Company Performance - Intrusion Inc. closed at $1.89, reflecting a -3.08% change from the previous day, underperforming the S&P 500's loss of 0.55% [1] - Over the past month, shares of Intrusion Inc. gained 8.33%, which is below the Computer and Technology sector's gain of 9.88% but above the S&P 500's gain of 3.64% [1] Upcoming Earnings - Analysts expect Intrusion Inc. to report earnings of -$0.1 per share, indicating a year-over-year growth of 71.43% [2] - The Zacks Consensus Estimate for revenue is projected at $1.91 million, representing a 27.33% increase from the previous year [2] Full Year Estimates - For the full year, analysts anticipate earnings of -$0.38 per share and revenue of $7.74 million, reflecting changes of +76.69% and +34.03% respectively from last year [3] Analyst Estimates - Recent modifications to analyst estimates for Intrusion Inc. indicate shifting business dynamics, with upward revisions suggesting positive sentiment towards the company's operations [4] - The Zacks Rank system, which incorporates these estimate changes, currently ranks Intrusion Inc. at 4 (Sell) [6] Industry Context - The Computer - Networking industry, part of the Computer and Technology sector, holds a Zacks Industry Rank of 50, placing it in the top 21% of over 250 industries [7] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [7]

Company Performance - Intrusion Inc. (INTZ) stock increased by 1.18% to $1.71, outperforming the S&P 500 which declined by 0.1% [1] - Prior to the recent trading session, shares of Intrusion Inc. had decreased by 2.31%, underperforming the Computer and Technology sector's gain of 5.94% and the S&P 500's gain of 2.57% [1] Upcoming Earnings - The company is expected to report an EPS of -$0.1, which represents a 71.43% improvement from the prior-year quarter [2] - Quarterly revenue is anticipated to be $1.91 million, reflecting a 27.33% increase from the year-ago period [2] Full-Year Estimates - Zacks Consensus Estimates project full-year earnings of -$0.38 per share and revenue of $7.74 million, indicating year-over-year changes of +76.69% and +34.03%, respectively [3] - Recent changes to analyst estimates for Intrusion Inc. are important as they often reflect short-term business trends, with positive revisions being a favorable sign for the business outlook [3] Zacks Rank and Industry Performance - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), currently ranks Intrusion Inc. at 4 (Sell) [5] - Over the past month, the Zacks Consensus EPS estimate has decreased by 4.17% [5] - The Computer - Networking industry, part of the Computer and Technology sector, holds a Zacks Industry Rank of 74, placing it in the top 30% of over 250 industries [6]

Summary of Intrusion (INTZ) Conference Call - August 21, 2025 Company Overview - **Company**: Intrusion (Ticker: INTZ) - **Industry**: Cybersecurity - **Key Personnel**: Tony Scott (CEO), Kim Pinson (CFO) Core Business and Technology - Intrusion operates in the cybersecurity space, providing an additional layer of protection beyond traditional firewalls [3][4] - The company has developed a fine-grained filtering technology that monitors both inbound and outbound traffic to detect and block threats [4][6] - Intrusion has a database of over **8.5 billion IP addresses**, which enhances its ability to identify malicious activity compared to competitors [6] - The company launched its first commercial product, Shield, in **mid-2021**, with subsequent enhancements in **2023 and 2024** [7] Financial Position - As of the call, Intrusion is **debt-free** and has a strong balance sheet with cash reserves [7] - The company reported a **$3 million contract** with the US Department of Defense for protecting critical infrastructure [12] - The target revenue for breakeven is estimated at around **$12 million** [32] - Current cash burn is approximately **$2 million per quarter**, with plans to raise capital in the second quarter of the following year if revenue does not significantly increase [42][43] Market Opportunities - The company sees significant growth potential in the **small and medium business** sector, which is increasingly targeted by cybercriminals [12][13] - The rise in cybercrime costs and the increasing frequency of attacks, particularly those enhanced by AI, present a favorable market environment for Intrusion [13][14] - The company is focusing on diversifying its customer base beyond government contracts, leveraging its technology for commercial applications [28] Competitive Landscape - Intrusion differentiates itself from traditional firewalls by providing a reputation-based filtering system that identifies threats beyond known signatures [34][38] - The complexity of modern networks necessitates additional layers of security, which Intrusion aims to provide [35][36] - The company acknowledges competition but believes its unique capabilities give it an advantage in the cybersecurity market [38] Future Plans and Developments - Intrusion is expanding its market presence through platforms like **AWS Marketplace** and **Azure Marketplace** [29] - The company is also licensing its technology to other solution providers, which is expected to enhance sales [30] - A robust development roadmap is in place, with plans for new capabilities and functionalities for existing products [48] Conclusion - Intrusion is well-positioned in the cybersecurity market with a unique product offering and a strong financial foundation. The company is focused on growth through diversification, strategic partnerships, and leveraging its extensive threat intelligence database to address the evolving landscape of cyber threats [10][12][13][14]

