[10-Q] INTRUSION INC Quarterly Earnings Report
Intrusion Inc. filed its Q3 2025 10‑Q reporting higher revenue and steady losses. Revenue was $1,966 for the quarter, up from $1,504 a year ago, driven largely by U.S. government work. Gross margin remained high at 76.6%, but operating expenses rose, resulting in a net loss of $2,094 versus $2,050 last year. For the first nine months, revenue reached $5,614 with a net loss of $6,234.
Cash and short‑term investments totaled $4.5 million as of September 30, 2025, and the company received $3.0 million on October 1 related to a Department of Defense contract extension. Sales to government entities represented 96.7% of Q3 revenue and 94.7% year‑to‑date, reflecting concentration risk. Financing included $7.0 million of net proceeds from a January 6, 2025 registered direct offering and receipt of $1.5 million under a standby equity purchase agreement recorded at year‑end. Streeterville debt was retired via equity exchanges, and no preferred stock remained outstanding. Operating cash flow was ($6,228) for the nine months. Shares outstanding were 20,102,939 as of November 11, 2025.
- None.
- None.
Insights
Revenue up, losses persist; liquidity supplemented by equity sales.
Intrusion posted Q3 revenue of
Liquidity featured
Debt with Streeterville was retired via equity exchanges; no preferred stock remained outstanding at quarter‑end. Actual performance will hinge on sustaining government contracts and managing operating cash use; future disclosures may specify additional funding steps.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended | |
| 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 | |
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(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 |
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.
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).
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 | ☐ | |
| ☒ | 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 November 11, 2025, was
INTRUSION INC.
INDEX
| PART I – FINANCIAL INFORMATION | 3 |
| Item 1. Financial Statements | 3 |
| Condensed Consolidated Balance Sheets as of September 30, 2025 (unaudited), and December 31, 2024 | 3 |
| Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2025, and 2024 | 4 |
| Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2025, and 2024 | 5 |
| Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025, and 2024 | 7 |
| Notes to Unaudited Condensed Consolidated Financial Statements | 8 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 22 |
| Item 4. Controls and Procedures | 22 |
| PART II – OTHER INFORMATION | 23 |
| Item 1. Legal Proceedings | 23 |
| Item 1A. Risk Factors | 23 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities | 23 |
| Item 3. Defaults Upon Senior Securities | 23 |
| Item 4. Mine Safety Disclosures | 23 |
| Item 5. Other Information | 23 |
| Item 6. Exhibits | 24 |
| Signature Page | 25 |
| 2 |
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
INTRUSION INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)
September 30, 2025 | December 31, 2024 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses and other assets | ||||||||
| Total current assets | ||||||||
| Noncurrent Assets: | ||||||||
| Property and equipment: | ||||||||
| Equipment | ||||||||
| Capitalized software development | ||||||||
| Leasehold improvements | ||||||||
| Property and equipment, gross | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Property and equipment, net | ||||||||
| Finance leases, right-of-use assets, net | ||||||||
| Operating leases, right-of-use assets, net | ||||||||
| Other assets | ||||||||
| Total noncurrent assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable, trade | $ | $ | ||||||
| Accrued expenses | ||||||||
| Finance lease liabilities, current portion | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Notes payable | ||||||||
| Deferred revenue | ||||||||
| Total current liabilities | ||||||||
| Noncurrent Liabilities: | ||||||||
| Finance lease liabilities, noncurrent portion | ||||||||
| Operating lease liabilities, noncurrent portion | ||||||||
| Total noncurrent liabilities | ||||||||
| Commitments and Contingencies – (See Note 5) | – | – | ||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Common stock held in treasury, at cost – 1 share | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Stock subscription receivable | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
INTRUSION INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest accretion and amortization of debt issuance costs, net | ||||||||||||||||
| Other (expense) income, net | ( | ) | ||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
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 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Stock-based compensation expense | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
| Registered direct offering, net of fees | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Issuance of common stock to reduce note payable | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Exchange of Series A preferred stock for common stock | ( | ) | ( | ) | – | – | – | – | – | – | |||||||||||||||||||||||||||||||
| Redemption of preferred stock | ( | ) | – | – | – | – | – | – | – | – | ( | ) | |||||||||||||||||||||||||||||
