<Page>

-------------------------------------------------------------------------------

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               -------------------

                                    FORM 10-Q

                               -------------------


  [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

            For the quarterly period ended March 31, 2002

                                       OR

  [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

       For the transition period from                     to
                                      -------------------    -------------------

                     Commission File Number 0-20191
                                            -------

                              INTRUSION INC.
                              --------------
        (Exact name of Registrant as specified in its charter)

            Delaware                                           75-1911917
-------------------------------                        -------------------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                            Identification No.)


                 1101 East Arapaho Road, Richardson, Texas 75081
              ----------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (972) 234-6400
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

                                 Not Applicable
              ----------------------------------------------------
                  (Former name, if changed since last report)

                               * * * * * * * * * *

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days: Yes /X/ No / /

The number of shares outstanding of the Registrant's Common Stock, $.01 par
value, on April 30, 2002 was 20,643,425.

-------------------------------------------------------------------------------

                                        1
<Page>



                                 INTRUSION INC.

                                     INDEX
<Table>
<Caption>
                                                                                                      PAGE
                                                                                                      ----
<S>                                                                                                   <C>
PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001..........................3

Condensed Consolidated Statements of Operations for the three months
     ended March 31, 2002 and March 31, 2001..............................................................4

Condensed Consolidated Statements of Cash Flows for the three months ended March
     31, 2002 and March 31, 2001..........................................................................5

Notes to Condensed Consolidated Financial Statements ..................................................6-10

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations....................................................................10-21

Item 3.  Quantitative and Qualitative Disclosures About Market Risk......................................22

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings..............................................................................23

Item 6.  Exhibits and Reports on Form 8-K...............................................................23

Signature Page..........................................................................................24

Exhibit 10.2.........................................................................................25-27
</Table>


                                        2
<Page>

                    PART I - FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS.

                    INTRUSION INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED BALANCE SHEETS
               (In thousands, except par value amounts)
<Table>
<Caption>
                                                                                     March 31,         Dec 31,
                                ASSETS                                                 2002             2001
                                                                                     --------          -------
                                                                                    (Unaudited)
<S>                                                                                  <C>              <C>
 Current Assets:
   Cash and cash equivalents                                                         $ 13,264         $ 15,783
   Short-term investments                                                               5,425            4,652
   Accounts receivable, less of allowance of $562 in 2002
     and $797 in 2001 for doubtful accounts and returns                                 4,122            5,206
   Income taxes receivable                                                                839            2,779
   Inventories, net                                                                     4,149            5,016
   Other assets                                                                           962              601
                                                                                     --------         --------
 Total current assets                                                                  28,761           34,037
 Property and equipment, net - continuing operations                                    3,087            3,603
 Property and equipment, net - discontinued operations                                      -              741
 Intangible assets, net                                                                 3,608            3,807
 Other assets                                                                              88              107
                                                                                     --------         --------
 TOTAL ASSETS                                                                        $ 35,544         $ 42,295
                                                                                     ========         ========
                             LIABILITIES AND STOCKHOLDERS' EQUITY
 Current Liabilities:
   Accounts payable and accrued expenses                                             $  5,955         $  6,000
   Deferred revenue                                                                     1,428            1,658
                                                                                     --------         --------
 Total current liabilities - continued operations                                       7,383            7,658
 Total current liabilities - discontinued operations                                        -            1,139
                                                                                     --------         --------
 Total current liabilities                                                              7,383            8,797
 Stockholders' Equity:
   Preferred stock, $.01 par value, authorized
     shares - 5,000, no shares issued and outstanding                                       -                -
   Common stock, $.01 par value, authorized shares - 80,000
     Issued shares - 20,683 in 2002 and 20,649 in 2001
     Outstanding shares - 20,643 in 2002 and 20,609 in 2001                               207              206
   Common stock held in treasury, at cost - 40 shares                                    (362)            (362)
   Additional paid-in capital                                                          47,370           47,320
   Accumulated deficit                                                                (18,721)         (13,327)
   Foreign currency translation adjustment                                               (333)            (339)
                                                                                     --------         --------
 Total stockholders' equity                                                            28,161           33,498
                                                                                     --------         --------
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                          $ 35,544         $ 42,295
                                                                                     ========         ========
</Table>

                              See accompanying notes.


                                        3
<Page>

                       INTRUSION INC. AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except per share amounts)
                                 (Unaudited)
<Table>
<Caption>
                                                              Three Months Ended
                                                          --------------------------
                                                          March 31,       March 31,
                                                            2002             2001
                                                          ---------       ---------
<S>                                                       <C>             <C>
Net Sales                                                 $  2,514        $  5,318

Cost of sales                                                1,709           4,499
                                                          ---------       ---------
Gross profit                                                   805             819

Operating expenses:
 Sales and marketing                                         3,902           8,008
 Research and development                                    1,879           4,282
 General and administrative                                    709           1,807
 Amortization of intangibles                                   199             335
                                                          ---------       ---------
Operating loss                                              (5,884)        (13,613)

Interest income, net                                            89             711
Other income                                                     -              33
                                                          ---------       ---------
Loss before income taxes                                    (5,795)        (12,869)

Income tax benefit                                               -          (1,036)
                                                          ---------       ---------
Loss from continuing operations                             (5,795)        (11,833)

Gain (loss) from discontinued
 operations                                                    401            (772)
                                                          ---------       ---------
Net loss                                                  $ (5,394)       $(12,605)
                                                          =========       =========
Basic and diluted loss per
 share, continuing operations                             $  (0.28)       $  (0.58)
                                                          =========       =========
Basic and diluted loss per share                          $  (0.26)       $  (0.61)
                                                          =========       =========
Weighted average common shares
 outstanding, basic and diluted                             20,632          20,516
                                                          =========       =========
</Table>

                              See accompanying notes.

