10-Q: Intrusion Inc. Q3 Revenue Jumps 31%, Net Loss Widens
Quarterly Report
Intrusion Inc. reported a 31% increase in third-quarter revenue and a 37% rise for the nine months ended September 30, 2025, driven by government contracts, despite a slight increase in net loss.
Summary
- Revenue for the three months ended September 30, 2025, increased by 31% to $2.0 million, up from $1.5 million in the prior year.
- Revenue for the nine months ended September 30, 2025, increased by 37% to $5.6 million, up from $4.1 million in the prior year.
- Consulting revenue significantly increased in 2025, primarily due to a Department of Defense contract awarded in the second half of 2024.
- INTRUSION Shield revenue grew to $0.5 million for the quarter and $1.4 million for the nine months, despite losing a major customer who accounted for 78% of Shield revenues on March 31, 2024.
- Net loss for the three months ended September 30, 2025, was $(2.1) million, slightly higher than $(2.0) million in the prior year.
- Net loss for the nine months ended September 30, 2025, was $(6.2) million, compared to $(5.8) million in the prior year, primarily due to a $1.0 million net interest credit in 2024 that did not recur.
- Cash and cash equivalents stood at $2.5 million, with an additional $2.0 million in short-term investments, totaling $4.5 million as of September 30, 2025.
- Net working capital improved significantly to $5.1 million as of September 30, 2025, from $1.9 million at December 31, 2024.
- The company received $3.0 million in cash on October 1, 2025, related to a Department of Defense contract extension.
Sentiment
Score: 4
Explanation: While revenue growth is strong, the widening net loss, continued cash burn from operations and investing, and explicit going concern warning indicate significant financial challenges. The reliance on capital raises and government contracts adds to the risk profile, despite some positive operational developments like offsetting a major customer loss.
Positives
- Significant revenue growth: 31% for the quarter and 37% for the nine months ended September 30, 2025.
- Strong performance in consulting revenue, driven by a new Department of Defense contract.
- INTRUSION Shield revenue growth despite the loss of a major customer, indicating successful customer acquisition.
- Improved net working capital to $5.1 million as of September 30, 2025, from $1.9 million at December 31, 2024.
- Successful capital raise of $7.0 million net proceeds from a registered direct offering in January 2025.
- Reduction in interest expense for the nine months ended September 30, 2025, to $67 thousand from $274 thousand in the prior year.
- Full retirement of Streeterville debt in March 2025.
- Receipt of $3.0 million cash on October 1, 2025, from a Department of Defense contract extension, enhancing immediate liquidity.
Negatives
- Net loss increased to $(6.2) million for the nine months ended September 30, 2025, from $(5.8) million in the prior year.
- Cash and cash equivalents decreased to $2.5 million as of September 30, 2025, from $4.9 million at December 31, 2024.
- Increased cash used in investing activities, primarily due to purchases of U.S. treasury securities and capitalized software development.
- High concentration of revenue from government entities (94.7% for nine months ended September 30, 2025), posing a risk if government contracts are disrupted.
- Operating expenses increased by 9% for the nine months ended September 30, 2025, to $10.6 million.
- Gross profit percentage slightly decreased to 76.2% for the nine months ended September 30, 2025, from 77.5% in the prior year.
Risks
- Dependence on government contracts: Sales to government entities involve risks such as potential disruptions in appropriations and spending, and the government's right to cancel contracts at its convenience.
- Going concern risk: If operations do not generate positive cash flow in the upcoming year, or if additional debt or equity financing is not obtained on acceptable terms, the company may be unable to implement its business plan, fund liquidity needs, or continue operations.
- Revenue concentration: A significant portion of revenue comes from a few government customers, making the company vulnerable to the loss or renegotiation of these contracts.
- Fluctuations in revenue concentration: The company expects revenue concentration among customers to fluctuate, which could impact financial results.
Future Outlook
The company anticipates that sales to government customers will continue to represent a significant portion of revenues. It also expects revenue concentration among customers to fluctuate in future periods depending on the timing of sales. The company continues to invest in research and development for new releases, improved functionality, and enhancements to its product offerings.
Management Comments
- 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.
- 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.
- While we do not currently anticipate renegotiations or cancellations of government contracts, the loss of government orders could materially affect our financial results.
Industry Context
Intrusion Inc. operates in the cybersecurity sector, offering solutions like INTRUSION Shield, TraceCop, and Savant. The company's significant reliance on U.S. government contracts (over 94% of 9-month revenue) indicates a strong niche in public sector cybersecurity. The increase in consulting revenue due to a Department of Defense contract suggests a robust demand for specialized cybersecurity services within government, potentially driven by ongoing national security priorities and evolving cyber threats. The company's focus on "Zero Trust, reputation-based security" and protection against "Zero-Day and ransomware attacks" aligns with critical industry needs. The loss of a major commercial customer for INTRUSION Shield, offset by new customers, highlights the competitive nature of the commercial cybersecurity market and the importance of continuous customer acquisition and product adaptation.
Comparison to Industry Standards
- The filing does not provide specific comparable companies, projects, or results to global benchmarks.
- The high gross profit margin (76.2% for 9M 2025) is generally strong for a software/service company, indicating efficient cost of revenue. However, this needs to be balanced against significant operating losses.
- The substantial increase in R&D expenses (21% for 9M 2025) and capitalized software development suggests a commitment to innovation, which is crucial in the rapidly evolving cybersecurity industry.