| Issuance of preferred stock for payment of preferred return | – | – | – | – | – | – | ( | ) | – | – | – | ||||||||||||||||||||||||||||||
| Amortization of preferred stock exchange premium | – | – | – | – | – | – | ( | ) | – | – | – | ||||||||||||||||||||||||||||||
| At-the-market (“ATM”) offering fees | – | – | – | – | – | – | – | ( | ) | – | – | ( | ) | ||||||||||||||||||||||||||||
| Standby purchase agreement proceeds, net of fees | – | – | – | – | – | – | – | ( | ) | – | |||||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | – | $ | $ | ( | ) | $ | ( | ) | $ | $ | – | $ | ( | ) | $ | |||||||||||||||||||||||||
| Stock-based compensation expense | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
| Issuance of common stock through employee stock purchase plan | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
| At-the-market (“ATM”) offering fees | – | – | – | – | – | – | – | ( | ) | – | – | ( | ) | ||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | – | $ | $ | ( | ) | $ | ( | ) | $ | $ | – | $ | ( | ) | $ | |||||||||||||||||||||||||
| Stock-based compensation expense | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||
| At-the-market (“ATM”) offering fees | – | – | – | – | – | – | – | ( | ) | – | – | ( | ) | ||||||||||||||||||||||||||||
| Restricted stock units vested | – | – | – | – | – | ( | ) | – | – | – | |||||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | – | $ | $ | ( | ) | $ | ( | ) | $ | $ | – | $ | ( | ) | $ | |||||||||||||||||||||||||
| 5 |
| Accumulated | |||||||||||||||||||||||||||||||||||||
| Other | Additional | ||||||||||||||||||||||||||||||||||||
| Series A | Comprehensive | Paid-In | |||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Treasury Stock | Loss | Capital | Accumulated | ||||||||||||||||||||||||||||||||
| Dollars | Shares | Dollars | Shares | Dollars | Shares | Dollars | Dollars | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | – | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||
| Stock-based compensation expense | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||
| Issuance of preferred stock to reduce note payable | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||
| Public stock offering, net of fees | – | – | – | – | – | – | |||||||||||||||||||||||||||||||
| Issuance of common stock to reduce note payable | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Stock-based compensation expense | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||
| Public stock offering, net of fees | – | – | – | – | – | – | |||||||||||||||||||||||||||||||
| Issuance of common stock and warrants associated with warrant inducements | – | – | – | – | – | – | |||||||||||||||||||||||||||||||
| Issuance of common stock and warrants, net of fees | – | – | – | – | – | – | |||||||||||||||||||||||||||||||
| Exchange of Series A preferred stock for common stock | ( | ) | – | – | – | – | – | – | |||||||||||||||||||||||||||||
| Preferred shares issued in conjunction with preferred return | – | – | – | – | – | – | ( | ) | – | – | |||||||||||||||||||||||||||
| Issuance of common stock in conjunction with obtaining minority interest in company | – | – | – | – | – | – | |||||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock-based compensation expense | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||
| Public stock offering, net of fees | – | – | – | – | – | – | |||||||||||||||||||||||||||||||
| Issuance of common stock associated with entry into Standby Equity Purchase Agreement | – | – | – | – | – | ( | ) | – | |||||||||||||||||||||||||||||
| Issuance of common stock for advance on Standby Equity Purchase Agreement, net of fees | – | – | – | – | – | – | |||||||||||||||||||||||||||||||
| Issuance of common stock to settle vendor payable | – | – | – | – | – | – | |||||||||||||||||||||||||||||||
| Exchange of Series A preferred stock for common stock | ( | ) | – | – | – | – | – | – | |||||||||||||||||||||||||||||
| Issuance of preferred stock for payment of preferred return | – | – | – | – | – | – | ( | ) | – | ( | ) | ||||||||||||||||||||||||||
| Redemption of preferred stock | ( | ) | – | – | – | – | – | – | – | – | ( | ) | |||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
INTRUSION INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Bad debt expense | ||||||||
| Gain on disposal of fixed assets | ||||||||
| Stock-based compensation | ||||||||
| Non-cash lease costs | ||||||||
| Note 1 and 2 interest accretion up to the redemption common stock settlement amount and debt issuance costs | ( | ) | ||||||
| Other amortization of debt issuance costs | ||||||||
| Other non-cash interest | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing Activities: | ||||||||
| Purchases of United States (“U.S.”) treasury securities | ( | ) | ||||||
| Maturities of U.S. treasury securities | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Capitalized software development | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities: | ||||||||
| Proceeds from notes payable | ||||||||
| Principal payments on notes payable | ( | ) | ||||||
| Proceeds from public stock offering net of fees | ( | ) | ||||||
| Proceeds from warrant inducements | ||||||||
| Proceeds from sales of common stock and warrants, net of fees | ||||||||
