CHANDLER, Ariz., Sept. 19, 2024 (GLOBE NEWSWIRE) -- VirTra, Inc. (Nasdaq: VTSI) ("VirTra" or the "Company"), a global provider of judgmental use of force training simulators, firearms training simulators for the law enforcement and military markets, will hold its 2024 Annual Meeting of Shareholders on Monday, October 21, 2024 at 4:30 p.m. Eastern Time (1:30 p.m. Arizona Time) at VirTra's headquarters located at 295 E. Corporate Place, Chandler, AZ 85225. The meeting will also be accessible via webcast here. ...

CHANDLER, Ariz., Aug. 22, 2024 (GLOBE NEWSWIRE) -- VirTra, Inc. (Nasdaq: VTSI) ("VirTra" or the "Company"), a global provider of judgmental use of force training simulators and firearms training simulators for the law enforcement and military markets, is confirmed to present at the 2024 Annual Gateway Conference, which is being held September 4-5, at the Four Seasons Hotel in San Francisco, CA. VirTra's management team is scheduled to present on Thursday, September 5 at 9:00 a.m. Pacific Time (PT). The pres ...

Financial Data and Key Metrics Changes - Total revenue for Q2 2024 was $6.1 million, down from $10.3 million in the prior year, primarily due to delays in federal funding and contract holds [14][4] - Gross profit was $5.5 million, representing a gross margin of 91%, compared to 57% in the prior year, driven by operational enhancements [14][15] - Net income increased to $1.2 million or $0.11 per diluted share, a 17% increase from $1 million or $0.09 per diluted share in the prior year [15] - Adjusted EBITDA was $1.6 million, down from $2.6 million in the prior year [15] Business Line Data and Key Metrics Changes - Government revenue decreased to $5.3 million from $9.5 million in the prior year due to delayed federal budget decisions [10] - International revenue was $0.6 million, a slight decrease from $0.7 million in the prior year, attributed to long lead times in the international pipeline [11] - Bookings totaled $5.9 million for Q2 2024, with a backlog of $13.8 million as of June 30, 2024 [16] Market Data and Key Metrics Changes - The military market is showing potential growth with the U.S. Army's Integrated Visual Augmentation System (IVAS) program, which includes a $5.9 million prototype contract [12] - The company is focusing on expanding its reach into U.S. federal and Department of Defense channels through targeted marketing campaigns [13] Company Strategy and Development Direction - The launch of the V-XR platform is a key component of the company's long-term growth strategy, aimed at enhancing professional training environments [9][18] - The company is prioritizing long-term relationships and is positioned to capitalize on military budget openings [6][18] - Investments in sales and marketing, as well as strategic hiring, are being made to support growth initiatives [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in the first half of the year due to delayed budget decisions but expressed optimism for the second half as grant funding becomes clearer [5][18] - The company is confident in its ability to navigate through temporary challenges and is focused on operational improvements and strategic initiatives for future growth [18] Other Important Information - The company has restructured its sales team to enhance international sales capabilities and stabilize future revenue streams [11] - The addition of a new Chief Technology Officer is expected to accelerate innovation and product development [6] Q&A Session Summary Question: Bookings activity and acceleration in Q3 - Management noted positive trends in the first month of Q3 but refrained from making forward-looking statements [20] Question: Transition from pilot programs to firm purchase orders in healthcare - Management indicated that several healthcare institutions are moving towards firm purchase orders, driven by new training requirements [21][22] Question: Expectations for gross margin in the second half - Management expects gross margin to decrease from Q2 levels but aims to maintain it in the mid- to high 50s range to gain market share [23][24][25] Question: Inventory levels and near-term opportunities - The increase in inventory is attributed to work-in-progress accounts and purchases for military contracts [26][28] Question: Cash flow and tax provisions - The decrease in cash was primarily due to tax payments and efforts to reduce accounts payable [30] Question: Activity levels outside of budget constraints - Management discussed the complexities of federal and local funding processes and indicated that federal contracts are key indicators for future growth [31][32]

Core Insights - VirTra, Inc. reported a significant increase in bookings and improved gross margins in Q2 2024, indicating a positive shift in market conditions and sales strategies [2][4][11] - The company is preparing to launch its new V-XR platform, which is expected to enhance training methodologies across various sectors [5][6] - Despite a year-over-year decline in total revenue, the company maintained a strong gross margin of 91% due to operational efficiencies [3][8][11] Financial Performance - Total revenue for Q2 2024 was $6.1 million, down 41% from $10.3 million in Q2 2023, and down 30% for the first half of 2024 compared to the same period in 2023 [3][7] - Gross profit was $5.5 million, with a gross margin of 91%, a significant increase from 57% in the prior year [3][8] - Net income for Q2 2024 was $1.2 million, or $0.11 per diluted share, compared to $1.0 million, or $0.09 per diluted share, in Q2 2023 [10][23] Operational Highlights - Bookings increased by $3 million quarter-over-quarter, doubling since Q1 2024, reflecting improved sales efforts [2][4] - The company appointed Brandon Cox as Chief Technology Officer to drive innovation and product development [2][6] - New masterclass training programs were launched to enhance customer engagement and training outcomes [2][6] Strategic Initiatives - The company is focusing on expanding its presence in U.S. Federal and Department of Defense markets through targeted marketing and a dedicated sales team [5][6] - VirTra's simulators have been approved for Department of Defense-funded research projects, enhancing its credibility in defense and research sectors [2][4] - The company aims to strengthen its working capital position to support strategic initiatives and long-term growth [12]

"We are deeply grateful to Bob for his visionary leadership and the foundational role he played in establishing VirTra as a leader in virtual training," said Givens. "Bob is widely acknowledged as a pioneer in the simulation industry, with his innovative approach dating back to the 1990s. His technological expertise has resulted in highly effective, differentiated training systems that elevate law enforcement and military training worldwide, earning him a revered spot in The National Center for Simulation H ...

