Item 1.01 Entry into a Material Definitive Agreement
Intrusion Inc. (the “Company”) entered into a securities
purchase agreement (the “SPA”) with Streeterville Capital, LLC (the “Investor”) on March 10, 2022, pursuant to
which, among other things, the Investor (i) purchased an unsecured promissory note (“Note #1”) in the aggregate principal
amount totaling $5,350,000 in exchange for $5,000,000 less certain expenses and (ii) agreed to purchase another unsecured promissory note
at the Company’s election (“Note #2” and, together with Note #1, the “Notes”) in aggregate principal amount
totaling $5,350,000 in exchange for $5,000,000, with the Company’s election being subject to the Company satisfying, among others,
the following conditions within six months of the issuance of Note #1: (A) obtaining stockholder approval for the issuance of shares of
the Company’s common stock (“Common Stock”) in excess of 19.99% of the outstanding shares of Common Stock in connection
with the potential redemption of the Notes (as described below) and (B) there being no Trigger Event (as defined in the Notes) under Note
#1. If Note #2 is issued, the terms of Note #1 and Note #2 will be substantively identical. The Company expects the net proceeds from
the issuance of Note #1 to be approximately $4.7 million and intends to use the proceeds from such issuance for general corporate purposes.
Under the SPA, the parties provided customary representations and warranties
to each other. Also, until amounts due under the Notes are paid in full, the Company agreed, among other things, to: (i) timely make all
filings under the Securities Exchange Act of 1934, (ii) ensure the Common Stock continues to be listed on the Nasdaq Stock Market (“Nasdaq”)
or the New York Stock Exchange, (iii) not issue debt securities or certain equity securities where the pricing of such equity securities
is tied to the public trading price of the Common Stock, in each case, without the Investor’s prior consent, and (iv) offer the
Investor the right to purchase up to 10% of future equity and debt securities offerings, subject to certain exceptions and limitations.
The Company also agreed under the SPA to reserve with the Company’s transfer agent 6.5 million shares of Common Stock for potential
issuance under each Note for shares that may be delivered in connection with the redemption right, which reservation may be increased
and decreased in certain circumstances.
The Notes have an interest rate of 7% per annum. The maturity date
of each Note is 18 months from the issuance date of such Note (the “Maturity Date”). Each of the Notes carry an original issue
discount totaling $350,000, which is included in the principal balance of the Note. If the Company elects to prepay the Notes prior to
the Maturity Date, it must pay a premium of (i) 5%, if the prepayment occurs prior to the three-month anniversary of issuance, (ii) 7.5%,
if the prepayment occurs between the three-month anniversary and six-month anniversary of issuance and (iii) 10% if the prepayment occurs
after the six-month anniversary of issuance (in each case, plus the principal, interest, and fees owed as of the prepayment date).
Beginning on the date that is six (6) months after the issuance date
of the applicable Note, the Noteholder has the right to redeem up to $500,000 of the outstanding balance of such Note per month. Payments
may be made by the Company, generally at the Company’s option, (a) in cash, (b) by paying the redemption amount in the form of shares
of Common Stock with the number of redemption shares being equal to the portion of the applicable redemption amount divided by the Redemption
Conversion Price or (c) a combination of cash and shares of Common Stock. The “Redemption Conversion Price” shall equal 85%
multiplied by the average of the two lowest daily volume weighted average prices per share of the Common Stock during the 15 trading days
immediately preceding the date that the Noteholder delivers notice electing to redeem a portion of the Note. The Company’s right
to satisfy the redemption amount in shares of Common Stock is subject to certain limitations, including (i) there not being any Equity
Conditions Failure (as defined in the Note), (ii) the Noteholder and its affiliates together not owning more than 9.99% of the outstanding
shares of Common Stock, and (iii) for Note #1, the aggregate shares of Common Stock issued upon redemption of Note #1 not exceeding 19.99%
of the outstanding Common Stock unless the Company has obtained stockholder approval under Nasdaq rules for such issuance.
The Notes contain certain Trigger Events that generally, if uncured
within five (5) trading days, may result in an event of default in accordance with the terms of the Notes (such event, an “Event
of Default”). Upon a Trigger Event, the Noteholder may increase the outstanding balance by 15% for certain major Trigger Events
and 5% for all other Trigger Events. Additionally, upon an Event of a Default, the Noteholder may consider the Note immediately due and
payable. Upon an Event of Default, the interest rate may also be increased to the lesser of 18% per annum or the maximum rate permitted
under applicable law.
The foregoing descriptions of the SPA, Note #1 and Note #2 are summaries,
do not purport to be complete and are qualified in their entirety by reference to the text of the SPA, the form of Note #1 and the form
of Note #2, which are filed as Exhibits 10.1, 4.1 and 4.2, respectively.