| Proceeds from sale of stock under standby purchase equity agreement | ||||||||
| Proceeds from registered direct offering, net of fees | ||||||||
| Proceeds from stock subscription receivable | ||||||||
| Reduction of finance lease liabilities | ( | ) | ( | ) | ||||
| Proceeds related to the issuance of common stock under stock purchase plan | ||||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Capitalized software included in accounts payable | $ | $ | ||||||
| Accounts payable on capitalized assets settled with vendor | $ | $ | ||||||
| Preferred stock issued to reduce notes payable | $ | $ | ||||||
| Common stock issued to reduce notes payable | $ | $ | ||||||
| Common stock issued to settle accounts payable | $ | $ | ||||||
| Redemption of preferred stock to reduce notes payable | $ | $ | ||||||
| Common stock used for minority investment in company | $ | $ | ||||||
| Modification of right-of-use finance lease | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
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 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 fair value of its assets and liabilities which qualify as financial instruments and includes this additional information in the notes to unaudited condensed consolidated financial statements when the fair value is different from the carrying value of these financial instruments. The estimated fair value of short-term investments, accounts receivable, accounts payable and accrued expenses approximate their carrying amounts due to the relatively short maturity of these instruments. Notes payable and financing and operating leases approximate fair value as they bear market rates of interest. None of these instruments are held for trading purposes.
As of September 30, 2025, we had
cash and investments in U.S. treasury securities totaling $
| 8 |
Reverse Stock Split
The Company effected a
Short-term Investments
Short-term investments
consist of highly liquid, investment-grade fixed income securities, such as corporate bonds, asset-backed securities, municipal
securities, U.S. Treasury and agency securities, and money market funds. These investments have maturities of greater than 90 days
and less than one year from the balance sheet date and are intended to be available to meet current operational needs. As of
September 30, 2025, the Company had $
| 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 one month as of September 30, 2025. The Company plans to extend the data service center agreement under its twelve-month autorenewal provision. |
In accordance with ASC 842, the Company has elected practical expedients to combine lease and non-lease components, which consist principally of common area maintenance charges, for all classes of underlying assets and to exclude leases with an initial term of 12 months or less.
As the implicit rate is not readily determinable for the Company's lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments.
For the three and nine months
ended September 30, 2025, the Company made operating lease payments of $
Schedule of Items Appearing on the Unaudited Condensed Consolidated Statements of Operations (in thousands):
| Schedule of lease cost | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Operating expense: | ||||||||||||||||
| Amortization expense – Finance ROU | $ | $ | $ | $ | ||||||||||||
| Lease expense – Operating ROU | $ | $ | $ | $ | ||||||||||||
| Other expense: | ||||||||||||||||
| Interest expense – Finance ROU | $ | $ | $ | $ | ||||||||||||
| Total lease expense | $ | $ | $ | $ | ||||||||||||
| 9 |
Future minimum lease obligations consisted of the following as of September 30, 2025 (in thousands):
| Schedule of future minimum lease obligations | ||||||||||||
| Operating | Finance | |||||||||||
| Year ending December 31, | ROU Leases | ROU Leases | Total | |||||||||
| Remaining 2025 | $ | $ | $ | |||||||||
| 2026 | ||||||||||||
| 2027 | ||||||||||||
| 2028 | ||||||||||||
| 2029 | ||||||||||||
| Thereafter | ||||||||||||
| $ | $ | $ | ||||||||||
| Less interest* | ( | ) | ( | ) | ||||||||
| $ | $ | |||||||||||
| * |
| 4. | Notes Payable |
Security Purchase Agreement
On March 10, 2022, the Company
entered into an unsecured loan agreement (“SPA”) with Streeterville Capital, LLC (“Streeterville”) pursuant to
which the Company issued two separate promissory notes of $
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 $
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 $
| 10 |
The maturity date for Note 1 was
September 10, 2024; however, the preferences for Series A preferred stock precluded repayment of Note 1 so long as any shares of Series
A preferred stock were outstanding. The Series A preferred stock was fully redeemed on January 3, 2025. In March 2025, the Company entered
into three separate agreements with Streeterville to exchange an aggregate $
For the nine months ended September
30, 2025, and 2024, the Company recorded simple interest of $
Scott Notes Payable
In 2024, the Company entered
into two separate note purchase agreements with Anthony Scott, the Company’s President and Chief Executive Officer and member of
the Company’s Board of Directors. On January 2, 2024, Mr. Scott purchased a note payable in the principal amount of $
On March 20, 2024, Mr. Scott
purchased a second note payable in the principal amount of $
On April 19, 2024, Mr.