Financial Data and Key Metrics Changes - Total revenue for Q1 2024 was $8.1 million, a 19% decrease from $10 million in the prior year period, primarily due to delays in federal funding caused by the U.S. government's continuing resolution [41] - Gross profit totaled $5.5 million, representing a gross margin of 67%, down from 69% in the prior year period, with a 21% decrease in gross profit attributed to changes in sales and increased costs from the Microsoft contract [30][41] - Net income was $1.2 million, or $0.11 per diluted share, compared to $2.9 million or $0.27 per diluted share in the prior year [42] - Adjusted EBITDA was $1.9 million, down from $4 million in the prior year period [42] - Net operating expenses increased by 17% to $4.1 million from $3.5 million in the prior year, driven by higher payroll and IT spending [14] Business Line Data and Key Metrics Changes - Government revenue increased by 7% to $6.7 million from $6.3 million in the prior year, attributed to design and prototyping revenue [9] - International revenue decreased to $1.3 million from $3.2 million in the prior year, primarily due to longer lead times in the international pipeline and geopolitical issues affecting government funding [27] Market Data and Key Metrics Changes - The backlog as of March 31, 2024, totaled $14 million, with $5.4 million in capital, $6.4 million in service and warranties, and $2.2 million in STEP contracts [15] - There are $6.8 million in renewable STEP contracts expected to represent additional revenue over the next five years, with a historical renewal rate of over 95% [15] Company Strategy and Development Direction - The company is preparing for the launch of the V-XR platform, which aims to enhance soft skills training across various sectors, including law enforcement and healthcare [5][6] - Strategic investments are being made in content and technology to improve training solutions and expand the scenario library [7] - The company is focused on enhancing customer engagement and operational efficiencies through a revised sales initiative and the addition of sales support specialists [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that Q1 performance was not satisfactory, citing external headwinds from cyclical budget decisions and the impact of continuing resolutions [4] - There is optimism for improved bookings as government budgets are approved, and the sales team restructuring is beginning to show results [10][22] - The company is positioned to capitalize on a healthy pipeline of opportunities as government budget resolutions take shape [32] Other Important Information - The company has significantly expanded its production capacity to meet growing demands, particularly in military markets [29] - The recent award of a $5.9 million prototype contract from the U.S. Army's IVAS program highlights the company's strategic alignment with military needs [28] Q&A Session Summary Question: How are bookings tracking in Q2? - Management indicated that bookings are tracking positively, but timing is uncertain due to reliance on federal funding [33] Question: What is the significance of the IVAS win? - The IVAS contract is seen as a significant milestone, representing a continuation of the company's involvement in military training technologies [28][47] Question: How many customers will receive the V-XR? - Management noted significant interest from both new and existing customers, but specific numbers were not disclosed [35][37]

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 ☐ 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: 001-38420 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q VIRTRA, INC. (Exact name of registrant as specified in its charter) | Nevada | 93-1207631 | | --- | --- | ...