                                        4

<Page>

                      INTRUSION INC. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)
                                (Unaudited)
<Table>
<Caption>
                                                              Three Months Ended
                                                          --------------------------
                                                          March 31,        March 31,
                                                            2002             2001
                                                          ---------        ---------
<S>                                                       <C>              <C>
Operating Activities:
Loss from continuing operations                           $  (5,795)        $ (11,833)
Adjustments to reconcile income (loss) from continuing
 operations to net cash used in operating activities of
 continuing operations:
  Depreciation and amortization                                 725             1,216
  Deferred income tax expense                                     -             1,923
Changes in operating assets and liabilities:
  Accounts receivable                                         1,084              (223)
  Income taxes receivable                                     1,940              (817)
  Inventories                                                   867               559
  Other assets                                                 (342)             (317)
  Accounts payable and accrued expenses                        (623)            1,037
  Deferred revenue                                             (230)              463
                                                          ---------         ---------
Net cash used in operating activities of continuing
 operations                                                  (2,374)           (7,992)
                                                          ---------         ---------
Investing Activities:
  Purchases of available for sale investments                (4,525)           (6,627)
  Maturities of available for sale investments                3,752             7,430
  Net purchases of property and equipment                        (4)             (196)
                                                          ---------         ---------
Net cash provided by (used in) investing activities of
 continuing operations                                         (777)              607
                                                          ---------         ---------
Financing Activities:
  Exercise of warrants and employee stock options                50               214
  Issuance of ESPP                                                1                 -
  Other                                                         (21)                -
                                                          ---------         ---------
Net cash provided by financing activities of
 continuing operations                                           30               214
                                                          ---------         ---------

Net cash provided by discontinued operations                    596             9,167
Effect of foreign currency translation adjustments
 on cash and cash equivalents                                     6               (71)
                                                          ---------         ---------
Net (decrease) increase in cash and cash equivalents         (2,519)            1,925
Cash and cash equivalents at beginning of period             15,783            20,345
                                                          ---------         ---------
Cash and cash equivalents at end of period                $  13,264         $  22,270
                                                          =========         =========
</Table>
                             See accompanying notes.


                                        5
<Page>

                         INTRUSION INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Description of Business

         We develop, market and support a family of security software and
appliances that address vital security issues facing organizations deploying
business applications over the Internet or internally via Intranets. We
currently provide e-security solutions including intrusion detection systems,
virtual private network appliances and firewall appliances.

         We market and distribute our products through a direct sales force to
end-users, distributors and by numerous domestic and international system
integrators, service providers and value-added resellers. Our end-user
customers include high-technology, manufacturing, telecommunications, retail,
transportation, health care, insurance, entertainment, utilities and energy
companies, government agencies, financial institutions, and academic
institutions.

         Our company was organized in Texas in September 1983 and
reincorporated in Delaware in October 1995. For more than 15 years, we provided
local area networking equipment and were known as Optical Data Systems or ODS
Networks. On April 17, 2000, we announced plans to sell, or otherwise dispose
of, our networking divisions, which included our Essential Communications
division and our local area networking assets. In accordance with these plans,
we have accounted for these businesses as discontinued operations. On June 1,
2000, we changed our name from ODS Networks, Inc. to Intrusion.com, Inc., and
our NASDAQ ticker symbol from ODSI to INTZ to reflect our focus on e-security
solutions. On November 1, 2001, we changed our name from Intrusion.com, Inc. to
Intrusion Inc.

         Our principal executive offices are located at 1101 E. Arapaho Road,
Richardson, Texas 75081, and our telephone number is (972) 234-6400. References
to "we", "us", "our" or "Intrusion Inc." refer to Intrusion Inc. and its
subsidiaries.

2. Basis of Presentation

         The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The December 31, 2001 balance sheet was
derived from audited financial statements, but does not include all the
disclosures required by generally accepted accounting principles. However, we
believe that the disclosures are adequate to make the information presented not
misleading. In our opinion, all the adjustments (consisting of normal recurring
adjustments) considered necessary for fair presentation have been included. The
results of operations for the three-month period ending March 31, 2002 are not
necessarily indicative of the results that may be achieved for the full fiscal
year or for any future period. The condensed consolidated financial statements
included herein should be read in conjunction with the consolidated financial
statements and


                                        6
<Page>

notes thereto included in the Company's annual report on Form 10-K for the year
ended December 31, 2001.

         Goodwill represents the excess purchase price over the fair market
value of the net assets acquired. Net goodwill at March 31, 2002 was $354
thousand. We adopted Financial Accounting Standards ("FAS") Board Statements
No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible
Assets, effective January 1, 2002. Under these new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be amortized,
but will be subject to annual impairment tests in accordance with the
Statements. Accordingly, there has been no amortization of goodwill recorded
effective January 1, 2002. Further, adoption of the impairment provision of FAS
142 had no material impact on our financial statements for the quarter ended
March 31, 2002. The impact on operations is as follows:

<Table>
<Caption>
                                                              Three Months Ended
                                                          --------------------------
                                                          March 31,        March 31,
                                                            2002             2001
                                                          ---------        ---------
<S>                                                       <C>              <C>
Reported net loss (in thousands)                          $ (5,394)        $ (12,605)

Goodwill amortization (in thousands)                              -               16
                                                          ---------        ---------

Adjusted net loss (in thousands)                          $ (5,394)        $ (12,589)
                                                          =========        =========

Reported net loss per share                               $  (0.26)        $   (0.61)

Goodwill amortization per share                                  -         $   (0.00)
                                                          ---------        ---------

Adjusted net loss per share                               $  (0.26)        $   (0.61)
                                                          =========        =========
</Table>

3. Inventories (In thousands)

  Inventories consist of:
<Table>
<Caption>
                                                              Three Months Ended
                                                          --------------------------
                                                          March 31,      December 31,
                                                            2002             2001
                                                          ---------        ---------
                                                         (Unaudited)
<S>                                                       <C>            <C>
  Raw materials                                           $   292           $   661
  Finished goods                                            3,778             4,002
  Demonstration systems                                        79               353
                                                          ---------        ---------
  Net inventory                                           $ 4,149           $ 5,016
                                                          =========        =========
</Table>

4. Income Taxes

         Our effective tax rate for the quarter ended March 31, 2002 was 0%. We
fully utilized our net operating loss carryback in 2001. We did not record an
income tax benefit as of March 31, 2002 related to net operating losses which
can be carried forward to offset taxable income in future years. We will
recognize the benefit of net operating loss carryforwards when we


                                        7
<Page>

generate taxable income and can be assured that such net operating loss
carryforwards can be utilized.