Financial Data and Key Metrics Changes - The preliminary vote report indicates that the nominees for the board have been duly elected and Whitley Penn has been selected as the independent CPA for fiscal year ending 2025 [13] - Advisory stockholder approval has been obtained for the compensation of the company's named executive officers as described in the proxy statement [13] Business Line Data and Key Metrics Changes - No specific data or metrics regarding individual business lines were provided in the meeting [17] Market Data and Key Metrics Changes - No specific market data or metrics were discussed during the meeting [17] Company Strategy and Development Direction and Industry Competition - The company is focused on maintaining a strong relationship with stockholders and values their opinions, particularly regarding executive compensation [11] - The company aims to communicate regularly with stockholders, indicating a commitment to transparency and engagement [16] Management's Comments on Operating Environment and Future Outlook - Management expressed gratitude for stockholder confidence and indicated a positive outlook for future communications, suggesting ongoing engagement and updates on company performance [16] - The CEO referred attendees to the recent earnings announcement for the latest results, indicating that the company is actively monitoring its performance [17] Other Important Information - The meeting was conducted virtually to enhance inclusivity and reach a broader audience of stockholders [3] - The company has established a process for addressing any unanswered questions on its corporate website after the meeting [4] Q&A Session Summary Question: Were there any questions submitted before the meeting? - There were no questions submitted before the meeting, and no questions were raised during the Q&A session [16]

Financial Data and Key Metrics Changes - The preliminary voting results indicate that the nominees for the board have been duly elected and Whitley Penn has been selected as the independent CPA for fiscal year ending 2025 [12] Business Line Data and Key Metrics Changes - No specific data or metrics regarding individual business lines were provided during the meeting [14] Market Data and Key Metrics Changes - No specific market data or metrics were discussed in the meeting [14] Company Strategy and Development Direction and Industry Competition - The company is focused on maintaining a strong relationship with stockholders and values their opinions, particularly regarding executive compensation [10] Management's Comments on Operating Environment and Future Outlook - Management expressed gratitude for stockholder confidence and indicated a commitment to regular communication through quarterly updates [15][16] Other Important Information - The meeting was conducted virtually to enhance inclusivity and reach a broader audience of stockholders [3] - The company will address any unanswered questions on its corporate website following the meeting [4] Q&A Session Summary Question: Were there any questions submitted before the meeting? - There were no questions submitted in advance, and no questions were received during the meeting [15][14]

Core Insights - Intrusion Inc. reported a second-quarter 2025 loss of $0.10 per share, an improvement from a loss of $0.53 per share a year ago, but wider than the Zacks Consensus Estimate of a loss of $0.09 per share [1] - Quarterly revenues reached $1.9 million, reflecting a 28% year-over-year increase and a 6% sequential rise, surpassing the Zacks Consensus Estimate of $1.8 million [2][9] - The company secured an additional $3 million from the Department of Defense (DoD) to enhance operational deployment of its infrastructure monitoring tools and expand threat analysis capabilities [3][9] Revenue and Product Performance - The revenue growth was driven by new customer acquisitions and expanded work with existing clients, particularly the DoD, marking the fifth consecutive quarter of revenue growth [2][9] - Consulting revenues for the quarter were $1.4 million, remaining flat sequentially but up by $0.2 million year-over-year, while Shield revenues totaled $0.5 million, an increase of $0.1 million sequentially and $0.2 million year-over-year [5] - The stability in gross margin at 76% year-over-year indicates the scalability of Intrusion's business model, although management notes potential fluctuations based on product mix [7] Operating Expenses and Financial Position - Operating expenses increased to $3.5 million from $3.1 million in the prior-year quarter, reflecting strategic investments in R&D, sales, and marketing [10] - The operating loss totaled $2.1 million compared to an operating loss of $2 million in the prior-year quarter [10] - As of June 30, 2025, Intrusion had $4.7 million in cash and cash equivalents, down from $10.7 million as of March 31 [11] Market Reaction - Following the results, Intrusion's shares gained 5.5% in trading, closing at $1.91 on August 12, and were up 4.2% in pre-market trading the following day [6]

