2.0 million or 76.0% and 77.8% of revenues for the three and six months ended June 30, 2024. The gross profit margin will vary depending on product mix. INTRUSION Shield revenues represent between 25% and 28% of revenues for the six month periods ended June 30, 2025, and 2024.

~~Gross~~Operating ~~Profit~~Expenses. ~~Gross~~Operating ~~profit~~expenses ~~was~~totaled $1.3.5 million orand ~~75.~~$7%.0 ofmillion ~~revenues~~ for the ~~quarter~~three- and six-month periods ended ~~March~~June 3130, 2025, compared to $03.91 million ~~or 80~~and $6.0%5 ofmillion ~~revenues~~ for the ~~quarter~~ ~~ended~~same ~~March~~periods ~~31,~~in 2024. The ~~decrease~~2024 infigures ~~gross~~include ~~profit~~one-time ~~margin~~negotiated ~~for~~contract ~~the~~savings ~~2025 period is a result~~ of a$0.1 ~~change~~million infor ~~product~~the ~~mix with INTRUSION~~three-month ~~Shield~~period ~~revenues~~and ~~representing 23~~$0.4% ofmillion ~~our~~for ~~revenue mix compared to 39.1% in~~ the ~~same~~six-month period ~~in 2024~~.

~~Operating~~Adjusting ~~Expenses.~~for ~~Operating~~these one-time savings, operating expenses for the ~~quarter~~three months ended ~~March~~June 3130, 2025, ~~totaled~~increased by $30.43 million, ~~remaining~~primarily ~~unchanged~~due ~~from~~to ~~the~~higher ~~same~~share-based ~~period in 2024. The 2024 period~~compensation ~~included~~from ~~$0.3~~equity ~~million~~grants made in ~~one-time~~the ~~negotiated~~first ~~contract~~quarter, ~~savings.~~timing ~~When~~of ~~adjusted~~merit ~~for these one-time savings~~increases, ~~operating~~and ~~expense for~~ the ~~three months~~addition ~~ended~~of ~~March~~a ~~31,~~Sales ~~2025~~Engineer isand $0Software Engineer.3 ~~million~~These increases ~~lower~~were ~~principally~~partially ~~due~~offset toby ~~decreased~~lower legal fees offollowing ~~$0.1~~the ~~million~~resolution ~~as a result~~ of prior-year litigation matters ~~from~~ ~~prior years being resolved,~~ and increased allocations from ~~out of~~ operating ~~expense~~expenses to cost of sales for resources dedicated to ~~the~~additional ~~increased~~ consulting work ~~performed~~during inthe quarter ~~of $0~~.~~2 million.~~

~~Sales~~For ~~and Marketing. Sales and marketing expenses totaled $1.2 million for both~~ the ~~quarters~~six months ended June ~~March 31~~30, 2025, ~~and~~operating ~~2024.~~expenses, ~~The~~when ~~2024~~adjusted ~~period~~for ~~includes approximately $0.1 million in~~ one-time ~~negotiated contract~~ savings~~. We anticipate increasing our spend to create more brand awareness~~, ~~concise~~were ~~product messaging~~$0.1 ~~and~~million ~~drive~~higher ~~increased~~than ~~sales through~~ the ~~remainder~~comparable ofperiod ~~2025~~in 2024.

~~Research~~Sales and ~~Development~~Marketing. ~~Research~~ Sales and ~~development~~marketing expenses totaled $1.2 million ~~for~~and ~~the quarter ended March 31, 2025, representing an increase of~~ $0.2.4 million ~~compared~~ tofor ~~the~~three ~~same~~and ~~period~~six inmonths ~~2024.~~ended ~~The~~June ~~increase~~30, is2025, ~~primarily~~respectively. ~~due~~The to2024 ~~increased~~period includes ~~depreciation~~approximately of $0.1 million ~~on internally developed software as we continue to invest~~ in ~~adding new features and functionality to the INTRUSION Shield and higher expense due to the 2024 period including~~ one-time negotiated ~~savings~~contract ~~of $0~~savings.1 ~~million.~~We ~~Research~~anticipate ~~and~~increasing ~~development~~our ~~costs~~spend ~~may~~to ~~vary~~create ~~over~~more ~~time~~brand ~~as we determine the frequency~~awareness, ofconcise ~~new~~product ~~releases,~~messaging ~~improved functionality~~ and ~~enhancements~~drive ~~needed~~increased tosales bethrough ~~competitive~~the ~~with~~remainder ~~our~~of ~~product offering~~2025.