5. Earnings per Share (In thousands, except per share amounts)(Unaudited)

<Table>
<Caption>
                                                              Three Months Ended
                                                          --------------------------
                                                          March 31,        March 31,
                                                            2002             2001
                                                          ---------        ---------
<S>                                                       <C>              <C>
Numerator:
Net loss and numerator for
  Basic and diluted earnings per share                     $ (5,394)       $ (12,605)
                                                          ---------        ---------
Loss from continuing operations
  and numerator for basic and diluted
  earnings per share, continuing
  operations                                               $ (5,795)       $ (11,833)
                                                          ---------        ---------
Denominator:
Denominator for basic earnings per share
  - weighted average common shares
  outstanding                                                20,632           20,516
Effect of dilutive securities:
  Stock options and warrants                                      -                -
                                                          ---------        ---------
Denominator for diluted earnings per
  share - adjusted weighted average
  common shares outstanding                                  20,632           20,516
                                                          =========        =========
Basic and diluted loss per share,
  continuing operations                                    $  (0.28)       $   (0.58)
                                                          =========        =========
Basic and diluted loss per share                           $  (0.26)       $   (0.61)
                                                          =========        =========
</Table>

         Total stock options outstanding at March 31, 2002 and March 31, 2001
that are not included in the diluted earnings per share computation due to the
antidilutive effect are 2.0 million and 2.2 million for the three months ended
March 31, 2002 and March 31, 2001, respectively. Such options are excluded due
to our incurring net losses during these periods.

6. Comprehensive Income

         Comprehensive loss for the three months ended March 31, 2002 and 2001
was $5.4 million and $12.7 million, respectively.

7. Discontinued Operations

         In March 2002 we sold the assets of our last remaining discontinued
operation, our Essential Communications division, for $1 million generating a
gain of $0.4 million, which we have shown as a gain from discontinued
operations in the accompanying financial statements. Terms of the sale included
transferring $0.7 million in net property, plant and equipment, $0.1 million in
current liabilities and product maintenance of which $0.4 million was recorded
in deferred revenue at December 31, 2001. Included in the gain on the sale of
Essential is a $0.3 million reserve to terminate an office lease, which is the
equivalent of 2 years' lease and maintenance of the


                                        8
<Page>

facility. Successful termination for less than 2 years will result in a greater
gain on disposition of Essential. Termination for more than $0.3 million will
reduce the gain on disposition of Essential.

         During the first quarter of 2001, we closed the sale of our legacy
local area networking division generating a gain of $2.1 million which was used
to reduce the estimated net realizable value of the net assets of our remaining
discontinued operations, Essential.

         The following represents a summary of assets and liabilities
classified as discontinued operations at December 31, 2001(In thousands):
<Table>
<Caption>
                                                                  December 31,
                                                                      2001
                                                                  ------------
<S>                                                               <C>
  Inventories, net                                                $          -
  Property and equipment, net                                              741
  Intangible assets, net
                                                                  ------------
  Discontinued assets                                             $        741
                                                                  ============
  Discontinued liabilities consist of:
  Deferred revenue                                                $        594
  Accrued operating losses                                                 545
                                                                  ------------
  Discontinued liabilities                                        $      1,139
                                                                  ============
</Table>

         The following represents a summary of gains and losses from
discontinued operations (In thousands)(Unaudited):
<Table>
<Caption>
                                                              Three Months Ended
                                                          --------------------------
                                                          Mar  31,        March 31,
                                                            2002             2001
                                                          ---------        ---------
<S>                                                       <C>              <C>
Net sales                                                  $  727           $ 1,397
Cost of sales                                                 323               837
                                                           ------           -------
Gross profit                                                  404               560

Operating expenses                                            502             1,388
                                                           ------           -------
Operating loss                                                (98)             (828)

Gain on sale                                                  499                (1)
                                                           ------           -------
Gain (loss) before income taxes                               401              (829)

Income tax benefit                                              -                57
                                                           ------           -------
Gain (loss) from discontinued
  operations                                               $  401           $  (772)
                                                           ======           =======
</Table>

8.  Commitments and Contingencies

         We are subject to legal proceedings and claims that arise in the
ordinary course of business. We do not believe that the outcome of those


                                        9
<Page>

matters will have a material adverse affect on our consolidated financial
position, operating results or cash flows. However, there can be no assurance
such legal proceedings will not have a material impact.

         On March 22, 2002, Morgan Newton Company, L.P. ("Morgan Newton") filed
suit against us in Dallas County District Court, Case No. DV02-02339-C,
alleging claims for breach of contract, promissory estoppel, and fraud. The
claims arise out of an alleged oral representation to Morgan Newton concerning
a request for quotation for the purchase of a large amount of Morgan Newton's
products. Morgan Newton has not specified the amount of damages it is seeking
in the lawsuit, but it is possible that Morgan Newton may be seeking damages in
excess of $2 million, or more. In addition to actual damages, Morgan Newton is
also seeking attorney's fees and punitive damages. We believe Morgan Newton's
claims are without merit and intend to vigorously defend this lawsuit. On April
22, 2002, we filed our response to Morgan Newton's lawsuit, generally denying
all claims and asserting certain affirmative defenses. As of this time, no
discovery has been completed and no trial date has been set.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

         This report contains forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, that involve risks and uncertainties, such as statements
concerning: the difficulties in forecasting future sales caused by current
economic and market conditions, the effect of military actions on government
and corporate spending on information security products, the impact of our cost
reduction programs, the difficulties and uncertainties in successfully
developing and introducing new products, our ability to continue to meet
operating expenses through current cash flow or additional financings, the
continuance and strength of our relationship with Check Point, the highly
competitive market for our products, difficulties in accurately estimating
market growth, the consolidation of the information security industry, the
impact of changing economic conditions, business conditions in the information
security industry, our ability to manage acquisitions effectively, our ability
to manage discontinued operations effectively, the impact of market peers and
their products as well as risks concerning future technology and others
identified in our Annual Report on Form 10-K and other Securities and Exchange
Commission filings. Such forward-looking statements are generally accompanied
by words such as "plan," "estimate," "expect," "believe," "should," "would,"
"could," "anticipate," "may" or other words that convey uncertainty of future
events or outcomes. These forward-looking statements and other statements made
elsewhere in this report are made in reliance on the Private Securities
Litigation Reform Act of 1995. The section below entitled "Factors That May
Affect Future Results of Operations" sets forth and incorporates by reference
certain factors that could cause actual future results of the company to differ
materially from these statements.

