INTZ Intrusion Inc

Under a previously disclosed securities purchase agreement (the “SPA”) dated March 10, 2022 between Intrusion Inc. (the “Company”) and Streeterville Capital, LLC (the “Investor”), on June 8, 2022, the Company notified Investor of the Company’s decision to exercise its option to issue, and for the Investor to purchase, an unsecured promissory note (the “Note”) in the aggregate principal amount of $5,350,000 in exchange for $5,000,000, subject to the Note #2 Conditions Precedent being satisfied on the issuance date. The issuance of the Note is expected to occur on July 1, 2022. The Note will have substantively identical terms to the unsecured promissory note that the Company issued to the Investor on March 10, 2022, as described in the Company’s Current Report on Form 8-K filed on March 10, 2022. The Company is expected to receive $4.8 million in net proceeds from the issuance of the Note, which the Company expects to use for general corporate purposes.

The Note will bear interest at a rate of 7% per annum and mature on January 1, 2024 (the “Maturity Date”). The Note will carry an original issue discount totaling $350,000, which will be included in the principal balance of the Note. If the Company elects to prepay the Note 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 January 1, 2023, the Noteholder will have the right to redeem up to $500,000 of the outstanding balance of the Note per month. Payments in satisfaction of any such redemption election 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 the Company’s common stock (“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 will be subject to certain limitations, including (i) there not being any Equity Conditions Failure (as defined in the Note) and (ii) the Noteholder and its affiliates together not owning more than 9.99% of the outstanding shares of Common Stock.

The Note will 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 Note (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 and the Note are summaries, do not purport to be complete and are qualified in their entirety by reference to the text of the SPA and the form of the Note, which are filed as Exhibits 10.1 and 4.1, respectively.