Scott entered into a private placement subscription agreement to convert the aggregate outstanding balance of $
The Company recorded interest
expense of $
| 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.
| 11 |
| 6. | Stockholders’ Equity |
ATM Offering
On June 11, 2025, the Company
terminated its At Market Sales Agreement with B. Riley Securities, Inc. (the “Riley ATM Agreement”). On June 12, 2025, the
Company entered into a new At The Market Offering Agreement with H.C. Wainwright & Co., LLC to potentially sell up to $50.0 million
of the Company’s common stock using a shelf registration statement on Form S-3/A (File No. 333-281565) which was filed on January
31, 2025 and became effective on February 10, 2025. For the period ended September 30, 2025, no sales of common stock were made under
the ATM utilizing the shelf registration. For the period ended September 30, 2024, the Company received proceeds of approximately $
Standby Equity Purchase Agreement
On July 3, 2024, the Company entered
into a $
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, $
On March 15, 2024, the Company
entered into an Exchange Agreement with Streeterville Capital that exchanged $
On April 3, 2024, and continuing
through December 31, 2024, in nine separate exchange transactions, the Company exchanged an aggregate of
On January 2 and 3, 2025, in two
separate exchange transactions, the Company exchanged an aggregate of
| 12 |
Registered Direct Offering
On January 6, 2025, the Company
sold to a single institutional investor
Common Stock Warrants
On September 30, 2025, the Company had
| 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 had two stock-based compensation plans as of September 30, 2025, and December 31, 2024, the 2021 Omnibus Incentive Plan and the 2015 Stock Incentive Plan. All awards outstanding under the 2005 Stock Incentive Plan expired during the nine months ended 2025.
The Company grants stock from the 2021 Omnibus Incentive Plan. This plan provides a means through which the Company may attract and retain key personnel and to provide a means whereby directors, officers, employees, consultants and advisors of the Company can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of common stock, thereby strengthening their commitment to the welfare of the Company and aligning their interests with those of the Company’s stockholders.
During the nine months ended
September 30, 2025, the Company granted
The Company recognized compensation
expense of $
| 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.
| 13 |
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.
For the three and nine months
ended September 30, 2025, revenues to various U.S. government entities totaled $
| 14 |
The Company’s accounts
receivable represents unconditional contract billings for sales per contracts with customers and are classified as current assets. As
of September 30, 2025, and December 31, 2024, the Company had accounts receivable balances of $
The Company classifies its contract
assets as other current assets because the Company generally has an unconditional right to payment for the Company’s sales or services
performed at the end of the reporting period. As of September 30, 2025 and December 31, 2024, the Company had contract assets balances
of $
Contract liabilities consist of cash payments in advance of the Company satisfying performance obligations and recognizing revenue. The Company currently classifies deferred revenue as a contract liability.