~~General~~Research and ~~Administrative~~Development. ~~General~~Research and ~~administrative~~development expenses totaled $1.03 million and $2.6 million for the ~~quarter~~three and six months ended ~~March~~June 3130, 2025, ~~compared~~representing an toincrease of $10.23 million ~~for~~and $0.5 million when compared to the ~~quarter ended~~same ~~March~~periods ~~31,~~in ~~2024~~the prior year. The ~~reduction~~increase is primarily due to ~~decreased~~increased depreciation ~~legal~~of ~~expenses~~$0.1 million on infrastructure hardware purchases and internally developed software as awe ~~result~~continue to invest in adding new features and functionality to the INTRUSION Shield and higher expense due to the 2024 period including one-time negotiated savings of $0.1 million. Research and development costs may vary over time as we determine the ~~prior~~frequency ~~year’s~~of ~~litigation~~new ~~matters~~releases, improved functionality ~~being~~and ~~fully~~enhancements ~~resolved~~needed to be competitive with our product offering.

~~Interest~~General ~~Expense.~~and ~~Interest~~Administrative. ~~expense~~General ~~for~~and ~~the~~administrative ~~period~~expenses ~~March~~totaled ~~31, 2025, was~~ $291.0 ~~thousand~~ and ~~consisting~~$2.0 ~~principally~~million offor the ~~stated~~three ~~interest~~and ~~related~~six tomonths ~~the~~ended ~~Streeterville note~~June ~~and~~30, ~~imputed~~2025, ~~interest~~compared onto ~~finance~~$1.0 and ~~leases~~$2.1 ~~Interest~~million ~~expense~~ for the ~~2024~~three ~~period~~and ~~totaled~~six ~~$228~~months ~~thousand~~ended ~~and~~June ~~consisted~~30, ~~principally~~2024. ofThe ~~the stated~~reduction ~~interest~~is ~~related~~primarily due to ~~the~~decreased ~~Streeterville~~legal ~~notes,~~expenses ~~interest~~as ~~associated~~a ~~with~~result of the ~~note~~prior year’s ~~payable~~litigation ~~issued~~matters tobeing ~~Scott~~fully resolved and ~~finance~~one-time ~~leases~~negotiated savings included in the 2024 period.

Interest Expense. Interest expense for the three and six month periods ended June 30, 2025, was $21 and $50 thousand, respectively, consisting principally of imputed interest on finance leases and the stated interest related to the Streeterville note that was fully retired in the first quarter of 2025. Interest expense for the 2024 periods totaled $34 and $262 thousand and consisted principally of the stated interest related to the Streeterville notes, interest associated with the notes payable issued to Anthony Scott, the Company’s President and Chief Executive Officer and a member of the Company’s Board of Directors, and finance leases.

Interest Accretion and Amortization of Debt Issuance Costs. During the March 2024 quarter, we entered into exchange agreements to convert $9.5 million in Streeterville debt to $9.3 million shares of Series A preferred stock and $0.2 million to common stock and, as a result, we 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.

Other Income (Expense), Net. Other income and expense were nominal amounts for both the ~~periods~~three and six months ended ~~March~~June 3130, 2025, and 2024.