Company Performance - Intrusion Inc. reported a quarterly loss of $0.1 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.09, but an improvement from a loss of $0.53 per share a year ago, indicating a significant year-over-year improvement [1] - The company posted revenues of $1.87 million for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 4.06% and showing an increase from $1.46 million in the same quarter last year [2] - Over the last four quarters, Intrusion has surpassed consensus EPS estimates just once, while it has topped consensus revenue estimates two times [2] Stock Performance - Intrusion shares have declined approximately 41.1% since the beginning of the year, contrasting with the S&P 500's gain of 8.4% [3] - The current Zacks Rank for Intrusion is 3 (Hold), suggesting that the shares are expected to perform in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.10 on revenues of $1.91 million, and for the current fiscal year, it is -$0.36 on revenues of $7.65 million [7] - The estimate revisions trend for Intrusion was mixed ahead of the earnings release, indicating potential volatility in future earnings expectations [6] Industry Context - The Computer - Networking industry, to which Intrusion belongs, is currently in the top 33% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Another company in the same industry, Lantronix, Inc., is expected to report a quarterly earnings of $0.01 per share, reflecting a year-over-year decline of 93.3% [9]

Financial Data and Key Metrics Changes - Total revenues for Q2 2025 were $1,900,000, representing a 6% increase sequentially and a 28% increase year-over-year, driven largely by work performed under the Department of Defense contract [9][11] - Operating expenses totaled $3,500,000, an increase of $100,000 sequentially and $400,000 year-over-year, primarily due to increased R&D spending [12][14] - Net loss for Q2 2025 was $2,000,000 or $0.10 per share, compared to a net loss of $2,100,000 for Q2 2024 [14] Business Line Data and Key Metrics Changes - Consulting revenues in Q2 2025 totaled $1,400,000, flat compared to the prior quarter but up $200,000 year-over-year [11] - Shield revenues in Q2 2025 were $500,000, an increase of $100,000 sequentially and up $200,000 year-over-year, primarily reflecting work under the Department of Defense contract [11][12] Market Data and Key Metrics Changes - The company is focusing on critical infrastructure protection, which is seen as a promising market opportunity, highlighted by a $3,000,000 contract extension with the Department of Defense [5][9] - The company anticipates deeper penetration in both governmental and commercial sectors, which will result in changes to the customer mix [12] Company Strategy and Development Direction - The company is making strategic investments in critical infrastructure and plans to launch its Shield Cloud product on the AWS Marketplace, with a similar launch on Microsoft Azure planned for later this year [6][7] - The company is refining its reseller partnerships, focusing on managed service providers (MSPs) and managed security service providers (MSSPs) to enhance sales efforts [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving sustainable growth and profitability, citing improved conversations with current and potential customers [15] - The company is optimistic about the demand for its products, particularly in the context of new federal budget opportunities [10][15] Other Important Information - The company has sufficient capital to fund operations through the remainder of 2025 and into early 2026, with cash and cash equivalents of $4,700,000 and short-term investments of $3,700,000 as of June 30, 2025 [15] Q&A Session Summary Question: Is the $3,000,000 contract with the DoD an expansion or extension of services? - The contract is both a renewal of an existing contract and an increase in scope and dollar value [17] Question: What is the broader opportunity within the DoD? - The company sees significant domestic opportunities in critical infrastructure sectors, which are a focus of the current administration [19][20] Question: What sales and marketing strategies will be employed in the marketplaces? - The company plans to follow best practices for creating awareness and promoting its technologies in the marketplaces [21] Question: What is the status of reseller partnerships? - The company is refining its reseller partnerships, focusing on those that show potential for success [23] Question: Have there been shifts in federal or enterprise budgets or sales cycles? - The company is seeing long sales cycles but is focusing on opportunities in operational technology (OT) protection, which is less crowded than IT protection [31][32] Question: When might the company achieve cash flow breakeven? - Management is optimistic about achieving cash flow breakeven soon, depending on securing contracts [42] Question: Who are the major competitors? - The company identifies perceived competitors but believes its offerings are unique and plans to better communicate these differences [44][46]