OVERVIEW

         We develop, market and support a family of security software and
appliances that address vital security issues facing organizations deploying
business applications over the Internet or internally via Intranets. We


                                        10
<Page>

currently provide e-security solutions including intrusion detection systems,
virtual private network appliances and firewall appliances. On June 1, 2000, we
changed our name from ODS Networks, Inc. to Intrusion.com Inc. and our NASDAQ
ticker symbol from ODSI to INTZ to reflect our focus on e-security solutions.
On November 1, 2001, we changed our name from Intrusion.com, Inc. to Intrusion
Inc. During the second quarter of 2000, we announced our plan to sell, or
otherwise dispose of, our networking divisions which included our Essential
Communications division and our local area networking assets and began
accounting for these networking divisions as discontinued operations.

         The following management's discussion and analysis of financial
condition and results of operations pertains only to our continuing operations
unless otherwise disclosed. Certain prior year information has been
reclassified to conform with the current presentation.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         Management's discussion and analysis of financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to product returns, bad debts, inventories,
intangible assets, income taxes, warranty obligations, restructuring,
maintenance contracts and contingencies. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

         We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.

REVENUE RECOGNITION

         We generally recognize product revenue upon shipment of product. We
accrue for estimated warranty costs, sales returns and other allowances at the
time of shipment based on our experience. Revenue from maintenance contracts is
deferred and recognized over the contractual period the services are performed.
To date, warranty costs and sales returns have not been material. There is a
risk that technical issues on new products could result in unexpected warranty
costs and returns.

         We recognize software revenue from the licensing of our software
products in accordance with Statement of Position ("SOP") No. 97-2 "Software
Revenue Recognition" and SOP 98-9 "Modification of 97-2, Software Revenue
Recognition, with respect to certain transactions" whereby revenue from the
licensing of our products is not recognized until all four of the following
have been met: i) execution of a written purchase order, license agreement or
contract; ii) shipment of the product has occurred; iii) the license fee is
fixed and determinable; and iv) collectibility is probable. The Company defers
and recognizes maintenance and support revenue over the term of the contract
period, which is generally one year.


                                        11
<Page>

         We have signed distribution agreements with distributors in the United
States, Europe and Asia. In general, these relationships are non-exclusive.
Distributors typically maintain an inventory of our products. Under these
agreements, we provide certain protection to the distributors for their
inventory of our products for price reductions as well as products that are
slow-moving or have been discontinued by us. Recognition of sales to
distributors and related gross profits are deferred until the merchandise is
resold by the distributors. However, since we have legally sold the inventory
to the distributor and we no longer have care, custody or control over the
inventory, we recognize the trade accounts receivable and reduce inventory
related to the sale at the time of shipment to the distributor. Revenue, offset
by deferred cost of sales, is included in deferred revenue in the accompanying
financial statements.

ALLOWANCE FOR DOUBTFUL ACCOUNTS AND RETURNS

         We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.

INVENTORY

         We write down our inventory for estimated obsolescence or unmarketable
inventory equal to the difference between the cost of inventory and the
estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required.

DISCONTINUED OPERATIONS

         In the second quarter of 2000, we discontinued our networking
operations and accordingly have shown the networking operations as discontinued
in the accompanying financial statements.

         During the first quarter of 2001, we closed the sale of our legacy
local area networking division generating a gain of $2.1 million which was used
to reduce the estimated net realizable value of the net assets of our remaining
discontinued operations, Essential.

         In March 2002 we sold the assets of our last remaining discontinued
operation, our Essential Communications division, for $1 million generating a
gain of $0.4 million, which we have shown as a gain from discontinued
operations in the accompanying financial statements. Terms of the sale included
transferring $0.7 million in net property, plant and equipment, $0.1 million in
current liabilities and product maintenance of which $0.4 million was recorded
in deferred revenue at December 31, 2001. Included in the gain on the sale of
Essential is a $0.3 million reserve to terminate an office lease, which is the
equivalent of 2 years' lease and maintenance of the facility. Successful
termination for less than 2 years will result in a greater gain on disposition
of Essential. Termination for more than $0.3 million will reduce the gain on
disposition of Essential. The contractual term of the lease runs through
February 2009 and remaining contractual lease payments total $1.2 million at
March 31, 2002.


                                        12
<Page>

RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, certain
financial data as a percentage of net sales. The period to period comparison of
financial results is not necessarily indicative of future results.
<Table>
<Caption>
                                                              Three Months Ended
                                                          --------------------------
                                                          March 31,        March 31,
                                                            2002             2001
                                                          ---------        ---------
<S>                                                       <C>              <C>
Net sales                                                    100.0%           100.0%
Cost of sales                                                 68.0             84.6
                                                          ---------        ---------
Gross profit                                                  32.0             15.4
Operating expenses:
  Sales and marketing                                        155.2            150.6
  Research and development                                    74.7             80.5
  General and administrative                                  28.2             34.0
  Amortization of intangibles                                  7.9              6.3
  Restructuring costs and other
   special charges                                               -                -
                                                          ---------        ---------
Operating loss                                              (234.0)          (256.0)

Interest income, net                                           3.5             13.4
Other income                                                     -              0.6
                                                          ---------        ---------
Loss before income taxes                                    (230.5)          (242.0)

Income tax benefit                                               -            (19.5)
                                                          ---------        ---------

Loss from continuing operations                             (230.5)          (222.5)
Gain (loss) from discontinued
 operations, net of tax                                       16.0            (14.5)
                                                          ---------        ---------

Net loss                                                    (214.5)          (237.0)
                                                          =========        =========
</Table>

<Table>
<Caption>
                                                              Three Months Ended
                                                          --------------------------
                                                          March 31,        March 31,
                                                            2002             2001
                                                          ---------        ---------
<S>                                                       <C>              <C>
Domestic sales                                                70.4%           78.5%
Export sales to:
  Europe                                                       7.3            12.9
  Canada                                                       4.9             3.1
  Asia                                                        17.3             4.9
  Latin America                                                0.1             0.6
                                                          ---------        ---------

Net sales                                                    100.0%          100.0%
                                                          =========        =========
</Table>

         NET SALES. Net sales decreased to $2.5 million for the quarter ended
March 31, 2002 compared to $5.3 million for the same period of 2001 as sales


                                        13
<Page>

from our SecureNet Pro intrusion detection and PDS security appliance families
of products did not increase as fast as our SecureCom and other security
product lines declined.

