UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2023

☐	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

VIRTRA, INC.

(Exact name of registrant as specified in its charter)

Nevada		93-1207631
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

295 E. Corporate Place, Chandler, AZ		85225
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (480) 968-1488

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.0001 par value		VTSI		Nasdaq Capital Market

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large, accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of August 10, 2023, the registrant had 10,926,774 shares of common stock outstanding.

TABLE OF CONTENTS

			PAGE NO.
PART I	FINANCIAL INFORMATION

	Item 1.	Financial Statements (Unaudited)	F-1
		Condensed Balance Sheets as of June 30, 2023 and December 31, 2022	F-1
		Condensed Statements of Operations for the Three and Six Months ended June 30, 2023 and 2022	F-2
		Condensed Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022	F-3
		Condensed Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022	F-4
		Notes to the Unaudited Financial Statements	F-5

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8

	Item 4.	Controls and Procedures	8

PART II	OTHER INFORMATION

	Item 1.	Legal Proceedings	9

	Item 1A.	Risk Factors	9

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9

	Item 3.	Defaults Upon Senior Securities	9

	Item 4.	Mine Safety Disclosures	9

	Item 5.	Other Information	9

	Item 6.	Exhibits	9

	SIGNATURES		10

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VIRTRA, INC.

CONDENSED BALANCE SHEETS

	June 30, 2023		December 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	13,342,974	$	13,483,597
Accounts receivable, net		17,931,407		3,002,887
Inventory, net		9,967,539		9,592,328
Unbilled revenue		2,422,109		7,485,990
Prepaid expenses and other current assets		546,332		531,051
Total current assets		44,210,361		34,095,853

Long-term assets:
Property and equipment, net		15,149,168		15,267,133
Operating lease right-of-use asset, net		968,234		1,212,814
Intangible assets, net		571,985		587,777
Security deposits, long-term		35,691		35,691
Other assets, long-term		202,462		376,461
Deferred tax asset, net		5,361,667		2,238,762
Total long-term assets		22,289,207		19,718,638
Total assets	$	66,499,568	$	53,814,491

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,156,170	$	1,251,240
Accrued compensation and related costs		1,653,150		1,494,890
Accrued expenses and other current liabilities		5,633,901		1,917,922
Note payable, current		246,215		232,537
Operating lease liability, short-term		569,692		557,683
Deferred revenue, short-term		8,379,515		4,302,492
Total current liabilities		17,638,643		9,756,764

Long-term liabilities:
Deferred revenue, long-term		2,539,330		1,605,969
Note payable, long-term		7,932,521		8,050,116
Operating lease liability, long-term		450,337		720,023
Total long-term liabilities		10,922,188		10,376,108
Total liabilities		28,560,831		20,132,872

Commitments and contingencies (See Note 9)		-		-

Stockholders’ equity:
Preferred stock $0.0001 par value; 2,500,000 authorized; no shares issued or outstanding		-
Common stock $0.0001 par value; 50,000,000 shares authorized; 10,926,774 shares issued and outstanding as of June 30,2023 and 10,900,759 shares issued and outstanding as of December 31,2022		1,092		1,089
Class A common stock $0.0001 par value; 2,500,000 shares authorized; no shares issued or outstanding		-		-
Class B common stock $0.0001 par value; 7,500,000 shares authorized; no shares issued or outstanding		-		-
Common stock, value		1,092		1,089
Additional paid-in capital		31,704,501		31,420,395
Retained earnings		6,233,144		2,260,135
Total stockholders’ equity		37,938,737		33,681,619
Total liabilities and stockholders’ equity	$	66,499,568	$	53,814,491

See accompanying notes to unaudited condensed financial statements.

F-1

VIRTRA, INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
	Three Months Ended						Six Months Ended
	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Revenue:
Net Sales	$	10,336,903		$	7,997,383		$	20,363,838		$	14,750,611
Total Revenue		10,336,903			7,997,383			20,363,838			14,750,611

Cost of sales		4,416,202			3,253,651			7,494,199			6,319,789

Gross Profit		5,920,701			4,743,732			12,869,639			8,430,822

Operating Expenses:
General and administrative		3,280,344			3,085,051			5,991,681			5,381,443
Research and Development		711,754			617,058			1,478,050			1,296,453

Net Operating expense		3,992,098			3,702,109			7,469,731			6,677,896

Income from operations		1,928,603			1,041,623			5,399,908			1,752,926

Other Income (expense):
Other Income		208,599			57,056			392,240			111,379
Other Expense		(133,078	)		(64,621	)		(200,305	)		(129,173	)

Net other income (expense)		75,521			(7,565	)		191,935			(17,794	)

Income before provision for income taxes		2,004,124			1,034,058			5,591,843			1,735,132

Provision for income taxes		977,489			246,684			1,618,834			370,684

Net Income	$	1,026,635		$	787,374		$	3,973,009		$	1,364,448

Net income per common share:
Basic	$	0.09		$	0.07		$	0.36		$	0.13
Diluted	$	0.09		$	0.07		$	0.36		$	0.13

Weighted average shares outstanding:
Basic		10,924,714			10,866,775			10,921,033			10,837,186
Diluted		10,933,130			10,892,302			10,925,702			10,867,667

See accompanying notes to unaudited condensed financial statements.