Financial Performance - Total revenue for Q1 2024 was $8.1 million, a decrease of 19% from $10.0 million in Q1 2023[3]. - Gross profit was $5.5 million, down 21% from $6.9 million in the prior year, with a gross margin of 67% compared to 69%[3][9]. - Net income decreased to $1.2 million, or $0.11 per diluted share, compared to $2.9 million, or $0.27 per diluted share in Q1 2023[3][11]. - Adjusted EBITDA for Q1 2024 was $1.9 million, a decline of 52% from $4.0 million in the same period last year[3][12]. - Total revenue for the three months ended March 31, 2024, was $8,094,398, a decrease of 19.3% compared to $10,026,935 for the same period in 2023[23]. - Gross profit for the same period was $5,462,141, down from $6,948,938, reflecting a gross margin decrease[23]. - Net income for Q1 2024 was $1,216,173, a decline of 58.8% from $2,946,373 in Q1 2023[23]. - Operating expenses increased to $4,063,802 in Q1 2024, compared to $3,477,633 in Q1 2023, primarily due to higher general and administrative costs[23]. Operational Highlights - The company maintained robust working capital of $33.2 million, supporting operational agility and growth initiatives[5]. - The upcoming launch of the V-XR training platform is expected to expand market reach into healthcare and education sectors[5][6]. - Recurring revenue streams, including the STEP program, services, and warranties, accounted for 23% of total revenue in Q1 2024[14]. - The company is focused on improving bookings performance and stabilizing backlog amidst order seasonality[14]. Expense Management - Net operating expenses increased by 17% to $4.1 million, driven by higher payroll and IT spending[10]. - Research and development expenses were $693,380 for Q1 2024, slightly down from $766,296 in Q1 2023, indicating a focus on cost management[23]. Cash Flow and Liquidity - Cash and cash equivalents rose to $22,415,177 as of March 31, 2024, up from $18,849,842 at the end of 2023, indicating improved liquidity[25]. - The company reported net cash provided by operating activities of $5,136,509 for Q1 2024, significantly higher than $978,603 in Q1 2023[25]. Liabilities and Assets - Total current liabilities decreased to $14,341,699 from $15,754,772, reflecting a reduction in accounts payable and deferred revenue[23]. - The company’s total assets decreased slightly to $69,376,178 as of March 31, 2024, from $69,634,042 at the end of 2023[21]. Revenue Challenges - The decrease in revenue was attributed to delays in federal funding due to the U.S. government's continuing resolution[8].

Financial Data and Key Metrics - Full year 2023 revenue increased 34% to $38 million from $28.3 million in 2022 [25] - Q4 2023 revenue increased 17% to $10.1 million from $8.6 million in Q4 2022 [25] - Gross profit for 2023 increased 64% to $26.7 million (70% of revenue) from $16.3 million (57% of revenue) in 2022 [26] - Q4 2023 gross profit increased 58% to $8.4 million (83% of revenue) from $5.3 million (61% of revenue) in Q4 2022 [26] - Net income for 2023 was $8.4 million ($0.77 per diluted share), up from $2 million ($0.18 per diluted share) in 2022 [28] - Q4 2023 net income totaled $2.8 million ($0.25 per diluted share), up from $1.4 million ($0.13 per diluted share) in Q4 2022 [28] - Adjusted EBITDA for 2023 increased to $11.6 million from $4 million in 2022 [29] Business Line Performance - Government revenue increased 39% to $31 million in 2023 from $22.4 million in 2022 [18] - International revenue was $5.8 million in 2023, up from $4.2 million in 2022 [19] - Subscription training equipment partnership (STEP) program continues to grow, with recurring revenue representing 20% of total quarterly revenue [21] Market Performance - Domestic market benefited from strategic sales restructuring and improved customer success functions [8][9] - International market growth attributed to stronger simulator and accessory sales, though longer lead times persist due to geopolitical tensions and US government budget issues [19][20] - Military market penetration progressing, with a dedicated business development and training center opened in Orlando, Florida [17] Strategic Direction and Industry Competition - Focus on expanding market share through technological innovation, including the V-XR extended reality training platform [12][14] - Integration of AI into content creation and data analytics to enhance training experiences [36][38] - Emphasis on developing soft skills training to expand into adjacent markets like hospitals and care facilities [15] - Targeting military market with VBS integration and custom recoil kits for M4 and M249 weapons [16] Management Commentary on Operating Environment and Future Outlook - Backlog reduced to $19.4 million entering 2024, with growing bookings and pipeline critical for future growth [7] - Confidence in sales initiatives taking effect, with expected momentum in bookings [30] - Anticipated higher close rates in international market as budgets are approved and geopolitical tensions ease [20] - Strong foundation laid for 2024 success through operational, sales, and product development improvements [40] Other Important Information - Bookings for 2023 totaled $33.6 million, a year-over-year increase of $0.5 million [30] - Backlog as of December 31, 2023, was $19.4 million, with $10.5 million in capital, $6.3 million in service and warranties, and $2.6 million in STEP contracts [31] - $6.9 million in renewable STEP contracts expected to generate additional revenue over the next five years [32] - Unrestricted cash and cash equivalents stood at $18.9 million as of December 31, 2023 [33] Q&A Session Question: Impact of government funding on business - Continuing resolution impacted expected stronger Q4, particularly affecting international, military contracts, and police department grants [42] - Backlog helped navigate through the impact, with improved conditions expected in Q2 2024 and beyond [43] Question: Initiatives around grant programs - Focus on helping small police departments access grants for training equipment, with a dedicated trainer assisting in grant identification and application [44][45] Question: Traction with V-XR and revenue impact timeline - V-XR product release set for Q2 2024, with multiple orders already in place [46] - V-XR expected to complement rather than cannibalize V300 sales, targeting smaller organizations with operational funds [47] Closing Remarks - Confidence in continued innovation and strong growth trajectory for 2024 [49]

PART I [Business Overview](index=5&type=section&id=Item%201.%20Business.) VirTra provides judgmental use of force and firearms training simulators, expanding market share through core growth, product broadening, and strategic partnerships - VirTra is a global provider of judgmental use of force and firearms training simulators for law enforcement, military, and commercial markets, leveraging patented technologies for realistic scenarios[19](index=19&type=chunk) - Key growth strategies involve building the core business, increasing total addressable market, broadening product offerings (including new VR), and pursuing partnerships and acquisitions[21](index=21&type=chunk)[23](index=23&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) - Product offerings include V-300™, V-180™, V-100™ Simulators, V-ST PRO™, V-VICTA™, STEP™, V-Author™ Software, Simulated Recoil Kits, and the patented Threat-Fire™ device[23](index=23&type=chunk)[27](index=27&type=chunk) - VirTra holds **seven issued U.S. patents** expiring between 2025 and 2037, along with key trademarks, protecting its intellectual property through trade secrets and copyrights[29](index=29&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) Research and Product Development Expenses | Year Ended December 31, | Amount ($) | | :---------------------- | :--------- | | 2023 | 2,794,314 | | 2022 | 2,606,840 | - As of March 22, 2024, VirTra employed **112 full-time employees**, operating from its Chandler, Arizona office and an Orlando, Florida facility opened in 2022 to support East Coast and military business[38](index=38&type=chunk) - The company is subject to U.S. and international regulatory matters, including export laws (U.S. Export Administration Regulations, ITAR) and trade sanctions, with potential non-compliance penalties[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) VirTra faces risks from government contract reliance, intense competition, export control compliance, supply chain disruptions, intellectual property claims, and public company compliance costs - Substantially all **2023 revenues** were from government contracts, making the company vulnerable to changes in government spending or contract terms[46](index=46&type=chunk)[49](index=49&type=chunk) - The company operates in highly competitive markets with well-resourced competitors, facing risks from lower-priced or more innovative products, particularly in VR training tools[50](index=50&type=chunk)[51](index=51&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) - Failure to obtain necessary licenses or comply with U.S. export control rules (e.g., ITAR) could materially adversely affect business, operations, and financial condition[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - Future success depends on identifying, marketing, and selling new products that meet evolving customer preferences, with new products potentially not generating sufficient revenue to cover costs[52](index=52&type=chunk) - Disruptions to manufacturing, warehousing, distribution, or supplier capabilities from unforeseen events (e.g., natural disasters, cybersecurity breaches) could negatively impact revenue and operating results[61](index=61&type=chunk) - Third-party intellectual property infringement assertions could lead to significant costs, product usage cessation, or costly licensing agreements[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) - The loss of key executive officers, particularly **Robert Ferris** (Executive Chairman) and **John Givens II** (CEO), could materially harm the business due to their expertise and relationships[69](index=69&type=chunk) - As a public company, VirTra incurs significantly increased legal, accounting, and compliance costs, requiring substantial management time for initiatives like Sarbanes-Oxley Act Section 404[75](index=75&type=chunk)[77](index=77&type=chunk) - The Common Stock price is likely to be highly volatile due to operating result fluctuations, limited public float, market conditions, and the absence of dividends[80](index=80&type=chunk)[81](index=81&type=chunk)[89](index=89&type=chunk) [Unresolved Staff Comments](index=19&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the SEC - Not applicable[90](index=90&type=chunk) [Cybersecurity](index=19&type=section&id=Item%201C.