Net Loss. Net loss for the ~~first~~three ~~quarter~~and ofsix month periods ended June 30, 2025, was ($2.10) million, orand ($04.111) ~~per share~~million, respectively compared to ~~a net loss of~~ ($12.71) million, and or ($03.948) ~~per~~million ~~share,~~ for the ~~first~~ ~~quarter~~same ofperiods ~~2024~~in the prior year. The increase in net loss for six months ended June 30, 2025, was a result of a net interest credit of $01.80 million recorded in the 2024 period ~~resulting~~ ~~from~~as ~~the~~discussed ~~exchange of $9~~above.~~3 million in senior debt for Series A preferred stock and the associated reversal of interest accretion for the ability to stock-settle principal redemptions on the debt.~~

Liquidity and Capital Resources

Sources of Liquidity

As of ~~March~~June 3130, 2025, we had cash and cash equivalents of $104.7 million, representing ana ~~increase~~decrease of ($50.82) million from $4.9 million as of December 31, 2024, and net working capital of $97.02 million compared to $1.9 million as of December 31, 2024. Our principal sources of cash for funding operations for in the ~~March~~six ~~2025~~months ~~quarter~~ended June 30, 2025 was receipt of $1.5 million in proceeds from the sale of common stock pursuant to the SEPA ~~$1.5 million~~, recorded as stock subscription receivable at December 31, 2024, and net proceeds of $7.0 million from a registered direct offering that closed on January 6, 2025. Our principal source for funding operations in the ~~March~~June 2024 ~~quarter~~period was through proceeds received from the ~~issuance~~ issuance of ~~notes~~common ~~payable~~stock toin ~~Scott~~a series of transactions which include $13.3 million ~~and~~from ~~the~~ATM ~~issuance~~sales, of$2.6 ~~common~~million ~~stock~~from ~~using~~a ~~our~~private ~~ATM~~placement, ~~program~~and ~~(defined below) which provided~~ $0.5 6 million from the exercise of warrants.

ATM Program

B.On ~~Riley~~June ~~Securities~~11, ~~Inc. acts~~2025, aswe ~~sales~~terminated our ~~agent~~At ~~for~~Market ~~our~~Sales ~~ATM~~Agreement ~~program~~with B. InRiley ~~December 2024~~Securities, weInc. ~~closed~~The ~~out~~following ~~sales~~day, ofon ~~common~~June ~~stock~~12, on2025, ~~the~~we ~~our~~entered ~~ATM~~into ~~program~~a ~~under~~new ~~the~~At ~~shelf~~The Market ~~registration~~Offering ~~statement~~Agreement on(the ~~Form~~“Sales ~~S-3~~Agreement”) ~~that~~with ~~was~~H.C. ~~filed~~Wainwright on& ~~August 5~~Co., ~~2021,~~LLC ~~and~~to ~~declared~~potentially ~~effective~~sell byup ~~the~~to ~~SEC on August 16, 2021~~$50.0 Onmillion ~~January~~of ~~31,~~the ~~2025,~~Company’s wecommon ~~filed~~stock using a ~~new~~ shelf registration statement on Form S-3/A ~~that~~(File ~~was~~No. ~~declared~~333-281565) ~~effective~~which bywas ~~the~~filed ~~SEC~~ on ~~February~~January 1031, 2025, ~~which~~and ~~allows~~became ~~us to~~effective ~~potentially sell up to $50.0 million of our common stock~~ on aFebruary ~~delayed~~10, ~~or continuous basis utilizing the ATM program~~2025. No sales under the new shelf registration have been made to date.

Notes Payable

In March 2025, through three separate exchange agreements we retired the remaining $0.5 million in Streeterville debt through the issuance of 552.3 thousand shares of common stock. The issuance of common stock was made pursuant to the exemption from the registration requirements afforded by the Securities Act.