F-2

VIRTRA, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Shares		Amount		Shares		Amount		Capital			Stock		Earnings		Total
	For the Three Months Ended June 30, 2023
	Preferred Stock				Common Stock				Additional Paid-In			Treasury		Accumulated
	Shares		Amount		Shares		Amount		Capital			Stock		Earnings		Total

Balance at March 31, 2023		-	$	-		10,924,274	$	1,091	$	31,536,182			-	$	5,206,508	$	36,743,781
Stock options exercised		-		-		2,500		1		10,475			-		-		10,476
Stock options repurchased		-		-		-		-		(17,568	)		-		-		(17,568	)
Stock reserved for future services		-		-		-		-		175,412			-		-		175,412
Net income		-		-		-		-		-			-		1,026,635		1,026,635
Balance at June 30, 2023		-	$	-		10,926,774	$	1,092	$	31,704,501		$	-	$	6,233,144	$	37,938,737

	For the Three Months Ended June 30, 2022
	Preferred Stock				Common Stock				Additional Paid-In		Treasury		Accumulated
	Shares		Amount		Shares		Amount		Capital		Stock		Earnings		Total

Balance at March 31, 2022		-	$	-		10,809,630		1,081		30,957,616	$	-	$	881,311	$	31,840,008
Stock options exercised		-		-		5,000		-		4,750		-		-		4,750
Stock issued for services		-		-		64,815		6		349,995		-		-		350,001
Stock reserved for future services		-		-		-		-		44,247		-		-		44,247
Net income		-		-		-		-		-		-		787,374		787,374
Balance at June 30, 2022		-	$	-		10,876,945		1,087		31,356,608	$	-	$	1,668,685	$	33,026,380

	For the Six Months Ended June 30, 2023
	Preferred Stock				Common Stock				Additional Paid-In			Treasury		Accumulated
	Shares		Amount		Shares		Amount		Capital			Stock		Earnings		Total

Balance at December 31, 2022		-	$	-		10,900,759	$	1,089	$	31,420,395			-	$	2,260,135	$	33,681,619
Stock options exercised		-		-		10,000		2		27,200			-		-		27,202
Stock options repurchased		-		-		-		-		(17,568	)		-		-		(17,568	)
Stock issued for services		-		-		16,015		1		74,999			-		-		75,000
Stock reserved for future services		-		-		-		-		199,475			-		-		199,475
Net income		-		-		-		-		-			-		3,973,009		3,973,009
Balance at June 30, 2023		-	$	-		10,926,774	$	1,092	$	31,704,501		$	-	$	6,233,144	$	37,938,737

	For the Six Months Ended June 30, 2022
	Preferred Stock				Common Stock				Additional Paid-In		Treasury		Accumulated
	Shares		Amount		Shares		Amount		Capital		Stock		Earnings		Total

Balance at December 31, 2021		-	$	-		10,807,130		1,081		30,923,391	$	-	$	304,237	$	31,228,709
Balance		-	$	-		10,807,130		1,081		30,923,391	$	-	$	304,237	$	31,228,709
Stock options exercised		-		-		5,000		-		12,725		-		-		12,725
Stock issued for services		-		-		64,815		6		349,995		-		-		350,001
Stock reserved for future services		-		-		-		-		70,497		-		-		70,497
Net income		-		-		-		-		-		-		1,364,448		1,364,448
Balance at June 30, 2022		-	$	-		10,876,945		1,087		31,356,608	$	-	$	1,668,685	$	33,026,380
Balance		-	$	-		10,876,945		1,087		31,356,608	$	-	$	1,668,685	$	33,026,380

See accompanying notes to unaudited condensed financial statements.