PART I – FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial information for Intrusion Inc. for the interim periods [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents Intrusion Inc.'s unaudited condensed consolidated financial statements and detailed notes for interim periods ending June 30, 2025 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Data (in thousands) | Metric (in thousands) | June 30, 2025 (unaudited) | December 31, 2024 | | :-------------------- | :------------------------ | :------------------ | | **Assets** | | | | Total current assets | $10,488 | $5,534 | | Total noncurrent assets | $5,868 | $5,975 | | **TOTAL ASSETS** | **$16,356** | **$11,509** | | **Liabilities** | | | | Total current liabilities | $3,247 | $3,672 | | Total noncurrent liabilities | $1,476 | $1,586 | | **Stockholders' Equity** | | | | Total stockholders' equity | $11,633 | $6,251 | - Total assets increased by approximately **$4.8 million (42.1%)** from December 31, 2024, to June 30, 2025, primarily driven by an increase in current assets, notably short-term investments and contract assets[13](index=13&type=chunk) - Total stockholders' equity significantly increased by approximately **$5.4 million (86.9%)** from December 31, 2024, to June 30, 2025[13](index=13&type=chunk) [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Statements of Operations Data (in thousands, except per share) | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $1,873 | $1,460 | $3,648 | $2,591 | | Cost of revenue | $442 | $350 | $874 | $576 | | Gross profit | $1,431 | $1,110 | $2,774 | $2,015 | | Operating loss | $(2,086) | $(2,033) | $(4,179) | $(4,505) | | Net loss | $(2,042) | $(2,067) | $(4,140) | $(3,783) | | Basic Net loss per share | $(0.10) | $(0.53) | $(0.21) | $(1.31) | | Diluted Net loss per share | $(0.10) | $(0.53) | $(0.21) | $(1.31) | - Revenue increased by **28%** for the three months ended June 30, 2025, and by **41%** for the six months ended June 30, 2025, compared to the same periods in 2024[16](index=16&type=chunk) - Net loss per share (basic and diluted) significantly improved from **$(0.53)** to **$(0.10)** for the three months ended June 30, 2025, and from **$(1.31)** to **$(0.21)** for the six months ended June 30, 2025, primarily due to a higher weighted average common shares outstanding[16](index=16&type=chunk) [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20%28Deficit%29) - Total stockholders' equity increased from **$6,251 thousand** at December 31, 2024, to **$11,633 thousand** at June 30, 2025[19](index=19&type=chunk) - Key activities impacting equity in H1 2025 included a registered direct offering (net proceeds of **$7,026 thousand**), issuance of common stock to reduce notes payable (**$537 thousand**), and exchange of Series A preferred stock for common stock[19](index=19&type=chunk) - The accumulated deficit increased from **$(118,007) thousand** at December 31, 2024, to **$(122,147) thousand** at June 30, 2025, reflecting the net losses incurred during the period[19](index=19&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Data (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(3,250) | $(4,036) | | Net cash used in investing activities | $(5,150) | $(697) | | Net cash provided by financing activities | $8,238 | $6,100 | | Change in cash and cash equivalents | $(162) | $1,367 | - Net cash used in operating activities decreased by **19.5%** in H1 2025 compared to H1 2024, indicating improved operational cash burn[21](index=21&type=chunk) - Net cash used in investing activities significantly increased in H1 2025, primarily due to purchases of U.S. treasury securities (**$3.7 million**) and increased capitalized software development and property/equipment purchases[21](index=21&type=chunk)[105](index=105&type=chunk) - Net cash provided by financing activities increased by **35.0%** in H1 2025, driven by proceeds from a registered direct offering (**$7.0 million**) and stock subscription receivable (**$1.5 million**)[21](index=21&type=chunk)[106](index=106&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [1. Description of Business](index=10&type=section&id=1.%20Description%20of%20Business) - Intrusion Inc. develops, sells, and supports cybersecurity products like TraceCop, Savant, and INTRUSION Shield, which fuse advanced threat intelligence with real-time mitigation to prevent cyberattacks[24](index=24&type=chunk) - The company markets its solutions through value-added resellers, managed service providers, and a direct sales force, serving U.S. federal and state/local government entities, and mid-market to large enterprises[24](index=24&type=chunk) [2. Basis of Presentation](index=10&type=section&id=2.%20Basis%20of%20Presentation) - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions, and should be read with the 2024 Annual Report on Form 10-K[26](index=26&type=chunk) - A 1-for-20 reverse stock split was effected on March 22, 2024, and all share and per share amounts presented reflect this adjustment[28](index=28&type=chunk) - As of June 30, 2025, the Company held **$3.7 million** in short-term investments, consisting of highly liquid, investment-grade fixed income securities with maturities between 90 days and one year[29](index=29&type=chunk) [3. Right-of-use Asset and Leasing Liabilities](index=11&type=section&id=3.%20Right-of-use%20Asset%20and%20Leasing%20Liabilities) - The Company records ROU assets and related lease liabilities under ASC 842, using an estimated incremental borrowing rate for present value calculations[30](index=30&type=chunk)[31](index=31&type=chunk) Lease Payments (in thousands) | Lease Payments (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease payments | $100 | $32 | $200 | $37 | | Finance lease payments | $100 | $200 | $200 | $300 | - Total lease expense for the six months ended June 30, 2025, was **$340 thousand**, down from **$530 thousand** in the prior year, primarily due to reduced amortization and lease expenses[33](index=33&type=chunk) [4. Notes Payable](index=12&type=section&id=4.