%20Cybersecurity) VirTra is enhancing cybersecurity with a new Director of Technology, pursuing CMMC certification by FY2025, and implementing a NIST-aligned program with Board oversight - VirTra is increasing information system investment, hiring a Director of Technology in 2024, and pursuing **CMMC certification by fiscal year 2025**[91](index=91&type=chunk) - The Management Leadership Team, with Board oversight, plans to implement a comprehensive cybersecurity program aligned with NIST frameworks[92](index=92&type=chunk) - The Director of Technology reports to the CFO, overseeing information security programs, strategy, and compliance, with Board and Audit Committee oversight of enterprise cybersecurity risks[93](index=93&type=chunk)[94](index=94&type=chunk) - While no recent material cybersecurity incidents occurred, the company acknowledges potential risks like reputational harm, revenue loss, and legal actions from future incidents[95](index=95&type=chunk) [Properties](index=20&type=section&id=Item%202.%20Properties) VirTra consolidated operations into a **76,650 sq ft** Chandler, Arizona facility and leased a **9,350 sq ft** Orlando, Florida facility for military and East Coast support - VirTra purchased a **76,650 square foot** industrial building in Chandler, Arizona, for **$10.8 million** in August 2021, consolidating all operations by 2023[97](index=97&type=chunk)[206](index=206&type=chunk) - The new Chandler facility is expected to support growth, enhance efficiency, and provide dedicated training and demo space, enabling remote demonstrations[97](index=97&type=chunk) - In June 2022, the company leased a **9,350 square foot** facility in Orlando, Florida, to expand military business and East Coast customer service[98](index=98&type=chunk) [Legal Proceedings](index=20&type=section&id=Item%203.%20Legal%20Proceedings) There are no material pending legal proceedings against VirTra, other than routine litigation incidental to its business - There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business[98](index=98&type=chunk) [Mine Safety Disclosures](index=20&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to VirTra's business operations - Not applicable[99](index=99&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=21&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) VirTra's Common Stock trades on NASDAQ under "VTSI," with **11,109,730 shares outstanding** held by approximately **39 record holders** as of March 29, 2024 - VirTra's Common Stock is traded on The NASDAQ Capital Market under the symbol **"VTSI"**[102](index=102&type=chunk) Common Stock Outstanding and Holders | As of Date | Shares Outstanding | Holders of Record | | :------------- | :----------------- | :---------------- | | March 29, 2024 | 11,109,730 | Approximately 39 | - No Class A, Class B, or Preferred Stock shares were issued and outstanding as of March 29, 2024[102](index=102&type=chunk) [Reserved](index=21&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) VirTra achieved significant 2023 financial growth with **34% revenue increase to $38.0 million** and **330% net income surge to $8.4 million**, driven by simulator sales and improved gross margin Key Financial Highlights (Year Ended December 31) | Metric | 2023 ($) | 2022 ($) | Change ($) | % Change | | :---------------------- | :----------- | :----------- | :----------- | :------- | | Revenues | 38,043,360 | 28,302,244 | 9,741,116 | 34% | | Cost of Sales | 11,378,264 | 12,047,366 | (669,102) | (6)% | | Gross Profit | 26,665,096 | 16,254,878 | 10,410,218 | 64% | | Gross Profit Margin | 70% | 57% | 13% pts | | | Net Operating Expense | 17,029,508 | 13,661,173 | 3,368,335 | 25% | | Income from Operations | 9,635,588 | 2,593,705 | 7,041,883 | 271% | | Other Income (Expense) | 586,082 | (66,165) | 652,247 | Positive | | Income Tax Expense | 1,818,812 | 571,642 | 1,247,170 | 218% | | Net Income | 8,402,858 | 1,955,898 | 6,446,960 | 330% | | Basic EPS | 0.77 | 0.18 | 0.59 | 328% | | Diluted EPS | 0.77 | 0.18 | 0.59 | 328% | Adjusted EBITDA (Year Ended December 31) | Metric | 2023 ($) | 2022 ($) | Change ($) | % Change | | :-------------- | :----------- | :----------- | :----------- | :------- | | Net Income | 8,402,858 | 1,955,898 | 6,446,960 | 330% | | EBITDA | 11,129,775 | 3,605,430 | 7,524,345 | 209% | | Adjusted EBITDA | 11,625,902 | 4,017,765 | 7,608,137 | 189% | Liquidity and Capital Resources (As of December 31) | Metric | 2023 ($) | 2022 ($) | Change ($) | % Change | | :---------------------- | :----------- | :----------- | :----------- | :------- | | Cash and Cash Equivalents | 18,849,842 | 13,483,597 | 5,366,245 | 39.8% | | Working Capital | 33,240,516 | 24,339,089 | 8,901,427 | 36.6% | Cash Flows (Year Ended December 31) | Activity | 2023 ($) | 2022 ($) | Change ($) | | :------------------------ | :----------- | :----------- | :----------- | | Operating Activities | 6,682,616 | (2,693,351) | 9,375,967 | | Investing Activities | (1,128,187) | (3,341,198) | 2,213,011 | | Financing Activities | (188,184) | (190,419) | 2,235 | - The increase in cash from operating activities was driven by changes in terms and conditions, enabling more upfront and quicker cash collection, decreasing unbilled revenue, and increasing deferred revenue[116](index=116&type=chunk) Backlog as of December 31, 2023 | Category | Amount ($ millions) | | :------- | :------------------ | | Capital | 10.5 | | Service | 6.3 | | STEP | 2.6 | | **Total**| **19.4** | - Management estimates that the majority of new bookings received in **Q4 2023** will convert to revenue in **2024**[119](index=119&type=chunk) - Management believes current capital resources are adequate for over **12 months** of operations but remains open to raising additional funds for expansion and market opportunities[120](index=120&type=chunk) Revenue Disaggregation by Customer Location (Year Ended December 31) | Customer Type | 2023 Revenue ($) | 2023 % of Total | 2022 Revenue ($) | 2022 % of Total | | :------------ | :--------------- | :-------------- | :--------------- | :-------------- | | Governmental | 31,047,588 | 82% | 22,371,959 | 79% | | Commercial | 1,237,836 | 3% | 1,770,682 | 6% | | International | 5,757,936 | 15% | 4,159,603 | 15% | | **Total** | **38,043,360** | **100%** | **28,302,244** | **100%** | STEP Revenue (Year Ended December 31) | Year | STEP Revenue ($) | % of Total Net Sales | | :--- | :--------------- | :------------------- | | 2023 | 3,525,873 | 9% | | 2022 | 2,912,451 | 10% | [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company has no material quantitative or qualitative disclosures about market risk - Not applicable[142](index=142&type=chunk) [Financial Statements and Supplementary Data](index=29&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents VirTra's audited financial statements for 2023 and 2022, including the Report of Independent Registered Public Accounting Firm, Balance Sheets, Statements of Operations, and Cash Flows, with detailed notes on accounting policies and financial items - The financial statements for **2023 and 2022** were audited by Haynie & Company, which issued an unqualified opinion[146](index=146&type=chunk)[150](index=150&type=chunk) Balance Sheet Summary (As of December 31) | Metric | 2023 ($) | 2022 ($) | | :---------------------- | :----------- | :----------- | | Total Current Assets | 48,995,288 | 34,095,853 | | Total Long-Term Assets | 20,638,754 | 19,718,638 | | **Total Assets** | **69,634,042** | **53,814,491** | | Total Current Liabilities | 15,754,772 | 9,756,764 | | Total Long-Term Liabilities | 11,257,403 | 10,376,108 | | **Total Liabilities** | **27,012,175** | **20,132,872** | | Total Stockholders' Equity | 42,621,867 | 33,681,619 | Statements of Operations Summary (Year Ended December 31) | Metric | 2023 ($) | 2022 ($) | | :---------------------- | :----------- | :----------- | | Total Revenue | 38,043,360 | 28,302,244 | | Gross Profit | 26,665,096 | 16,254,878 | | Net Operating Expense | 17,029,508 | 13,661,173 | | Income from Operations | 9,635,588 | 2,593,705 | | Net Income | 8,402,858 | 1,955,898 | Statements of Cash Flows Summary (Year Ended December 31) | Activity | 2023 ($) | 2022 ($) | | :------------------------ | :----------- | :----------- | | Net cash from operating activities | 6,682,616 | (2,693,351) | | Net cash used in investing activities | (1,128,187) | (3,341,198) | | Net cash used in financing activities | (188,184) | (190,419) | | Net increase (decrease) in cash | 5,366,245 | (6,224,968) | | Cash, end of period | 18,849,842 | 13,483,597 | - Revenue recognition follows **ASC 606**, identifying performance obligations and allocating transaction prices, with primary sources including simulator sales, STEP programs, training, and extended warranties[166](index=166&type=chunk)[167](index=167&type=chunk)[169](index=169&type=chunk) Inventory Valuation (As of December 31) | Category | 2023 ($) | 2022 ($) | | :------------------------ | :----------- | :----------- | | Raw materials and work in process | 12,834,368 | 9,894,759 | | Reserve | (429,488) | (302,431) | | **Total Inventory** | **12,404,880** | **9,592,328** | Property and Equipment, Net (As of December 31) | Category | 2023 ($) | 2022 ($) | | :------------------------ | :----------- | :----------- | | Total property and equipment | 20,375,888 | 19,247,700 | | Less: Accumulated depreciation | (4,888,876) | (3,980,567) | | **Property and equipment, net** | **15,487,012** | **15,267,133** | Intangible Assets, Net (As of December 31) | Category | 2023 ($) | 2022 ($) | | :------------------------ | :----------- | :----------- | | Total intangible assets | 695,207 | 695,207 | | Less accumulated amortization | (127,667) | (107,430) | | **Intangible assets, net** | **567,540** | **587,777** | Accrued Compensation and Related Costs (As of December 31) | Category | 2023 ($) | 2022 ($) | | :------------------------ | :----------- | :----------- | | Salaries and wages payable | 457,565 | 502,940 | | Employee benefits payable | 54,811 | 31,618 | | Accrued paid time off (PTO) | 361,418 | 590,491 | | Profit sharing payable | 1,347,622 | 369,841 | | **Total** | **2,221,416** | **1,494,890** | Note Payable Summary (As of December 31) | Category | 2023 ($) | 2022 ($) | | :------------------------ | :----------- | :----------- | | Note