VirTra(VTSI) - 2025 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion for the period ended June 30, 2025 Item 1. Financial Statements This section presents VirTra, Inc.'s unaudited condensed consolidated financial statements for the period ended June 30, 2025, including balance sheets, statements of operations, cash flows, and accompanying notes Condensed Balance Sheets Presents the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Condensed Balance Sheet Highlights (as of June 30, 2025) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $20,697,354 | $18,040,827 | | Total current assets | $44,149,274 | $44,473,235 | | Total assets | $67,369,972 | $65,453,086 | | Liabilities & Equity | | | | Total current liabilities | $10,028,833 | $9,646,555 | | Total liabilities | $20,026,886 | $19,762,198 | | Total stockholders' equity | $47,343,086 | $45,690,888 | - Total assets increased to $67.4 million from $65.5 million at year-end 2024, primarily driven by an increase in cash and intangible assets[8] - Stockholders' equity grew to $47.3 million from $45.7 million, mainly due to retained earnings from net income[8] Condensed Statements of Operations Details the company's revenues, expenses, and net income for the three and six months ended June 30, 2025 and 2024 Statements of Operations Highlights | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $6,978,938 | $6,075,040 | $14,139,185 | $13,421,461 | | Gross Profit | $4,812,477 | $5,524,616 | $10,009,357 | $10,238,779 | | Income from Operations | $914,366 | $1,131,421 | $2,282,169 | $1,781,782 | | Net Income | $175,314 | $1,200,727 | $1,439,375 | $1,668,923 | | Diluted EPS | $0.02 | $0.11 | $0.13 | $0.15 | - For Q2 2025, revenue increased 15% year-over-year, but net income decreased significantly by 85% from $1.2 million to $175,314, primarily due to a substantial increase in cost of sales and a swing to 'Other expense'[11] Condensed Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,047,430 | $1,268,224 | | Net cash used in investing activities | ($3,261,941) | ($1,608,798) | | Net cash used in financing activities | ($128,962) | ($97,634) | | Net increase (decrease) in cash | $2,656,527 | ($438,208) | - Cash from operations increased significantly to $6.0 million for the first six months of 2025, compared to $1.3 million in the prior year period, mainly due to higher net income and improved accounts receivable collections[16] - Investing activities included $2.3 million for internal intangible assets and nearly $1.0 million for property and equipment purchases[16] Notes to the Unaudited Financial Statements Provides detailed explanations of accounting policies, significant transactions, and financial statement line items - A restatement of 2024 revenue was noted, where $747,977 was incorrectly recorded in Q1 2024 instead of 2023 due to an accounting software implementation issue[27] - For the six months ended June 30, 2025, government customers comprised 75% of total net sales, while international customers grew to 23% of sales, up from 9% in the same period of 2024[33] - The company identified six business segments, with 'Simulators and Accessories' being the largest revenue contributor, followed by 'Extended Service-type warranties' and the 'STEP' subscription program[38][39] - As of June 30, 2025, the company had significant customer concentration, with two customers accounting for 31% and 13% of total accounts receivable[51] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting revenue growth, profitability decline, liquidity, and backlog, noting future booking uncertainties Results of Operations Analyzes key financial metrics including net sales, gross profit, operating income, and net income for the recent periods Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $6,978,938 | $6,075,040 | $903,898 | 15% | | Gross Profit | $4,812,477 | $5,524,616 | ($712,139) | -13% | | Gross Margin | 69% | 91% | -22 p.p. | N/A | | Operating Income | $914,366 | $1,131,421 | ($217,055) | -19% | | Net Income | $175,314 | $1,200,727 | ($1,025,413) | -85% | - The 294% increase in Q2 cost of sales was attributed to a reclassification of COGS labor in 2024 that was an outlier, making the 2025 expense appear disproportionately high in comparison[90] - Net operating expenses decreased by 11% in Q2 2025 due to company efforts to lower overhead and operating costs[93] - A significant swing in 'Other income (expense)' from a $157K gain in Q2 2024 to a $748K loss in Q2 2025, primarily from foreign exchange fluctuations, heavily impacted net income[95] Liquidity, Capital Resources, Bookings, and Backlog Assesses the company's cash position, working capital, new bookings, and total backlog, including future outlook - The company maintained a strong liquidity position with $20.7 million in cash and cash equivalents and $34.1 million in working capital as of June 30, 2025[100] - Bookings totaled $4.6 million for Q2 2025 and $11 million for the first six months of the year[104] - Total backlog stood at $18.8 million as of June 30, 2025, composed of $7.1 million in Capital, $5.7 million in Service, and $6 million in STEP agreements[105] - Management expressed uncertainty about future bookings due to potential budget cuts and funding freezes from the new federal administration[108] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that this disclosure is not required as it qualifies as a smaller reporting company - Disclosure is not required for smaller reporting companies[113] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were ineffective due to identified material weaknesses, with ongoing remediation efforts - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025[114] - The ineffectiveness was due to previously identified material weaknesses: (i) lack of multiple levels of management review on complex issues and (ii) failure to implement adequate system and manual controls[114] - The company is in the process of implementing more formal review processes and increasing ERP training for staff to address these weaknesses[115] PART II: OTHER INFORMATION This section covers other required disclosures, including legal proceedings, equity sales, and senior securities, noting non-applicability for smaller reporting companies Item 1. Legal Proceedings The company reports that there are no material pending legal proceedings, other than ordinary routine litigation incidental to its business - There are no material pending legal proceedings to which the company is a party[117] Item 1A. Risk Factors The company states that this disclosure is not required as it qualifies as a smaller reporting company - Disclosure is not required for smaller reporting companies[118] Other Items (2, 3, 4, 5, 6) The company reports no unregistered equity sales, no defaults on senior securities, and confirms mine safety disclosures are not applicable - The company reported no unregistered sales of equity securities, defaults upon senior securities, or other material information during the period[119][120][121] Signatures The report is duly signed by the Chief Executive Officer, John F. Givens II, and the Chief Financial Officer, Alanna Boudreau, on August 11, 2025