Unaudited Condensed Consolidated Statements of Cash Flows

Our cash flows for the ~~three~~six months ended ~~March~~June 30, 312025, ~~2025~~ and 2024 were (in thousands):

	Three Months Ended March 31,
	Six Months Ended June 30,
	2025			2024
Net cash used in operating activities	$	(13,~~690~~250	)	$	(14,~~114~~036	)
Net cash used in investing activities		(~~787~~5,150	)		(~~427~~697	)
Net cash provided by financing activities		8,~~370~~238			16,~~524~~100
Change in cash and cash equivalents	$	~~5,893~~(162	)	$	~~(17~~1,367	)

Operating Activities

Net cash used in operations for the ~~quarter~~six months ended ~~March~~June 3130, 2025, was ($13.73) million due primarily to a net loss of ($24.1) million partially offset by 1) adjustments for non-cash items of $01.85 million which ~~are~~were mostly comprised of depreciation and stock-based compensation, and 2) changes in working capital of ($0.47) million.

Net cash used in operations for the ~~quarter~~six months ended ~~March~~June 3130, 2024, was ($14.10) million ~~principally~~primarily ~~due~~resulting tofrom 1) a net loss of ($13.78) million offset partially offset by adjustments for non-cash items of $0.4 million which are mostly comprised of depreciation, stock-based compensation and non-cash interest related to the Streeterville notes, and 2) changes in working capital of ($0.7) million which consisted principally of ~~reductions~~increased inaccounts receivable ~~prepaid~~and ~~expenses~~decreased vendor payables.

Investing Activities

For the ~~three~~six months ended ~~March~~June 3130, 2025, net cash used in investing activities was ($05.82) million, which ~~was~~included ~~comprised~~short-term investments in highly liquid, investment-grade fixed income securities of ($3.7) million and capitalization of internally developed software and hardware purchases of ($1.4) million. Net cash used by investing activities for the ~~three~~six months ended ~~March~~June 3130, 2024, was ($0.47) million ~~principally~~ for capitalization of internally developed software and hardware purchases.

Financing Activities

For ~~three~~the six months ended ~~March~~ 31June 30, 2025, net cash provided by financing activities was $8.42 million which resulted from the receipt of proceeds from the sale of ~~common~~ common stock pursuant to the SEPA of $1.5 million, previously recorded as stock subscription receivable at December 31, 2024, and net ~~proceeds~~ proceeds of $7.0 million from a registered direct offering that closed on January 6, 2025, partially offset by payments on financing leases of ($0.2) million. Net proceeds from financing activities for the ~~March~~ June 2024 period totaled $16.51 million which ~~was~~resulted ~~primarily~~from ~~the~~$6.5 ~~result~~million in of net proceeds from ~~issuance~~the sale of ~~the~~common ~~Scott~~stock ~~notes~~through ~~$1.1~~the ~~million~~use ~~and~~our ATM program, ~~public~~a ~~offerings~~private placement offering, and the exercise of ~~$0.5~~warrants partially ~~million~~offset by finance lease payments.

Critical Accounting Policies and Use of Estimates

Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

We believe the critical ~~accounting~~ accounting policies and estimates discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025, (the “2024 Annual Report”), reflect our more significant judgments and estimates used in the preparation of the condensed consolidated financial statements. There have been no significant changes to our critical accounting policies and estimates as disclosed in the 2024 Annual Report.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Effectiveness of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance of achieving the desired control objectives, and we must apply our reasonable judgment in evaluating the cost-benefit relationship of potential disclosure controls and procedures.

As of ~~March~~June 3130, 2025, our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures and concluded that the disclosure controls and procedures were effective as of ~~March~~June 3130, 2025.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting that occurred during the three months ended ~~March~~June 3130, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

As of ~~March~~June 3130, 2025, the Company iswas not involved in any material pending legal proceedings. The Company is periodically involved in various litigation claims ~~asserted~~ asserted in the normal course of its business. The Company believes these actions are routine and incidental to the business. While the ~~outcome~~ 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.