The following tables presents changes in the Company’s contract liabilities during the nine months ended September 30, 2025, and the year ended December 31, 2024 (in thousands):
| Schedule of contract assets and liability | ||||||||
| September 30, 2025 | December 31, 2024 | |||||||
| Balance at beginning of period | $ | $ | ||||||
| Additions | ||||||||
| Revenue recognized | ( | ) | ( | ) | ||||
| Balance at end of period | $ | $ | ||||||
| 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
net loss per share numbers, basic and diluted. Basic net loss attributable to common stockholders per share is computed by dividing net
loss attributable to common stockholders for the period by the weighted average number of common shares outstanding for the period. Diluted
net loss attributable to common stockholders per share is computed by dividing the net loss attributable to common stockholders for the
period by the weighted average number of common shares and dilutive common stock equivalents outstanding for the period. The common stock
equivalents include all common stock issuable upon exercise of outstanding warrants, options and vesting of restricted stock awards. The
aggregate number of common stock equivalents excluded from the diluted loss per share calculation for the three months ended September
30, 2025, and 2024 totaled
| 15 |
| 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 $
On April 2, 2024, the Company
reduced the principal balance due under the Promissory Note by $0.1 million which reflected the amount due from Mr. Scott for the exercise
of common stock purchase warrants. On April 19, 2024, Mr. Scott entered into a private placement subscription agreement to convert the
aggregate outstanding balance of $
The Company recorded interest
expense of $
There were
| 12. | Subsequent Events |
None.
| 16 |
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.
| 17 |
Results of Operations
Comparison of the Periods Ended September 30, 2025, and September 30, 2024
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||
| Revenue | $ | 1,966 | $ | 1,504 | $ | 462 | 31% | $ | 5,614 | $ | 4,095 | $ | 1,519 | 37% | ||||||||||||||||||
| Cost of revenue | 461 | 344 | 117 | 34% | 1,335 | 920 | 415 | 45% | ||||||||||||||||||||||||
| Gross profit | 1,505 | 1,160 | 345 | 30% | 4,279 | 3,175 | 1,104 | 35% | ||||||||||||||||||||||||
| Gross profit percentage | 76.6% | 77.1% | 76.2% | 77.5% | ||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||
| Sales and marketing | 1,273 | 1,207 | 66 | 5% | 3,664 | 3,542 | 122 | 3% | ||||||||||||||||||||||||
| Research and development | 1,329 | 1,150 | 179 | 16% | 3,879 | 3,204 | 675 | 21% | ||||||||||||||||||||||||
| General and administrative | 1,039 | 841 | 198 | 24% | 3,051 | 2,972 | 79 | 3% | ||||||||||||||||||||||||
| Total operating expenses | 3,641 | 3,198 | 443 | 14% | 10,594 | 9,718 | 876 | 9% | ||||||||||||||||||||||||
| Operating loss | (2,136 | ) | (2,038 | ) | (98 | ) | -5% | (6,315 | ) | (6,543 | ) | 228 | 3% | |||||||||||||||||||
| Interest expense | (17 | ) | (12 | ) | (5 | ) | 42% | (67 | ) | (274 | ) | 207 | -76% | |||||||||||||||||||
| Interest accretion and amortization of debt issuance costs, net | – | – | – | 0% | – | 990 | (990 | ) | -100% | |||||||||||||||||||||||
| Other income (expense), net | 59 | – | 59 | 0% | 148 | (6 | ) | 154 | -2,567% | |||||||||||||||||||||||
| Net loss | $ | (2,094 | ) | $ | (2,050 | ) | $ | (44 | ) | -2% | $ | (6,234 | ) | $ | (5,833 | ) | $ | (401 | ) | -7% | ||||||||||||
Revenue. Revenue for the three and nine months ended September 30, 2025, was $2.0 million and $5.6 million, respectively, compared to $1.5 million and $4.1 million for the same periods in 2024. Consulting revenue totaled $1.5 million and $4.2 million for the three and nine months ended September 30, 2025, up from $1.1 million and $2.9 million for the corresponding periods in 2024. The increase in consulting revenue in 2025 primarily reflects work performed under a Department of Defense contract awarded in the second half of 2024. In contrast, consulting revenue for the nine months ended September 30, 2024, was negatively impacted by a continuing resolution and delays in the approval of the federal budget. The budget was not passed until March 22, 2024, which affected the timing of contract renewals and task orders and led to lower consulting revenues in the first half of 2024. INTRUSION Shield revenue was $0.5 million and $1.4 million for the three and nine months ended September 30, 2025, compared to $0.4 million and $1.2 million for the same periods in 2024. On March 31, 2024, we lost a major INTRUSION Shield customer who used a highly customized product configuration. This customer accounted for 78% of INTRUSION Shield revenues; this loss has been fully offset by new customers inclusive of the Department of Defense contract awarded in late 2024.