         EXPORT SALES. Export sales for the quarter ended March 31, 2002
decreased to $0.7 million compared to $1.1 million for the same period of 2001
as sales from our SecureNet Pro intrusion detection and PDS security appliance
families of products did not increase as fast as our SecureCom and other
security product lines declined. Though we expect increased sales from export
sales going forward, such export sales may vary as a percentage of net sales in
the future.

         CONCENTRATION OF SALES. Sales to Westcon Group, Inc. ("Westcon") and
subsidiaries were 13.4% for the quarter ended March 31, 2002, compared to 9.8%
for the same period of 2001. Sales to Computer Science Corporation ("CSC") and
subsidiaries were 10.4% for the quarter ended March 31, 2002, compared to 2.0%
for the same period of 2001. Sales to TRW Systems & Information Technology
("TRW") were 0% for the quarter ended March 31, 2002, compared to 13.0% for the
same period of 2001. Sales to Lockheed Martin Federal Systems ("Lockheed
Martin") were 0.1% for the quarter ended March 31, 2002, compared to 11.8% for
the same period of 2001. In addition, a portion of our sales to TRW, Lockheed
Martin and other corporations were for products resold by those organizations
to various agencies of the U.S. Government.

         GROSS PROFIT. Gross profit was $0.8 million or 32.0% of net sales for
the quarter ended March 31, 2002, compared to $0.8 million or 15.4% of net
sales for the quarter ended March 31, 2001. Gross profit margins as a
percentage of net sales were up for the three months ended March 31, 2002
primarily because of the change in product mix from lower margin hardware
products to higher margin intrusion detection products.

         Gross profit as a percentage of net sales is impacted by several
factors, including shifts in product mix, changes in channels of distribution,
sales volume, fluctuations in manufacturing costs, pricing strategies, and
fluctuations in sales of integrated third-party products.

         SALES AND MARKETING. Sales and marketing expenses decreased to $3.9
million for the quarter ended March 31, 2002, compared to $8.0 million for the
quarter ended March 31, 2001. Sales and marketing expenses decreased in the
quarter ended March 31, 2002, compared to the same period of 2001, primarily
due to the reorganization of our sales and marketing departments and other cost
reduction initiatives. We expect sales and marketing expenses to continue to
decline in the second quarter of 2002, in comparison to the first quarter of
2002. Sales and marketing expenses may vary as a percentage of net sales in the
future.

         RESEARCH AND DEVELOPMENT. Research and development expenses decreased
to $1.9 million for the quarter ended March 31, 2002, compared to $4.3 million
for the quarter ended March 31, 2001. Research and development costs are
expensed in the period incurred. Research and development expenses decreased in
the three months ended March 31, 2002, compared to the same period in 2001 as
we focused more of our development efforts on our core security products,
SecureNet Pro and PDS security appliances, while reducing efforts on our other
security products. It is expected that research and development expenses will
continue to decrease in the second quarter of 2002, in comparison to the first
quarter of 2002. Research and development expenses may vary as a percentage of
net sales in the future.


                                        14
<Page>

         GENERAL AND ADMINISTRATIVE. General and administrative expenses
decreased to $0.7 million for the quarter ended March 31, 2002, compared to
$1.8 million for the quarter ended March 31, 2001. General and administrative
expenses decreased in the three months ending March 31, 2002 compared to the
same period of 2001, primarily due to the restructuring done in 2001 and other
cost reduction initiatives. It is expected that general and administrative
expenses will continue to decrease in the second quarter of 2002, in comparison
to the first quarter of 2002. General and administrative expense may vary as a
percentage of net sales in the future.

         AMORTIZATION. Amortization expenses decreased to $0.2 million for the
quarter ended March 31, 2002, compared to $0.3 million for the quarter ended
March 31, 2001. Amortization expenses decreased in the three-month period ended
March 31, 2002, compared with the same period in 2001, as a result of the June
30, 2001 write off of certain impaired intangible assets and intellectual
properties acquired from Science Applications International Corporate ("SAIC")
in 1998 and the discontinuance of the amortization of goodwill effective
January 1, 2002. Absent subsequent acquisitions, all future amortization will
continue to be associated only with Mimestar identifiable intangibles and will
be approximately $0.2 million per quarter.

         INTEREST. Net interest income decreased to $0.1 million for the
quarter ended March 31, 2002, compared to $0.7 million for the same period in
2001. The net interest income decreases were primarily due to the reduced
overall cash balances resulting from operating losses. Net interest income may
vary in the future based on our cash flow and rate of return on investments.

         INCOME TAXES. Our effective tax rate for the quarter ended March 31,
2002 was 0% compared to income tax benefit of 8.0% for the quarter ended March
2001. We fully utilized our net operating loss carryback in 2001. We did not
record an income tax benefit as of March 31, 2002 related to net operating
losses which can be carried forward to offset taxable income in future years.
We will recognize the benefit of net operating loss carryforwards when we
generate taxable income and can be assured that such net operating loss
carryforwards can be utilized.

LIQUIDITY AND CAPITAL RESOURCES

         Our principal source of liquidity at March 31, 2002 is $13.3 million
of cash and cash equivalents and $5.4 million of short-term investments. As of
March 31, 2002, excluding discontinued operations, working capital was $21.4
million compared to $25.2 million as of December 31, 2001.

         Cash used in continuing operations for the three months ended March
31, 2002 was $2.4 million, primarily due to an operating loss from continuing
operations of $5.8 million, offset by a decrease in income taxes receivable,
accounts receivable and inventories. Future fluctuations in inventory balances,
accounts receivable and accounts payable will be dependent upon several
factors, including, but not limited to, quarterly sales, our strategy in
building inventory in advance of receiving orders from customers, and the
accuracy of our forecasts of product demand and component requirements.

