8-K: Intrusion Inc. Completes Series of Preferred Stock Exchanges for Common Stock, Increasing Outstanding Shares

Intrusion Inc. has executed multiple agreements with Streeterville Capital, LLC to exchange Series A Preferred Stock for common stock, resulting in a significant increase in the company's outstanding shares.

Summary

• Intrusion Inc. entered into several exchange agreements with Streeterville Capital, LLC between December 30, 2024, and January 3, 2025.
• These agreements involved the exchange of Series A Preferred Stock for shares of Intrusion's common stock.
• A total of 9,275 shares of Series A Preferred Stock were previously issued to Streeterville Capital, LLC.
• The exchanges resulted in the issuance of 626,388 common shares on December 30, 2024, for 1,230 preferred shares, 614,525 common shares on December 30, 2024, for 2,000 preferred shares, 629,888 common shares on December 31, 2024, for 2,050 preferred shares, 626,016 common shares on January 2, 2025, for 1,750 preferred shares, and 667,117 common shares on January 3, 2025, for 1,837 preferred shares.
• The total fair value of these exchanges was approximately $9,753,700.
• Following these exchanges and sales under the ATM program, the total common shares outstanding as of January 3, 2025, is 16,885,394.
• The company also received $9.8 million net of fees from the sale of common stock through its ATM program in the twelve months ended December 31, 2024.
• Since the inception of the ATM program, the company has received $22.0 million net of fees from the sale of 7.5 million shares of common stock.

Sentiment

Score: 4

Explanation: The document indicates a significant increase in outstanding shares, which is generally negative for existing shareholders due to potential dilution. While the company has raised capital, the method and scale of the share issuance raise concerns about long-term value.

Positives

• The company successfully executed multiple exchanges of preferred stock for common stock.
• The company has raised a significant amount of capital through its ATM program.
• The exchange agreements are structured to comply with Section 3(a)(9) of the Securities Act of 1933.

Negatives

• The exchange of preferred stock for common stock significantly increases the number of outstanding common shares, which could dilute existing shareholders.
• The company is relying on the ATM program for capital, which may not be a sustainable long-term funding strategy.

Risks

• The increased number of outstanding common shares could lead to dilution of existing shareholders' equity.
• The company's reliance on the ATM program for funding could be impacted by market conditions.
• The company's ability to continue to raise capital through the ATM program is subject to regulatory limits.

Future Outlook

The company will continue to utilize its ATM program for potential future capital raises, subject to regulatory limits.

Industry Context

The exchange of preferred stock for common stock is a common practice for companies seeking to simplify their capital structure and raise capital. The use of an ATM program is also a common method for companies to raise capital in the public markets.

Comparison to Industry Standards

• Many small-cap and micro-cap companies use similar methods to raise capital, including preferred stock conversions and ATM programs.
• The specific terms of the exchange agreements and the ATM program are typical for companies of Intrusion's size and stage of development.
• Comparable companies that have used similar methods include those in the technology and cybersecurity sectors, which often require ongoing capital to fund growth and operations.

Stakeholder Impact

• Existing shareholders will likely experience dilution due to the increased number of outstanding shares.
• The company's employees may be impacted by the company's financial decisions.
• The company's customers and suppliers may be indirectly impacted by the company's financial stability.

Next Steps

• The company will continue to monitor its capital needs and may utilize the ATM program for future funding.
• The company will need to manage the increased number of outstanding shares and communicate its strategy to investors.

Key Dates

Keywords

common stock, preferred stock, exchange agreement, Streeterville Capital, ATM program, share dilution, capital raise, securities act, Rule 144