%20Notes%20Payable) - The Company fully retired the remaining **$0.5 million** Streeterville debt in March 2025 by issuing **552.3 thousand shares** of common stock[40](index=40&type=chunk)[101](index=101&type=chunk) - In March 2024, **$9.3 million** of Streeterville debt was exchanged for Series A preferred stock and **$0.2 million** for common stock, leading to a **$1.0 million** credit to interest expense in H1 2024 due to the reversal of interest accretion and write-off of debt issuance costs[39](index=39&type=chunk)[41](index=41&type=chunk)[95](index=95&type=chunk) - Notes payable to Anthony Scott (CEO) totaling **$1.1 million** were converted into common stock and warrants in April 2024[44](index=44&type=chunk)[75](index=75&type=chunk) [5. Commitments and Contingencies](index=13&type=section&id=5.%20Commitments%20and%20Contingencies) - The Company is involved in routine litigation claims but does not anticipate any material adverse impact on its business[45](index=45&type=chunk)[114](index=114&type=chunk) [6. Stockholders' Equity](index=13&type=section&id=6.%20Stockholders%27%20Equity) - The Company terminated its ATM agreement with B. Riley Securities on June 11, 2025, and entered into a new ATM offering agreement with H.C. Wainwright & Co., LLC to potentially sell up to **$50.0 million** of common stock[46](index=46&type=chunk)[100](index=100&type=chunk) - All Series A preferred stock was exchanged for common stock or redeemed by January 3, 2025, with no shares outstanding as of June 30, 2025[51](index=51&type=chunk) - In January 2025, the Company completed a registered direct offering, selling **653 thousand common shares** and **1,806 thousand prefunded warrants** for aggregate gross proceeds of **$7.5 million**[52](index=52&type=chunk) [7. Stock-Based Compensation](index=14&type=section&id=7.%20Stock-Based%20Compensation) - The Company recognized stock-based compensation expense of **$0.3 million** and **$0.5 million** for the three and six months ended June 30, 2025, respectively, an increase from **$0.1 million** and **$0.2 million** for the same periods in 2024[57](index=57&type=chunk) - During the six months ended June 30, 2025, the Company granted **383.9 thousand restricted stock units (RSUs)**[57](index=57&type=chunk) [8. Revenue Recognition](index=14&type=section&id=8.%20Revenue%20Recognition) - Revenue is recognized upon shipment for products (hardware, software subscriptions, consulting) or monthly over the contract term for INTRUSION Shield SaaS offerings[58](index=58&type=chunk)[61](index=61&type=chunk)[63](index=63&type=chunk) - For the three and six months ended June 30, 2025, U.S. government entities accounted for **95.5%** and **93.6%** of total revenues, respectively, an increase from **89.0%** and **75.7%** in the same periods of 2024[64](index=64&type=chunk) Contract Assets (in thousands) | Contract Assets (in thousands) | 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 (in thousands) | Contract Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Balance at beginning of period | $730 | $439 | | Additions | $3,509 | $3,914 | | Revenue recognized | $(2,264) | $(3,623) | | Balance at end of period | $1,975 | $730 | [9. Capitalized Software Development](index=16&type=section&id=9.%20Capitalized%20Software%20Development) - The Company capitalizes internally developed software costs during the application development stage, amortizing them on a straight-line basis over an estimated useful life of generally three years[71](index=71&type=chunk)[72](index=72&type=chunk) [10. Net Loss Per Share](index=16&type=section&id=10.%20Net%20Loss%20Per%20Share) - Basic and diluted net loss per share are the same due to the Company being in a net loss position[73](index=73&type=chunk) - The aggregate number of common stock equivalents excluded from diluted loss per share was **3.8 million shares** for the three and six months ended June 30, 2025, and **3.1 million** and **1.7 million shares** for the three and six months ended June 30, 2024, respectively[73](index=73&type=chunk) [11. Related Party Transactions](index=17&type=section&id=11.%20Related%20Party%20Transactions) - In H1 2024, the Company engaged in invoice financing arrangements with CEO Anthony Scott, totaling **$1.1 million**, which were later converted into common stock and warrants[74](index=74&type=chunk)[75](index=75&type=chunk) - No related party transactions occurred for the three or six months ended June 30, 2025[77](index=77&type=chunk) [12. Subsequent Events](index=17&type=section&id=12.