payable, short-term | 226,355 | 232,537 | | Note payable, long-term | 7,813,021 | 8,050,116 | Income Tax Provision (Year Ended December 31) | Category | 2023 ($) | 2022 ($) | | :------------------------ | :----------- | :----------- | | Current | 4,924,686 | 1,136,170 | | Deferred | (3,105,874) | (564,528) | | **Total Provision** | **1,818,812** | **571,642** | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosures](index=29&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) There have been no changes in or disagreements with accountants on accounting and financial disclosures - None[261](index=261&type=chunk) [Controls and Procedures](index=29&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of December 31, 2023, VirTra's disclosure controls and internal control over financial reporting were ineffective due to material weaknesses, with remediation efforts ongoing - As of **December 31, 2023**, VirTra's disclosure controls and procedures were not effective due to identified material weaknesses in internal control over financial reporting[261](index=261&type=chunk) - Management concluded that internal control over financial reporting was not effective as of **December 31, 2023**, based on the **2013 COSO framework**[262](index=262&type=chunk) - Identified material weaknesses include a lack of multiple management review levels on complex issues and inadequate system and manual controls[263](index=263&type=chunk) - The company anticipates continuing to report material weaknesses until staff expansion and accounting system/procedure enhancements are completed[263](index=263&type=chunk) - Subsequent to **December 31, 2023**, the company implemented more formal review and documentation of workflow processes and increased ERP training[267](index=267&type=chunk) [Other Information](index=30&type=section&id=Item%209B.%20Other%20Information) This item reports that there is no other information required to be disclosed - None[268](index=268&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspection](index=30&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspection) This item reports that there are no disclosures regarding foreign jurisdictions that prevent inspection - None[269](index=269&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=30&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) VirTra's five-member Board includes Executive Chairman Robert D. Ferris and CEO John F. Givens II, overseeing corporate risk through audit, compensation, and governance committees Board of Directors and Executive Officers | Name | Age | Position/Title | | :---------------- | :-- | :----------------------------- | | Robert D. Ferris | 51 | Executive Chairman of the Board| | John F. Givens II | 59 | Chief Executive Officer and Director | | Alanna Boudreau | 44 | Chief Financial Officer | | Jeffrey D. Brown | 59 | Director | | Gregg C.E. Johnson| 58 | Director | | Jim McDonnell | 64 | Director | - **Robert D. Ferris** transitioned to Executive Chairman in **August 2023**, and **John F. Givens II** was appointed CEO, having served as Co-CEO since April 2022[272](index=272&type=chunk)[273](index=273&type=chunk) - Jeffrey D. Brown, Gregg C.E. Johnson, and Jim McDonnell are independent directors, but the Board lacks a majority of independent directors as per NASDAQ standards[281](index=281&type=chunk) - The Board of Directors oversees corporate risk, with the audit committee managing financial risks and the compensation committee overseeing compensation-related risks[283](index=283&type=chunk) - The Board has established an audit committee (chaired by **Mr. Brown**, an audit committee financial expert), a compensation committee, and a nominating and corporate governance committee (chaired by **Mr. Johnson**)[284](index=284&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk)[289](index=289&type=chunk) - The company has adopted a written Code of Ethics and a Whistleblower Protection Policy, applicable to all directors, officers, and employees, available on its website[290](index=290&type=chunk) [Executive Compensation](index=35&type=section&id=Item%2011.%20Executive%20Compensation) 2023 executive compensation included significant stock awards for CEO John F. Givens II (**$617,332**) and Executive Chairman Robert D. Ferris (**$47,850**), alongside a **$1.26 million** profit-sharing program 2023 Director Compensation | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | | :---------------- | :------------------------------ | :--------------- | | Jeffrey D. Brown | 24,000 | - | | Gregg C.E. Johnson| 24,000 | - | | James McDonnell | 24,000 | 50,000 | 2023 Summary Executive Compensation | Name and Principal Position | Fiscal Year Ended | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Total ($) | | :-------------------------- | :---------------- | :--------- | :-------- | :--------------- | :---------------- | :-------- | | Robert D. Ferris, Executive Chairman | 12/31/2023 | 349,860 | 12,334 | 47,850 | - | 410,044 | | John F. Givens II, Chief Executive Officer | 12/31/2023 | 349,860 | 6,943 | 617,332 | - | 974,135 | | Alanna Boudreau, Chief Financial Officer | 12/31/2023 | 185,385 | 307 | 36,800 | - | 222,492 | - **Robert D. Ferris** and **John F. Givens II** served as Co-CEOs until **August 