Concentration of Revenues. For the three and nine months ended September 30, 2025, revenues from sales to various U.S. government entities totaled $1.9 million and $5.3 million, comprising 96.7% and 94.7% of total revenues, respectively. This compares to $1.3 million and $3.3 million, or 85.9% and 79.5% of total revenues, for the same periods in 2024. The shift in revenue mix was primarily due to the loss of a significant Shield customer, as previously noted, and the addition of a Department of Defense contract in the second half of 2024.
| 18 |
We expect our revenue concentration among customers to fluctuate in future periods, depending on the timing of sales; however, we anticipate that sales to government customers will continue to represent a significant portion of our revenues. Sales to government entities involve certain risks beyond those associated with commercial customers, including potential disruptions in appropriations and spending, and the government's right to cancel contracts and purchase orders at its convenience. While we do not currently anticipate renegotiations or cancellations of government contracts, the loss of government orders could materially affect our financial results. Given the increased percentage of sales to U.S. government entities in 2025, no individual commercial customer accounted for more than 10% of total revenues, compared to one such customer in the prior year. Our product and service offerings are not managed as separate segments, as management evaluates the business as a whole and does not allocate expenses by product.
Gross Profit. Gross profit was $1.5 and $4.3 million or 76.6% and 76.2% of revenues for the three and nine month periods ended September 30, 2025, compared to $1.2 and $3.2 million or 77.1% and 77.5% of revenues for the three and nine months ended September 30, 2024. The gross profit margin will vary depending on product mix. INTRUSION Shield revenues represented 25% of revenues for the nine month period ended September 30, 2025 and 30% for the nine month period ended September 30, 2024
Operating Expenses. Operating expenses totaled $3.6 million and $10.6 million for the three and nine month periods ended September 30, 2025, compared to $3.2 million and $9.7 million for the same periods in 2024. The 2024 figures include one-time negotiated contract savings of $0.1 million for the three month period and $0.5 million for the nine month period.
Adjusting for these one-time savings, operating expenses for the three months ended September 30, 2025, increased by $0.3 million, primarily due to higher share-based compensation from equity grants made in the first quarter, timing of merit increases, and increased spend on sales and marketing.
For the nine months ended September 30, 2025, operating expenses, when adjusted for one-time savings, were $0.4 million higher than the comparable period in 2024.
Sales and Marketing. Sales and marketing expenses totaled $1.3 million and $3.7 million for three and nine months ended September 30, 2025, respectively. Both 2024 periods includes approximately $0.1 million in one-time negotiated contract savings. When adjusted for the one-time savings, Sales and marketing expenses for the three and nine months ended September 30, 2025 remained flat. The current year spend included increased participation in trade shows and increased spend to create more brand awareness and concise product messaging which was offset by increased allocations out of operating expenses to cost of sales for resources dedicated to additional consulting work during the quarter.
Research and Development. Research and development expenses totaled $1.3 million and $3.9 million for the three and nine months ended September 30, 2025, representing an increase of $0.2 million and $0.7 million when compared to the same periods in the prior year. The increase was primarily due to increased depreciation of $0.1 million on infrastructure hardware purchases and internally developed software and the addition of a Sales Engineer and Software Engineer. Research and development costs may vary over time as we determine the frequency of new releases, improved functionality and enhancements needed to be competitive with our product offering.
General and Administrative. General and administrative expenses totaled $1.0 and $3.1 million for the three and nine months ended September 30, 2025, compared to $0.8 and $3.0 million for the three and nine months ended September 30, 2024. The increase is primarily due to one-time negotiated savings of $0.1 million included in the 2024 period.
Interest Expense. Interest expense for the three and nine month periods ended September 30, 2025, was $17 and $67 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 $12 and $274 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.
| 19 |
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 in the 2025 periods consist principally of interest income on cash and short-term investments. Other income and expense for both the three and nine months ended September 30, 2024, were nominal.
Net Loss. Net loss for the three and nine month periods ended September 30, 2025, was ($2.1) million and ($6.2) million, respectively compared to ($2.1) million and ($5.8) million for the same periods in the prior year. The increase in net loss for nine months ended September 30, 2025, was primarily a result of a net interest credit of $1.0 million recorded in the 2024 period as discussed above.