         Cash used in investing activities of continuing operations in the three
months ended March 31, 2002 was $0.8 million, which consisted primarily of


                                        15

<Page>

the net proceeds from the maturities and purchases of available for sale
securities.

         Cash provided by financing activities of continuing operations in the
three months ended March 31, 2002 was $30 thousand, which was primarily the
result of the issuance of common stock upon the exercise of employee stock
options.

         Net cash provided by discontinued operations in the three months ended
March 31, 2002 was $0.6 million, which consisted primarily of the net proceeds
of the sale of the assets of our final remaining discontinued operation,
Essential Communications.

         At March 31, 2002, the Company did not have any material commitments
for capital expenditures.

         During the three months ended March 31, 2002, the Company funded its
operations through the use of cash and cash equivalents.

         Although we believe we have sufficient cash resources to finance our
operations and expected capital expenditures for the remainder of 2002, the
sufficiency of our cash resources may depend to a certain extent on general
economic, financial, competitive or other factors beyond our control. Moreover,
despite actions to reduce our costs and improve our profitability, we expect
our operating losses and net operating cash outflows to continue during 2002.
As a result, we may not be able to achieve the revenue and gross margin
objectives necessary to achieve positive cash flow or profitability without
obtaining additional financing. We do not currently have any arrangements for
financing, and we may not be able to secure additional debt or equity financing
on terms acceptable to us, or at all, at the time when we need such funding. If
our business does not generate sufficient cash flow from operations and
sufficient future financings are not available, we may not be able to operate
or grow our business, pay our expenses when due or fund our other liquidity
needs.

         We intend to explore the possible acquisitions of businesses, products
and technologies that are complementary to our existing business. We are
continuing to identify and prioritize additional security technologies which we
may wish to develop, either internally or through the licensing or acquisition
of products from third parties. While we engage from time to time in
discussions with respect to potential acquisitions, there can be no assurances
that any such acquisitions will be made or that we will be able to successfully
integrate any acquired business. In order to finance such acquisitions, it may
be necessary for us to raise additional funds through public or private
financings. Any equity or debt financings, if available at all, may be on terms
which are not favorable to us and, in the case of equity financings, may result
in dilution to our stockholders.

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

         Numerous factors may affect our business and future results of
operations. These factors include, but are not limited to, current economic and
market conditions, the effect of military actions on government and corporate
spending on information security products, technological changes, competition
and market acceptance, acquisitions, product transitions, timing of orders,
manufacturing and suppliers, reliance on outsourcing vendors and other
partners, intellectual property and licenses, third-party products,


                                        16
<Page>

dependence on government customers, international operations, intellectual
property issues, liquidity and cash resources and effects of restructuring
plans and cost reductions. The discussion below addresses some of these and
other factors. For a more thorough discussion of these and other factors that
may affect our business and future results, see the discussion under the
caption "Factors That May Affect Future Results of Operations" in our Annual
Report on Form 10-K for the year ended December 31, 2001.

         TECHNOLOGICAL CHANGES. The market for our products is characterized by
frequent product introductions, rapidly changing technology and continued
evolution of new industry standards. The market for security products requires
our products to be compatible and interoperable with products and architectures
offered by various vendors, including other security products, networking
products, workstation and personal computer architectures and computer and
network operating systems. Our success will depend to a substantial degree upon
our ability to develop and introduce in a timely manner new products and
enhancements to our existing products that meet changing customer requirements
and evolving industry standards. The development of technologically advanced
products is a complex and uncertain process requiring high levels of innovation
as well as the accurate anticipation of technological and market trends. There
can be no assurance that we will be able to identify, develop, manufacture,
market and support new or enhanced products successfully in a timely manner.
Further, we or our competitors may introduce new products or product
enhancements that shorten the life cycle of or make obsolete our existing
product lines, any of which could have a material adverse effect on our
business, operating results and financial condition.

         MARKET ACCEPTANCE. We are pursuing a strategy to increase the
percentage of our revenue generated through indirect sales channels including
distributors, value added resellers, system integrators, original equipment
manufacturers and managed service providers. There can be no assurance that our
products will gain market acceptance in these indirect sales channels. Further,
competition among security companies to sell products through these indirect
sales channels could result in significant price competition and reduced profit
margins.

         We are also pursuing a strategy to further differentiate our product
line by introducing complementary security products and incorporating new
technologies into our existing product line. There can be no assurance that we
will successfully introduce these products or that such products will gain
market acceptance. We anticipate competition from networking companies, network
security companies and others in each of our product lines. We anticipate that
profit margins will vary among our product lines and that product mix
fluctuations could have an adverse effect on our overall profit margins.

         DISCONTINUED OPERATIONS. In the second quarter of 2000, we
discontinued our networking operations and accordingly have shown the
networking operations as discontinued in the accompanying financial statements.

         In March 2002 we sold the assets of our last remaining discontinued
operation, Essential Communications division, for $1 million generating a gain
of $0.4 million. Included in the gain on the sale of Essential is a $0.3
million reserve to terminate the lease which is the equivalent of 2 years'
lease and maintenance of the facility. Successful termination for


                                        17
<Page>

less than 2 years will result in a greater gain on disposition of Essential.
Termination for more than $0.3 million will reduce the gain on disposition of
Essential. The contractual term of the lease runs through February 2009 and
remaining contractual lease payments total $1.2 million at March 31, 2002.

         ACQUISITIONS. ISS, Cisco, Enterasys, NFR, Nokia, Celestix, IBM, Compaq
and other competitors have recently acquired several security companies with
complementary technologies, and we anticipate that such acquisitions will
continue in the future. These acquisitions may permit such competitors to
accelerate the development and commercialization of broader product lines and
more comprehensive solutions than we currently offer. In the past, we have
relied upon a combination of internal product development and partnerships with
other security vendors to provide competitive solutions to customers. Certain
of the recent and future acquisitions by our competitors may have the effect of
limiting our access to commercially significant technologies. Further, the
business combinations and acquisitions in the security industry are creating
companies with larger market shares, customer bases, sales forces, product
offerings and technology and marketing expertise. There can be no assurance
that we will be able to compete successfully in such an environment.