- The company's heavy reliance on government contracts (94.7% of 9M 2025 revenue) is a distinct characteristic, differing from many commercial cybersecurity firms that aim for a more diversified customer base. This concentration can offer stability with long-term contracts but also introduces specific risks related to government funding cycles and policies.
Legal Proceedings
- The company is periodically involved in various litigation claims asserted in the normal course of its business, which are believed to be routine and incidental and not expected to have a material adverse impact.
Related Party Transactions
- No related party transactions occurred for the three or nine months ended September 30, 2025.
Stakeholder Impact
- Shareholders: Potential for dilution from future equity raises (ATM program, SEPA). Continued net losses and going concern risk could negatively impact share value.
- Employees: Continued investment in R&D and hiring of Sales and Software Engineers suggests ongoing employment opportunities in key areas.
- Customers: Government customers benefit from continued service under existing contracts and extensions (e.g., DoD contract). Commercial customers benefit from INTRUSION Shield development.
- Creditors: Streeterville debt has been fully retired, reducing immediate creditor risk. However, the going concern warning indicates potential future challenges for new creditors.
Next Steps
- Continue to market and distribute INTRUSION Shield through value-added resellers, managed service providers, and a direct sales force.
- Seek to generate positive cash flow from operations in the upcoming year.
- Potentially obtain additional debt or equity financing if needed to fund liquidity and business plan.
- Continue to invest in research and development for new product releases, improved functionality, and enhancements.
- Manage revenue concentration risks associated with government contracts.
Key Dates
| Date | Description |
|---|---|
| 2022-03-10 | Company entered into an unsecured loan agreement (SPA) with Streeterville Capital, LLC, issuing two promissory notes. |
| 2022-06-29 | Received $4.7 million in net funds from the second tranche of the Streeterville SPA. |
| 2023-01-11 | Company amended promissory notes with Streeterville, waiving redemption rights through March 31, 2023, in exchange for a fee. |
| 2023-08-02 | Company entered into a Forbearance Agreement with Streeterville, extending maturity dates for notes and granting Streeterville a first-position security interest in all assets. |
| 2023-08-07 | Forbearance Agreement with Streeterville was amended. |
| 2024-01-02 | Anthony Scott (CEO) purchased a promissory note from the company for $1.0 million cash, with a principal amount of $1.1 million. |
| 2024-03-15 | Company filed Amended and Restated Certificate of Incorporation to eliminate previous preferred shares and created new Series A preferred stock. Entered into an Exchange Agreement with Streeterville Capital to exchange $9.3 million in debt for 9,275 shares of Series A preferred stock. |
| 2024-03-20 | Anthony Scott (CEO) purchased a second non-interest bearing promissory note from the company for $340 thousand cash, with a principal amount of $343 thousand. |
| 2024-03-22 | Company effected a 1-for-20 reverse stock split. Federal budget was passed, impacting timing of government contract renewals. |
| 2024-03-31 | Company lost a major INTRUSION Shield customer who accounted for 78% of INTRUSION Shield revenues. |
| 2024-04-02 | Company reduced the principal balance due under the first Scott note by $101 thousand, reflecting amount due from Mr. Scott for warrant exercise. |
| 2024-04-03 | Began a series of nine separate exchange transactions through December 31, 2024, exchanging 6,123 shares of Series A preferred stock for 2,637.7 thousand shares of common stock. |
| 2024-04-19 | Anthony Scott (CEO) entered into a private placement subscription agreement to convert the aggregate outstanding balance of $1.1 million for both notes into common stock and common stock purchase warrants. |
| 2024-07-03 | Company entered into a $10 million Standby Equity Purchase Agreement (SEPA) with Streeterville. |
| 2025-01-02 | Began two separate exchange transactions through January 3, 2025, exchanging 3,587 shares of Series A preferred stock for 1,293 thousand shares of common stock. |
| 2025-01-03 | Series A preferred stock was fully redeemed. |
| 2025-01-06 | Company sold 653 thousand shares of common stock and 1,806 thousand prefunded warrants in a registered direct offering for aggregate gross proceeds of $7.5 million. |
| 2025-01-31 | Filed a shelf registration statement on Form S-3/A (File No. 333-281565). |
| 2025-02-10 | Shelf registration statement on Form S-3/A became effective. |
| 2025-03-01 | In March 2025, the company entered into three separate agreements with Streeterville to exchange an aggregate $0.5 million in principal for 552.3 thousand shares of common stock, retiring the remainder of Note 1 in full. |
| 2025-06-11 | Company terminated its At Market Sales Agreement with B. Riley Securities, Inc. |
| 2025-06-12 | 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 common stock. |
| 2025-09-30 | End of the reporting period for this Form 10-Q. |
| 2025-10-01 | Received $3.0 million in cash related to the Department of Defense contract extension. |
| 2025-11-11 | Number of shares outstanding of Common Stock was 20,102,939. |
| 2025-11-12 | Date of signing for the Quarterly Report on Form 10-Q by CEO and CFO. |
Recommendation
sellDespite strong revenue growth, the company continues to incur significant net losses and burn cash from operations and investing activities. The explicit "going concern" warning, coupled with a heavy reliance on future capital raises and a highly concentrated customer base (primarily government), presents substantial financial risk. While the company has successfully raised capital and secured government contracts, the fundamental profitability and cash flow issues remain unaddressed, making it a high-risk investment. The increase in shares outstanding due to recent offerings also dilutes existing shareholders.
Keywords
cybersecurity, INTRUSION Shield, government contracts, cyberattacks, Zero-Day, ransomware, financial results, SEC filing, 10-Q, software as a service, SaaS, cyber defense, network security
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