Liquidity and Capital Resources
Sources of Liquidity
As of September 30, 2025, we had cash and cash equivalents of $2.5 million and short-term investments in U.S. treasuries of $2.0 million resulting in $4.5 million available to fund operations compared to $4.9 million as of December 31, 2024. Net working capital at September 30, 2025, totaled $5.1 million compared to $1.9 million at December 31, 2024. On October 1, 2025, we received $3.0 million in cash related to the Department of Defense contract extension.
Our principal sources of cash for funding operations for the nine months ended September 30, 2025 were receipt of $1.5 million in proceeds from the sale of common stock pursuant to the SEPA, 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 September 2024 period was through proceeds received from the issuance of common stock in a series of transactions which include $4.8 million from ATM sales, $2.6 million from a private placement, and $0.6 million from the exercise of warrants.
We generated a net loss of $6.2 million and $5.8 million for the nine months ended September 30, 2025, and 2024, respectively. If our operations do not generate positive cash flow in the upcoming year, or if we are not able to obtain additional debt or equity financing on terms and conditions acceptable to us, we may be unable to implement our business plan, fund our liquidity needs or even continue our operations.
ATM Program
On June 11, 2025, we terminated our At Market Sales Agreement with B. Riley Securities, Inc. The following day, on June 12, 2025, we entered into a new At The Market Offering Agreement (the “Sales 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. 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.
| 20 |
Unaudited Condensed Consolidated Statements of Cash Flows
Our cash flows for the nine months ended September 30, 2025, and 2024 were (in thousands):
| Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (6,228 | ) | $ | (6,115 | ) | ||
| Net cash used in investing activities | (4,185 | ) | (1,051 | ) | ||||
| Net cash provided by financing activities | 8,089 | 8,078 | ||||||
| Change in cash and cash equivalents | $ | (2,324 | ) | $ | 912 | |||
Operating Activities
Net cash used in operations for the nine months ended September 30, 2025, was ($6.2) million due primarily to a net loss of ($6.2) million partially offset by 1) adjustments for non-cash items of $2.4 million which were mostly comprised of depreciation and stock-based compensation, and 2) changes in working capital of ($2.4) million driven largely by an increase in contract billings.
Net cash used in operations for the nine months ended September 30, 2024, was ($6.1) million primarily resulting from 1) a net loss of ($5.8) million offset by adjustments for non-cash items of $1.0 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 ($1.3) million resulting principally from increased accounts receivable.
Investing Activities
For the nine months ended September 30, 2025, net cash used in investing activities was ($4.2) million, which included short-term investments in highly liquid, investment-grade fixed income securities of ($2.0) million and capitalization of internally developed software and hardware purchases of ($2.2) million. Net cash used in investing activities for the nine months ended September 30, 2024, was ($1.1) million for capitalization of internally developed software and hardware purchases.
Financing Activities
For the nine months ended September 30, 2025, net cash provided by financing activities was $8.1 million which resulted from the receipt of proceeds from the sale of common stock pursuant to the SEPA of $1.5 million, previously 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, partially offset by payments on financing leases of ($0.4) million. Net proceeds from financing activities for the September 2024 period totaled $8.1 million which resulted from $8.0 million in net proceeds from the sale of common stock through the use our ATM program, a private placement offering, and the exercise of warrants partially 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.
| 21 |
We believe the critical 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 September 30, 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 September 30, 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 September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 22 |
PART II – OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
As of September 30, 2025, the Company was not involved in any material pending legal proceedings. 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.
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, as the same may be amended from time to time. 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
None.
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 September 30, 2025, no director or officer |
| 23 |
Item 6. EXHIBITS
The following Exhibits are filed or furnished with this Quarterly Report on Form 10-Q:
| 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.
| 24 |
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: November 12, 2025 | /s/ Anthony Scott | |||
| Anthony Scott | ||||
| President & Chief Executive Officer | ||||
| (Principal Executive Officer) | ||||
| Date: November 12, 2025 | /s/ Kimberly Pinson | |||
| Kimberly Pinson | ||||
| Chief Financial Officer (Principal Financial & Accounting Officer) |
||||
| 25 |
FAQ
What were Intrusion (INTZ) Q3 2025 revenue and net loss?
How concentrated were INTZ’s sales to government customers in Q3 2025?
What was INTZ’s liquidity position at September 30, 2025?
What financing actions did INTZ take in 2025?
What were operating cash flows for the nine months ended September 30, 2025?
How many shares were outstanding for INTZ?
Does INTZ have warrants outstanding?