         We have made acquisitions in the past, and we may, in the future,
acquire or invest in additional companies, business units, product lines, or
technologies to accelerate the development of products and sales channels
complementary to our existing products and sales channels. Acquisitions involve
numerous risks, including: difficulties in assimilation of operations,
technologies, and products of the acquired companies; risks of entering markets
in which we have no or limited direct prior experience and where competitors in
such markets have stronger market positions; the potential loss of key
employees of the acquired company; and the diversion of our attention from
normal daily operation of our business. There can be no assurance that any
other acquisition or investment will be consummated or that such acquisition or
investment will be realized.

         PRODUCT TRANSITIONS. Once current security products have been in the
market place for a period of time and begin to be replaced by higher
performance products (whether of our design or a competitor's design), we
expect the net sales of such products to decrease. In order to achieve revenue
growth in the future, we will be required to design, develop and successfully
commercialize higher performance products in a timely manner. There can be no
assurance that we will be able to introduce new products and gain market
acceptance quickly enough to avoid adverse revenue transition patterns during
current or future product transitions. Nor can there be any assurance that we
will be able to respond effectively to technological changes or new product
announcements by competitors, which could render portions of our inventory
obsolete.

         MANUFACTURING AND SUPPLIERS. Our operational strategy relies on
outsourcing of product assembly and certain other operations. There can be no
assurance that we will effectively manage our third-party contractors or that
these contractors will meet our future requirements for timely delivery of
products of sufficient quality and quantity. Further, we intend to introduce a
number of new products and product enhancements in 2002 that will require that
we rapidly achieve volume production of those new products by coordinating our
efforts with those of our suppliers and contractors. The inability of the
third-party contractors to provide us with adequate supplies of high-quality
products could cause a delay in our ability to fulfill orders


                                        18
<Page>

and could have an adverse effect on our business, operating results and
financial condition.

         All of the materials used in our products are purchased under
contracts or purchase orders with third parties. While we believe that many of
the materials used in the production of our products are generally readily
available from a variety of sources, certain components such as microprocessors
and mother boards are available from one or a limited number of suppliers. The
lead times for delivery of components vary significantly and can exceed twelve
weeks for certain components. If we should fail to forecast our requirements
accurately for components, we may experience excess inventory or shortages of
certain components that could have an adverse effect on our business and
operating results. Further, any interruption in the supply of any of these
components, or the inability to procure these components from alternative
sources at acceptable prices within a reasonable time, could have an adverse
effect on our business and operating results.

         INTELLECTUAL PROPERTY AND LICENSES. There are many patents held by
companies which relate to the design and manufacture of data security systems.
Potential claims of infringement could be asserted by the holders of those
patents. We could incur substantial costs in defending ourself and our
customers against any such claim regardless of the merits of such claims. In
the event of a successful claim of infringement, we may be required to obtain
one or more licenses from third parties. There can be no assurance that we
could obtain the necessary licenses on reasonable terms.

         SUFFICIENCY OF CASH FLOW. As of March 31, 2002, we had cash, cash
equivalents and investments in the amount of approximately $18.7 million, down
from approximately $20.4 million as of December 31, 2001. Although we believe
we have sufficient cash resources to finance our operations and expected
capital expenditures for the remainder of 2002, the sufficiency of our cash
resources may depend to a certain extent on general economic, financial,
competitive or other factors beyond our control. Moreover, despite actions to
reduce our costs and improve our profitability, we expect our operating losses
and net operating cash outflows to continue during 2002. As a result, we may
not be able to achieve the revenue and gross margin objectives necessary to
achieve positive cash flow or profitability without obtaining additional
financing. We do not currently have any arrangements for financing, and we may
not be able to secure additional debt or equity financing on terms acceptable
to us, or at all, at the time when we need such funding. If our business does
not generate sufficient cash flow from operations and sufficient future
financings are not available, we may not be able to operate or grow our
business, pay our expenses when due or fund our other liquidity needs.

         DEPENDENCE ON CHECK POINT TECHNOLOGIES. A large percentage of our
sales are represented by our PDS family of security appliances which are
integrated with Check Point Software Technologies' market-leading virtual
private network and firewall security software. We expect the percentage of
sales represented by these products to increase in the future. Although we are
a certified appliance partner of Check Point and our PDS products have received
certification from Check Point, we have no long-term agreement or exclusive
relationship with Check Point. As a result, the loss or significant change in
our relationship with Check Point, the failure of future PDS products to
receive Check Point certification, the business failure of Check Point or its
acquisition by or of one of our competitors, and the loss of market share of
Check Point or market acceptance of its


                                        19
<Page>

products could each have a material adverse effect on our business, financial
condition and results of operations.

         THIRD-PARTY PRODUCTS. We believe that it is beneficial to work with
third parties with complementary technologies to broaden the appeal of our
security products. These alliances allow us to provide integrated solutions to
our customers by combining our developed technology with third-party products.
As we also compete with these technology partners in certain segments of the
market, there can be no assurance that we will have access to all of the
third-party products that may be desirable or necessary in order to offer fully
integrated solutions to our customers.

         INTERNATIONAL OPERATIONS. Our international operations may be affected
by changes in demand resulting from fluctuations in currency exchange rates and
local purchasing practices, including seasonal fluctuations in demand, as well
as by risks such as increases in duty rates, difficulties in distribution,
regulatory approvals and other constraints upon international trade. Our sales
to foreign customers are subject to export regulations. In particular, certain
sales of our data security products require clearance and export licenses from
the U.S. Department of Commerce under these regulations. Any inability to
obtain such clearances or any required foreign regulatory approvals on a timely
basis could have a material adverse effect on our operating results.

         IMPACT OF GOVERNMENT CUSTOMERS. $0.4 million or 14.3% of revenue in
the quarter ended March 31, 2002 was derived from sales to the U.S. government,
either directly by Intrusion or through system integrators and other resellers
compared to $1.7 million or 32.4% of revenue in the quarter ended March 31,
2001. Sales to the government present risks in addition to those involved in
sales to commercial customers, including potential disruptions due to
appropriation and spending patterns and the government's reservation of the
right to cancel contracts and purchase orders for its convenience.