15, 2023**, when Mr. Ferris became Executive Chairman and Mr. Givens became CEO[296](index=296&type=chunk) - The company has a discretionary profit-sharing program for eligible employees, with **$1,260,431 expensed in 2023** and **$300,000 in 2022**[313](index=313&type=chunk) - The **2017 Equity Incentive Plan** is designed to attract, retain, and motivate employees, officers, consultants, and directors through various equity awards[314](index=314&type=chunk) Securities Authorized for Issuance Under Equity Compensation Plans (As of December 31, 2023) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) ($) | Number of securities remaining available for future issuance under equity compensation plans (c) | | :-------------------------------- | :------------------------------------------------------------------------------------------ | :---------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------------- | | Plans approved by our stockholders: VirTra, Inc. 2017 Equity Incentive Plan | - | - | 1,259,819 | | Plans not approved by stockholders: Stock Option Plan | 234,167 | 2.47 | - | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=41&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of March 29, 2024, Robert D. Ferris beneficially owned **3.1%** and John F. Givens II **2.1%** of VirTra's Common Stock, with the executive group owning **5.7%** Beneficial Ownership of Common Stock (As of March 29, 2024) | Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | | :---------------------------------------- | :---------------------------------------- | :--------------- | | Robert D. Ferris | 344,029 | 3.1% | | John F. Givens II | 236,341 | 2.1% | | Jeffrey D. Brown | 49,193 | * | | Alanna Boudreau | 7,291 | * | | Gregg C.E. Johnson | 2,100 | * | | Jim McDonnell | - | - | | All named executive officers and directors as a group (six persons) | 638,954 | 5.7% | - Beneficial ownership percentages are based on **11,109,730 shares** of Common Stock outstanding as of **March 29, 2024**[326](index=326&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=42&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) In 2023 and 2022, VirTra redeemed stock options from related parties, including the Executive Chairman, incurring additional compensation expense, and issued common stock upon option exercises Stock Option Redemptions from Related Parties | Year Ended December 31, | Options Redeemed | Additional Compensation Expense ($) | | :---------------------- | :--------------- | :-------------------------------- | | 2023 | 15,000 | 29,251 | | 2022 | 27,500 | 74,368 | Stock Option Exercises by Related Parties | Year Ended December 31, | Options Exercised | Exercise Price ($) | | :---------------------- | :---------------- | :----------------- | | 2023 | 15,000 | 54,900 | | 2022 | 17,500 | 40,845 | - Restricted stock units were awarded to executive officers in **2023 and 2022**, as detailed in Item 11[330](index=330&type=chunk) [Principal Accountant Fees and Services](index=42&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Haynie & Company, VirTra's independent auditor, billed **$111,204** for 2023 audit fees, with all services pre-approved by the audit committee to ensure independence Principal Accountant Fees (Fiscal Years Ended December 31) | Fee Category | 2023 ($) | 2022 ($) | | :---------------- | :--------- | :--------- | | Audit Fees | 111,204 | 141,664 | | Audit-Related Fees| - | - | | Tax Fees | - | 55,500 | | All Other Fees | - | - | | **Total** | **111,204**| **197,164**| - All audit and permissible non-audit services provided by Haynie & Company were pre-approved by the audit committee[338](index=338&type=chunk) - The audit committee determined that the services provided were compatible with the provision of independent audit services[340](index=340&type=chunk) PART IV [Exhibit and Financial Statement Schedules](index=43&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, supplementary data, and comprehensive exhibits filed with the Form 10-K, including governance and financial documents - The consolidated financial statements and Report of Independent Registered Public Accounting Firm are included, starting on **page F-2**[342](index=342&type=chunk) - All required financial statement schedules are either not applicable or their disclosures are contained within the financial statements[343](index=343&type=chunk) - A detailed list of exhibits is provided, including Articles of Incorporation, Bylaws, Employment Agreements, and various SEC certifications[345](index=345&type=chunk)[348](index=348&type=chunk) [Form 10-K Summary](index=44&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K summary is provided - None[348](index=348&type=chunk) [Signatures](index=45&type=section&id=Signatures) The Form 10-K report is signed by the CEO, CFO, Executive Chairman, and other Directors, with the CEO and CFO authorized as attorneys-in-fact for amendments - The report is signed by **John F. Givens II** (CEO) and **Alanna Boudreau** (CFO) on **April 1, 2024**[352](index=352&type=chunk) - Signatories, including **Robert D. Ferris** (Executive Chairman), appoint **John F. Givens II** and **Alanna Boudreau** as attorneys-in-fact for report amendments[353](index=353&type=chunk)[354](index=354&type=chunk)