%20Subsequent%20Events) - There were no subsequent events requiring disclosure[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition and results of operations for the three and six months ended June 30, 2025, highlighting key drivers and outlook [Forward-Looking Statements](index=18&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements regarding financial position, business strategies, product marketing, and financing, which involve substantial risks and uncertainties[79](index=79&type=chunk) - Readers are cautioned not to unduly rely on these statements, as actual results may differ due to various risks outlined in the 'Risk Factors' section of this report and the Annual Report on Form 10-K[80](index=80&type=chunk)[81](index=81&type=chunk) [Overview](index=18&type=section&id=Overview) - Intrusion Inc. offers cybersecurity products and services, including INTRUSION TraceCop, Savant, and INTRUSION Shield, leveraging a threat intelligence database of over 8.5 billion IP addresses and domain names[83](index=83&type=chunk) - INTRUSION Shield, launched in 2021, provides a Zero Trust, reputation-based security solution to block malicious connections and protect against Zero-Day and ransomware attacks[83](index=83&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) Results of Operations Summary (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (Amount) | Change (%) | | :-------------------- | :------------------------------- | :------------------------------- | :-------------- | :--------- | | Revenue | $1,873 | $1,460 | $413 | 28% | | Cost of revenue | $442 | $350 | $92 | 26% | | Gross profit | $1,431 | $1,110 | $321 | 29% | | Gross profit percentage | 76.4% | 76.0% | | | | Operating expenses | $3,517 | $3,143 | $374 | 12% | | Operating loss | $(2,086) | $(2,033) | $(53) | 3% | | Net loss | $(2,042) | $(2,067) | $25 | -1% | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (Amount) | Change (%) | | :-------------------- | :----------------------------- | :----------------------------- | :-------------- | :--------- | | Revenue | $3,648 | $2,591 | $1,057 | 41% | | Cost of revenue | $874 | $576 | $298 | 52% | | Gross profit | $2,774 | $2,015 | $759 | 38% | | Gross profit percentage | 76.0% | 77.8% | | | | Operating expenses | $6,953 | $6,520 | $433 | 7% | | Operating loss | $(4,179) | $(4,505) | $326 | -7% | | Net loss | $(4,140) | $(3,783) | $(357) | 9% | - Consulting revenue increased in 2025 due to a Department of Defense contract awarded in late 2024, offsetting the negative impact of federal budget delays in H1 2024[84](index=84&type=chunk) - INTRUSION Shield revenue grew to **$0.5 million** (Q2 2025) and **$0.9 million** (H1 2025), despite losing a major customer (**78%** of Shield revenues) in Q1 2024, with new customers, including a DoD contract, fully offsetting this loss[84](index=84&type=chunk) - Revenue concentration shifted further towards U.S. government entities, comprising **95.5%** and **93.7%** of total revenues for the three and six months ended June 30, 2025, respectively, up from **89.0%** and **75.7%** in 2024[85](index=85&type=chunk) - Operating expenses increased by **$0.3 million** for Q2 2025 (adjusted for one-time savings) due to higher share-based compensation, merit increases, and new hires, partially offset by lower legal fees[89](index=89&type=chunk) - Research and development expenses increased by **$0.3 million** (Q2 2025) and **$0.5 million** (H1 2025) due to increased depreciation from infrastructure hardware and capitalized software, reflecting continued investment in INTRUSION Shield features[92](index=92&type=chunk) - General and administrative expenses decreased primarily due to resolved prior-year litigation matters and one-time negotiated savings in 2024[93](index=93&type=chunk) - Net loss for the six months ended June 30, 2025, increased by **9%** to **$(4.1) million**, primarily due to a **$1.0 million** net interest credit recorded in the 2024 period from debt conversion[97](index=97&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, cash and cash equivalents were **$4.7 million**, a decrease of **$0.2 million** from December 31, 2024, while net working capital increased significantly to **$7.2 million** from **$1.9 million**[98](index=98&type=chunk) - Principal sources of cash in H1 2025 included **$1.5 million** from the SEPA (stock subscription receivable) and **$7.0 million** from a registered direct offering[98](index=98&type=chunk)[106](index=106&type=chunk) - Net cash used in investing activities for H1 2025 was **$5.2 million**, including **$3.7 million** in short-term investments and **$1.4 million** in capitalized software and hardware purchases[105](index=105&type=chunk) [Critical Accounting Policies and Use of Estimates](index=23&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) - The Company's financial statements rely on estimates and assumptions, with no significant changes to critical accounting policies and estimates since the 2024 Annual Report on Form 10-K[107](index=107&type=chunk)[108](index=108&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) States that the Company has no material quantitative or qualitative disclosures about market risk to report for the period - No applicable disclosures about market risk are provided in this report[109](index=109&type=chunk) [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Details the evaluation of the effectiveness of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[111](index=111&type=chunk) - There have been no material changes in internal control over financial reporting during the three months ended June 30, 2025[112](index=112&type=chunk) PART II – OTHER INFORMATION Provides other information including legal proceedings, risk factors, equity sales, and controls and procedures [Item 1. Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) Addresses the Company's involvement in legal proceedings, stating no material pending legal proceedings as of June 30, 2025 - As of June 30, 2025, the Company was not involved in any material pending legal proceedings[114](index=114&type=chunk) - Routine litigation claims are not expected to have a material adverse impact on the Company's business[114](index=114&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, Intrusion Inc. refers readers to comprehensive risk factors in its 2024 Annual Report on Form 10-K - Risk factors are omitted from this Form 10-Q as the Company is a smaller reporting company[115](index=115&type=chunk) - Readers should refer to the risk factors disclosed in the 2024 Annual Report on Form 10-K for potential material adverse effects on the business[115](index=115&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Indicates no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities to report for the period - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities occurred during the period[116](index=116&type=chunk) [Item 3. Defaults Upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) States that there are no defaults upon senior securities to report - No applicable defaults upon senior securities are reported[117](index=117&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[118](index=118&type=chunk) [Item 5. Other Information](index=24&type=section&id=Item%205.%20Other%20Information) Provides other information, including no material changes to Board nominee procedures or Rule 10b5-1 trading arrangements by directors or officers - No material changes to procedures for security holders to recommend Board nominees have occurred[120](index=120&type=chunk) - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[120](index=120&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) Lists the exhibits filed or furnished with the Quarterly Report on Form 10-Q, including certifications and XBRL documents - Exhibits include certifications from the CEO and CFO (31.1, 31.2, 32.1) and various XBRL documents (101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104)[122](index=122&type=chunk) [Signature Page](index=26&type=section&id=Signature%20Page) Contains the signatures of the Registrant's authorized officers, Anthony Scott (President & CEO) and Kimberly Pinson (CFO), certifying the report - The report is signed by Anthony Scott, President & Chief Executive Officer, and Kimberly Pinson, Chief Financial Officer, on August 12, 2025[126](index=126&type=chunk)

[Company Overview & Q2 2025 Highlights](index=1&type=section&id=Company%20Overview%20%26%20Q2%202025%20Highlights) Intrusion Inc. reported positive Q2 2025 results, driven by Shield product expansion and a DoD contract, focusing on sustainable growth and enhanced offerings [Introduction and Strategic Focus](index=1&type=section&id=Introduction%20and%20Strategic%20Focus) Intrusion Inc. reported positive Q2 2025 results, driven by Shield product expansion in critical infrastructure, with a strategic focus on enhancing offerings and customer acquisition - Intrusion Inc. is a leader in cyberattack prevention solutions[2](index=2&type=chunk) - The company is committed to achieving sustainable growth and long-term profitability[3](index=3&type=chunk) - Revenue growth is primarily driven by continuous improvements in the Shield product suite, especially in critical infrastructure[3](index=3&type=chunk) - Future priorities include enhancing product offerings, accelerating customer acquisition, and strengthening sales channels[3](index=3&type=chunk) [Recent Financial & Business Highlights](index=1&type=section&id=Recent%20Financial%20%26%20Business%20Highlights) The company achieved its fifth consecutive quarter of revenue growth in Q2 2025, securing an additional **$3 million** from a DoD contract for critical infrastructure monitoring and threat analysis - Secured an additional **$3 million** in support from a U.S. Department of Defense contract for deploying critical infrastructure monitoring tools and deepening threat analysis capabilities[9](index=9&type=chunk) - Achieved its fifth consecutive quarter of revenue growth[9](index=9&type=chunk) [Second Quarter 2025 Financial Performance](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Performance) Intrusion Inc. reported Q2 2025 revenue of **$1.9 million** with a **76%** gross margin, a **$2 million** net loss, and **$4.7 million** in cash [Revenue and Gross Profit](index=1&type=section&id=Revenue%20and%20Gross%20Profit) Intrusion Inc. reported Q2 2025 revenue of approximately **$1.9 million**, a **28%** YoY increase driven by new customer acquisitions, maintaining a **76%** gross margin | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | YoY Change | | :----- | :--------------------- | :--------------------- | :--------- | | Revenue | $1,873 | $1,460 | +28% | | Gross Profit | $1,431 | $1,110 | +28.9% | | Gross Profit Margin | 76% | 76% | Flat | - The sequential revenue growth this quarter was primarily driven by recently signed new customers, including the U.S. Department of Defense contract[4](index=4&type=chunk) [Operating Expenses and Net Loss](index=1&type=section&id=Operating%20Expenses%20and%20Net%20Loss) Q2 2025 operating expenses increased to **$3.5 million**, resulting in a net loss of **$2.0 million** or **$0.10** per share, an improvement from Q2 2024 | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | YoY Change | | :---------------------- | :--------------------- | :--------------------- | :--------- | | Operating Expenses | $3,517 | $3,143 | +$374 | | Net Loss | $(2,042) | $(2,067) | -$25 | | Net Loss Per Share (Basic) | $(0.10) | $(0.53) | -$0.43 | - Operating expenses for Q2 2025 were **$3.5 million**, an increase of **$0.4 million** compared to Q2 