F-3

VIRTRA, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	2023			2022
	Six Months Ended June 30
	2023			2022

Cash flows from operating activities:
Net income	$	3,973,009		$	1,364,448
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		479,889			446,688
Right of use amortization		244,580			160,658
Employee stock compensation		199,475			70,497
Stock issued for service		75,000			350,001
Changes in operating assets and liabilities:
Accounts receivable, net		(14,928,520	)		(2,491,348	)
Inventory, net		(375,211	)		(3,816,862	)
Deferred taxes		(3,122,905	)		255,511
Unbilled revenue		5,063,881			(873,605	)
Prepaid expenses and other current assets		(15,281	)		92,128
Other assets		173,999			(186,727	)
Security deposits, long-term		-			(15,979	)
Accounts payable and other accrued expenses		3,792,847			1,115,242
Payments on operating lease liability		(257,677	)		(170,535	)
Deferred revenue		5,010,384			921,613
Net cash provided by (used in) operating activities		313,470			(2,778,270	)

Cash flows from investing activities:
Purchase of intangible assets		-			(86,012	)
Purchase of property and equipment		(345,640	)		(1,725,726	)
Net cash (used in) investing activities		(345,640	)		(1,811,738	)

Cash flows from financing activities:
Principal payments of debt		(118,087	)		(115,049	)
Stock options exercised		9,634			12,725
Net cash (used in) financing activities		(108,453	)		(102,324	)

Net increase (decrease) in cash and restricted cash		(140,623	)		(4,692,332	)
Cash and restricted cash, beginning of period		13,483,597			19,708,565
Cash and restricted cash, end of period	$	13,342,974		$	15,016,233

Supplemental disclosure of cash flow information:
Cash (refunded) paid:	$	134,514		$	99,035
Income taxes paid (refunded)	$	-		$	128,507

Supplemental disclosure of non-cash investing and financing activities:
Conversion of inventory to property and equipment	$	-		$	294,016

See accompanying notes to unaudited condensed financial statements.

F-4

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note 1. Organization and Significant Accounting Policies

Organization and Business Operations

VirTra, Inc. (the “Company,” “VirTra,” “we,” “us” or “our”), located in Chandler, Arizona, is a global provider of judgmental use of force training simulators and firearms training simulators for the law enforcement, military, educational and commercial markets. The Company’s patented technologies, software, and scenarios provide intense training for de-escalation, judgmental use-of-force, marksmanship and related training that mimics real-world situations. VirTra’s mission is to save and improve lives worldwide through practical and highly effective virtual reality and simulator technology. The Company sells its products worldwide through a direct sales force and international distribution partners. The original business started in 1993 as Ferris Productions, Inc. In September 2001, Ferris Productions, Inc. merged with GameCom, Inc. to ultimately become VirTra, Inc., a Nevada corporation.

The Russian-Ukraine conflict is a global concern. The Company does not have any significant direct exposure to Russia or Ukraine through its operations, employee base, investments, or sanctions. We have no basis to evaluate the possible risks of this conflict.

Basis of Presentation

The unaudited financial statements included herein have been prepared by us without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our audited financial statements for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 31, 2023. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted as permitted by the SEC, although we believe the disclosures that are made are adequate to make the information presented herein not misleading.

The accompanying unaudited financial statements reflect, in our opinion, all normal recurring adjustments necessary to present fairly our financial position on June 30, 2023, and the results of our operations and cash flows for the periods presented. We derived the December 31, 2022, balance sheet data from audited financial statements; however, we did not include all disclosures required by GAAP.

Interim results are subject to seasonal variations, and the results of operations for the six months ended June 30, 2023, are not necessarily indicative of the results to be expected for the full year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Significant accounting estimates in these financial statements include valuation assumptions for share-based payments, allowance for doubtful accounts, inventory reserves, accrual for warranty reserves, the carrying value of long-lived assets and intangible assets, income tax valuation allowances, and the allocation of the transaction price to the performance obligations in our contracts with customers.

Revenue Recognition

The Company adopted the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customer (Topic 606) (“ASC 606”) on January 1, 2018, and the Company elected to use the modified retrospective transition method which requires application of ASC 606 to uncompleted contracts at the date of adoption. The adoption of ASC 606 did not have a material impact on the financial statements.

F-5

Under ASC 606, the Company must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the Company satisfies a performance obligation. Significant judgment is necessary when making these determinations.

The Company’s primary sources of revenue are derived from simulator and accessories sales, training and installation, the sale of customizable software and the sale of extended service-type warranties. The Company’s policy is to typically invoice upon completion of installation and/or training until such a time the performance obligations that have been satisfied are included in unbilled. Sales discounts are presented in the financial statements as reductions in determining net revenues. Credit sales are recorded as current assets (accounts receivable and unbilled revenue). Prepaid deposits received at the time of sale and extended warranties purchased are recorded as current and long-term liabilities (deferred revenue) until earned. The following briefly summarizes the nature of our performance obligations and method of revenue recognition:

Performance Obligation		Method of Recognition

SEC Form 10-Q filed by VirTra Inc.