Item 1A. RISK FACTORS

As a smaller reporting company, as such term is defined in Item 10(f) of Regulation S-K, promulgated under the Exchange Act, risk factors are not required to be included in, and have been omitted from, this Quarterly Report on Form 10-Q. You should carefully consider the risk factors we previously disclosed in the 2024 Annual Report. These risks could materially and adversely affect our business, financial condition, results of operations, and cash flows. However, these risks are not the only risks we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, results of operations, and cash flows.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

~~On January 1, 2025, we exchanged 1,750 shares of Series A preferred stock for 626~~None.0 thousand shares of our common stock. This exchange and sale was made pursuant to an exemption from registration as set forth as set forth in Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.

On January 3, 2025, we exchanged 1,837 shares of Series A preferred stock for 667.1 thousand shares of our common stock. This exchange and sale was made pursuant to an exemption from registration as set forth as set forth in Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.

On March 5, 2025, we exchanged $0.15 million in aggregate principal on Streeterville Note 1 for 170.5 thousand shares of our common stock. The issuance of the common stock was made pursuant to the exemption from the registration requirements afforded by Section 3(a)(9) of the Securities Act.

On March 13, 2025, we exchanged $0.15 million in aggregate principal on Streeterville Note 1 for 153.3 thousand shares of our common stock. The issuance of the common stock was made pursuant to the exemption from the registration requirements afforded by Section 3(a)(9) of the Securities Act.

On March 17, 2025, we exchanged $0.24 million in aggregate principal on Streeterville Note 1 for 228.6 thousand shares of our common stock. The issuance of the common stock was made pursuant to the exemption from the registration requirements afforded by Section 3(a)(9) of the Securities Act.

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

(a)

None.

(b)

There have been no material changes to procedures by which security holders may recommend nominees to the Company’s Board of Directors since the Company last provided disclosure in response to the requirements of Item 407(c)(3) of Regulation S-K.

(c) During the three months ended ~~March~~June 3130, 2025, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

Item 6. EXHIBITS

The following Exhibits are filed or furnished with this Quarterly report on Form 10-Q:

Exhibit No. 4.1	Description Form of Warrant (incorporated by reference to Exhibit 4.1 of the registrant’s Current Report on Form 8-K filed on January 7, 2025).
10.1	Exchange Agreement dated January 2, 2025, by and between Registrant and Streeterville Capital, LLC (incorporated by reference to Exhibit 99.4 of the registrant’s Current Report on Form 8-K filed on January 3, 2025).
10.2	Exchange Agreement dated January 3, 2024, by and between Registrant and Streeterville Capital, LLC (incorporated by reference to Exhibit 99.5 of the registrant’s Current Report on Form 8-K filed on January 3, 2025).
10.3 10.4	Securities Purchase Agreement dated January 6, 2025 (incorporated by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K filed on January 7, 2025). Exchange Agreement, dated as of March 5, 2025, by and between the registrant and Streeterville Capital, LLC (incorporated by reference to Exhibit 99.1 to the registrant’s Current Report on Form 8-K filed on March 11, 2025).
10.5	Exchange Agreement, dated as of March 13, 2025, by and between the registrant and Streeterville Capital, LLC (incorporated by reference to Exhibit 99.1 of the registrant’s Current Report on Form 8-K filed on March 17, 2025).
10.6	Exchange Agreement, dated as of March 17, 2025, by and between the registrant and Streeterville Capital, LLC (incorporated by reference to Exhibit 99.1 of the registrant’s Current Report on Form 8-K filed on March 21, 2025).
31.1*	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act.
31.2*	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act.
32.1**	Certification Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*Filed herewith

**Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		INTRUSION INC.
Date: April 29, 2025		/s/ Anthony Scott
Date: August 12, 2025		/s/ Anthony Scott
		Anthony Scott
		President & Chief Executive Officer
		(Principal Executive Officer)
Date: April 29, 2025		/s/ Kimberly Pinson
Date: August 12, 2025		/s/ Kimberly Pinson
		Kimberly Pinson
		Chief Financial Officer, (Principal Financial & Accounting Officer)
		Chief Financial Officer (Principal Financial & Accounting Officer)

Filing Compare · INTRUSION INC