2024[6](index=6&type=chunk) [Liquidity and Capital Resources](index=1&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company maintained a healthy liquidity position with **$4.7 million** in cash and **$3.7 million** in short-term U.S. Treasury investments | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change | | :-------------------------- | :----------------------------- | :----------------------------- | :----- | | Cash and cash equivalents | $4,689 | $4,851 | -$162 | | Short term investments | $3,749 | $0 | +$3,749 | [Business Description](index=2&type=section&id=Business%20Description) Intrusion Inc. is a Plano, Texas-based cybersecurity company specializing in advanced threat intelligence through its TraceCop database and Shield platform [About Intrusion Inc.](index=2&type=section&id=About%20Intrusion%20Inc.) Intrusion Inc., a Plano, Texas-based cybersecurity firm, specializes in advanced threat intelligence through its proprietary TraceCop database, which tracks IP addresses and domain reputations - Intrusion Inc. is a cybersecurity company focused on advanced threat intelligence[10](index=10&type=chunk) - Its core capability is TraceCop, a proprietary database for recording historical behavior, associations, and reputational risks of IP addresses, domains, and hostnames[10](index=10&type=chunk) - TraceCop data is based on years of accumulated global internet intelligence and government entity support[10](index=10&type=chunk) [Products and Solutions](index=2&type=section&id=Products%20and%20Solutions) Intrusion Shield is a next-generation cybersecurity platform offering real-time threat detection and prevention through "Observe Mode" for insights and "Protect Mode" for automated blocking of malicious connections - Intrusion Shield is a next-generation cybersecurity platform for real-time threat detection and prevention[11](index=11&type=chunk) - 'Observe Mode' provides analytical insights to identify unknown patterns and risks[11](index=11&type=chunk) - 'Protect Mode' monitors traffic and automatically blocks malicious and unknown connections, providing defense against zero-day threats and ransomware[11](index=11&type=chunk) [Condensed Consolidated Financial Statements](index=3&type=section&id=Condensed%20Consolidated%20Financial%20Statements) The condensed consolidated financial statements show total assets increased to **$16.4 million** and a net loss of **$4.1 million** for the six months ended June 30, 2025 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to **$16.36 million**, driven by short-term investments, and stockholders' equity grew to **$11.63 million** | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | **ASSETS** | | | | | Total current assets | $10,488 | $5,534 | +$4,954 | | Total noncurrent assets | $5,868 | $5,975 | -$107 | | **TOTAL ASSETS** | **$16,356** | **$11,509** | **+$4,847** | | **LIABILITIES** | | | | | Total current liabilities | $3,247 | $3,672 | -$425 | | Total noncurrent liabilities | $1,476 | $1,586 | -$110 | | **Total Liabilities** | **$4,723** | **$5,258** | **-$535** | | **STOCKHOLDERS' EQUITY** | | | | | Total stockholders' equity | **$11,633** | **$6,251** | **+$5,382** | [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) For the six months ended June 30, 2025, revenue increased to **$3.65 million**, but net loss expanded to **$4.14 million** due to higher operating expenses | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :-------------------- | :----------------------------- | :----------------------------- | :----- | | Revenue | $3,648 | $2,591 | +$1,057 | | Cost of revenue | $874 | $576 | +$298 | | Gross profit | $2,774 | $2,015 | +$759 | | Sales and marketing | $2,391 | $2,335 | +$56 | | Research and development | $2,550 | $2,054 | +$496 | | General and administrative | $2,012 | $2,131 | -$119 | | Operating loss | $(4,179) | $(4,505) | +$326 | | Net loss | $(4,140) | $(3,783) | -$357 | | Net loss per share (Basic) | $(0.21) | $(1.31) | +$1.10 | [Additional Information](index=1&type=section&id=Additional%20Information) This section provides details on the Q2 2025 earnings conference call and a cautionary statement regarding forward-looking information [Conference Call Information](index=1&type=section&id=Conference%20Call%20Information) Intrusion management held a conference call on August 12, 2025, at 5:00 PM ET to discuss results, with live access and replay options available - The conference call was held on August 12, 2025, at 5:00 PM ET[8](index=8&type=chunk) - Live dial-in and webcast access were provided[8](index=8&type=chunk) - Replay services were accessible until August 26, 2025[8](index=8&type=chunk) [Cautionary Statement Regarding Forward-Looking Information](index=2&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Information) This press release contains forward-looking statements, subject to significant risks and uncertainties detailed in SEC filings, which should not be considered predictions of future events - The press release contains forward-looking statements regarding financial condition, business strategies, and product marketing[12](index=12&type=chunk) - These statements are subject to significant risks and uncertainties[12](index=12&type=chunk) - Readers should not regard forward-looking statements as predictions of future events[13](index=13&type=chunk) - The company undertakes no obligation to update these statements except as required by law[14](index=14&type=chunk)