         EFFECTS OF RECENT TERRORIST ATTACKS AND MILITARY ACTIONS. Terrorist
attacks in the United States on September 11, 2001, as well as military actions
or other events occurring in response or in connection to them, including
future terrorist attacks against United States targets, actual conflicts
involving the United States or it allies or military or trade disruptions could
impact our operations, including by:

            - reducing government or corporate spending on network security
              products;
            - increasing the cost and difficulty in obtaining materials or
              shipping products; and
            - affecting our ability to conduct business internationally.

Should such events occur, our business, operating results and financial
condition could be materially and adversely affected.

         RESTRUCTURING AND COST REDUCTIONS. We implemented a restructuring plan
in 2001 and April 2002. The objective of our restructuring plan was to reduce
our cost structure to a sustainable level that is consistent with the current
macroeconomic environment. We also implemented other strategic initiatives
designed to strengthen our operations. These plans involved, among other
things, reductions in our workforce and facilities, aligning our


                                        20
<Page>

organization around our business objectives, realignment of our sales force and
changes in our sales management. The workforce reductions could result in
temporary reduced productivity of our remaining employees. Additionally, our
customers and prospects may delay or forgo purchasing our products due to a
perceived uncertainty caused by the restructuring and other changes. Failure to
achieve the desired results of our initiatives could seriously harm our
business, results of operations and financial condition.

         GENERAL. Sales of our products fluctuate, from time to time, based on
numerous factors, including customers' capital spending levels and general
economic conditions. While certain industry analysts believe that there is a
significant market for data security products, there can be no assurance as to
the rate or extent of the growth of such market or the potential adoption of
alternative technologies. Currently, capital spending for information
technology products, including security products is being adversely affected by
uncertain economic conditions. Future declines in data security product sales
as a result of general economic conditions, adoption of alternative
technologies or any other reason could have a material adverse effect on our
business, operating results and financial condition.

         Due to the factors noted above and in "Management's Discussion and
Analysis of Financial Condition and Results of Operations", our future earnings
and common stock price may be subject to significant volatility, particularly
on a quarterly basis. Past financial performance should not be considered a
reliable indicator of future performance and investors should not use
historical trends to anticipate results or trends in future periods. Any
shortfall in revenue and earnings from the levels anticipated by securities
analysts could have an immediate and significant effect on the trading price of
our common stock in any given period. Also, we participate in a highly dynamic
industry which often results in volatility of our common stock price.


                                        21
<Page>

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         FOREIGN EXCHANGE. Revenue originating outside the U.S. in the quarters
ended March 31, 2002, 2001 and 2000 was 29.5%, 21.7% and 8.2% of total
revenues, respectively. International sales are made mostly from our foreign
sales subsidiaries in the local countries and are typically denominated in U.S.
dollars. These subsidiaries incur most of their expenses in the local currency.

Our international business is subject to risks typical of an international
business, including, but not limited to: differing economic conditions, changes
in political climate, differing tax structures, other regulations and
restrictions and foreign exchange rate volatility. Accordingly, our future
results could be materially adversely affected by changes in these or other
factors. The effect of foreign exchange rate fluctuations on us in 2002, 2001
and 2000 was not material.

         INTEREST RATES. We invest our cash in a variety of financial
instruments, including bank time deposits, fixed rate obligations of
corporations, municipalities, and state and national governmental entities and
agencies. These investments are denominated in U.S. dollars. Cash balances in
foreign currencies overseas are operating balances and are invested in
short-term time deposits of the local operating bank.

         Interest income on our investments is carried in "Interest income,
net". We account for our investment instruments in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS 115"). All of the cash equivalents and
short-term investments are treated as available-for-sale under SFAS 115.

         Investments in fixed rate interest earning instruments carry a degree
of interest rate risk. Fixed rate securities may have their fair market value
adversely impacted due to a rise in interest rates. Due in part to these
factors, our future investment income may fall short of expectations due to
changes in interest rates or we may suffer losses in principal if forced to
sell securities which have seen a decline in market value due to changes in
interest rates. Our investment securities are held for purposes other than
trading. The weighted-average interest rate on investment securities at March
31, 2002 was 6.7%. The fair value of investments held at March 31, 2002
approximated amortized cost.


                                        22
<Page>

                            PART II - OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS.

                  We are subject to legal proceedings and claims that arise in
                  the ordinary course of business. We do not believe that the
                  outcome of those matters will have a material adverse affect
                  on our consolidated financial position, operating results or
                  cash flows. However, there can be no assurance such legal
                  proceedings will not have a material impact.

                  On March 22, 2002, Morgan Newton Company, L.P. ("Morgan
                  Newton") filed suit against us in Dallas County District
                  Court, Case No. DV02-02339-C, alleging claims for breach of
                  contract, promissory estoppel, and fraud. The claims arise out
                  of an alleged oral representation to Morgan Newton concerning
                  a request for quotation for the purchase of a large amount of
                  Morgan Newton's products. Morgan Newton has not specified the
                  amount of damages it is seeking in the lawsuit, but it is
                  possible that Morgan Newton may be seeking damages in excess
                  of $2 million, or more. In addition to actual damages, Morgan
                  Newton is also seeking attorney's fees and punitive damages.
                  We believe Morgan Newton's claims are without merit and intend
                  to vigorously defend this lawsuit. On April 22, 2002, we filed
                  our response to Morgan Newton's lawsuit, generally denying all
                  claims and asserting certain affirmative defenses. As of this
                  time, no discovery has been completed and no trial date has
                  been set.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K.

              (A.)     EXHIBITS. The following exhibits are included herein:

                       10.1(1)  Amended and Restated 401(k) Savings Plan of the
                                Registrant
                       10.2(2)  Intrusion Inc. 401(k) Savings Plan
                                Summary of Material Modifications

                       (1)   Filed as an Exhibit in the Registrants' Annual
                             Report on Form 10-K, for the fiscal year ended
                             December 31, 2000, which Exhibit is
                             incorporated herein by reference.
                       (2)   Filed herewith.

              (B.)     FORM 8-K.    We filed no reports on Form 8-K during the
                                    three months ended March 31, 2002.


                                        23
<Page>

                               S I G N A T U R E S

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                       INTRUSION INC.


Date: May 3, 2002                    /s/ Jay R. Widdig
                         ----------------------------------------
                                       Jay R. Widdig
                         Vice President, Chief Financial Officer,
                                   Treasurer & Secretary
                        (Principal Financial & Accounting Officer)




                                        24