Notes Payable

12 Months Ended

Dec. 31, 2024

Debt Disclosure [Abstract]

Notes Payable

6. Notes Payable

On March 10, 2022, Intrusion Inc. entered into a SPA with Streeterville whereby the Company issued two separate promissory notes of $5.4 million each, with an initial interest rate of 7%, subject to some increases in the case of among other things, an event of default. On March 10, 2022, the Company received $4.6 million in net funds from the first tranche (First Note) pursuant to a promissory note executed contemporaneously with the execution of the loan agreement. On June 29, 2022, the Company received an additional $4.7 million in net funds from the second tranche (Second Note) pursuant to a promissory note. Each note had an 18-month maturity, may be prepaid subject to varying prepayment premiums, and may be redeemed at any time after six months into the term of such note in amounts up to $0.5 million per calendar month upon the noteholder’s election. 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 Consolidated Balance Sheets by $0.4 million. On August 2, 2023, the Company entered into a Forbearance Agreement with Streeterville which was subsequently amended on August 7, 2023. The Forbearance Agreement and amendment extended the maturity dates for each Note by twelve 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.

The Company has the option, in its sole discretion, to satisfy any redemption demands in cash or shares of the Company’s common stock that will be issued in an amount equal to the dollar amount of the redemption demand divided by the number that represents 85% of the average of the two lowest daily volume weighted average prices of common stock over a fifteen-day trailing period. This option to settle in shares at a 15% discount is deemed a beneficial conversion feature (“BCF”). Any remaining indebtedness at maturity is payable in cash.

In 2023 the Company paid $0.4 million in cash principal payments on the notes. On October 11, 2023, and October 17, 2023, the Company agreed to exchange $0.4 million in aggregate principal on the Streeterville First Note for 50.1 thousand shares of the Company’s common stock. On December 19, 2023, the Company exchanged an additional $0.2 million in principal for 43.5 thousand shares of common stock. The issuance of the shares was made pursuant to the exemption from the registration requirements afforded by the Securities Act.

In March 2024, the Company entered into an agreement with Streeterville to exchange $0.2 million in principal for 52.2 thousand shares of common stock. Also in March 2024, the Company exchanged $9.3 million in Streeterville debt for 9.3 thousand shares of newly created Series A Preferred. The issuance of both common and preferred shares was made pursuant to the exemption from the registration requirements afforded by the Securities Act, as amended. Following the exchanges noted herein, the remaining balance on Note One was $0.5 million, the Second Note was paid in full, the interest accretion associated with the ability to stock-settle principal redemptions was reversed and the Company wrote off the balance of unamortized debt issuance costs.

The maturity date for Note One was September 10, 2024, the preferences for the Series A Preferred precluded repayment of Note One so long as any Series A Preferred is outstanding. The Series A Preferred was repaid in full on January 3, 2025. Note One is pending an amendment to extend the maturity date.

The Company incurred debt issue costs totaling $1.8 million associated with the issuance and amendment of the notes which were being amortized over their respective terms. On December 31, 2024, and 2023, the balance of unamortized debt issuance costs for both notes were $0 and $0.4 million, respectively.

For the years ended December 31, 2024, and 2023, the Company recorded simple interest related to Note 1 and Note 2 of $0.2 million and $0.7 million, respectively, in the accompanying Consolidated Statement of Operations.

Streeterville Notes Payable

On September 30, 2024, the Company entered into a note purchase agreement with Streeterville where Streeterville purchased a note payable in the principal amount of $630 thousand in exchange for $500 thousand in cash after redemption of $100 thousand of Series A preferred stock. The note was non-interest bearing and was repaid on November 27, 2024.

Scott Notes Payable

On January 2, 2024, the Company entered into a note purchase agreement with the Company’s Chief Executive Officer, Anthony Scott. Scott purchased a note payable in the principal amount of $1.1 million in exchange for $1.0 million in cash. The note called for weekly payments of $40 thousand until maturity on June 15, 2024. Interest accrued on the balance of the note at 7% per annum compounding daily. During the period ended March 31, 2024, the Company made $0.2 million in principal payments on the first note payable.

On March 20, 2024, Scott purchased a second note payable in the principal amount of $343 thousand in exchange for $340 thousand in cash. The note was non-interest bearing and matured on April 19, 2024. On April 2, 2024, the Company reduced the principal balance due under the note by $101 thousand which reflected the amount due from Scott for the exercise of common stock purchase warrants.

On April 19, 2024, Scott entered into a private placement subscription agreement to convert the remaining aggregate outstanding balance of $1.1 million for both notes in exchange for common stock and common stock purchase warrants.

The Company recorded interest expense for the first Scott note totaling $20 thousand and amortization of debt issuance costs of $83 thousand in the accompanying consolidated statement of operations in 2024.