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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 March 31, 2025

☐	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 May 12, 2025, the registrant had 11,261,588 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 March 31, 2025, and December 31, 2024	F-1
		Condensed Statements of Operations for the Three Months ended March 31, 2025 and 2024	F-2
		Condensed Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2025 and 2024	F-3
		Condensed Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024	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

(Unaudited)

	March 31,		December 31,
	2025		2024

ASSETS
Current assets:
Cash and cash equivalents	$	17,612,626	$	18,040,827
Accounts receivable, net		8,905,570		8,005,452
Inventory, net		14,987,491		14,583,400
Unbilled revenue		2,108,976		2,570,441
Prepaid expenses and other current assets		1,616,686		1,273,115
Total current assets		45,231,349		44,473,235
Long-term assets:
Property and equipment, net		16,318,615		16,204,663
Operating lease right-of-use asset, net		395,231		437,095
Intangible assets, net		556,429		558,651
Security deposits, long-term		35,691		35,691
Other assets, long-term		148,177		148,177
Deferred tax asset, net		4,111,630		3,595,574
Total long-term assets		21,565,773		20,979,851
Total assets	$	66,797,122	$	65,453,086

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,216,094	$	957,384
Accrued compensation and related costs		1,094,053		1,253,544
Accrued expenses and other current liabilities		1,006,591		657,114
Note payable, current		228,452		230,787
Operating lease liability, short-term		192,669		192,410
Deferred revenue, short-term		6,235,630		6,355,316
Total current liabilities		9,973,489		9,646,555
Long-term liabilities:
Deferred revenue, long-term		2,113,385		2,282,996
Note payable, long-term		7,504,157		7,567,536
Operating lease liability, long-term		221,628		265,111
Other long term liabilities		-		-
Total long-term liabilities		9,839,170		10,115,643
Total liabilities		19,812,659		19,762,198

Commitments and contingencies (See Note 11)		-		-

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; 11,260,209 and 11,255,709 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively		1,126		1,125
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		-		-
Additional paid-in capital		32,944,626		32,915,112
Retained Earnings		14,038,711		12,774,651
Total stockholders’ equity		46,984,463		45,690,888
Total liabilities and stockholders’ equity	$	66,797,122	$	65,453,086

See accompanying notes to unaudited condensed financial statements.

F-1

VIRTRA, INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

	2025			2024
	Three Months Ended March 31,
	2025			2024
				(restated)
Revenues:
Net sales	$	7,160,247		$	7,346,421
Total revenue		7,160,247			7,346,421

Cost of sales		1,963,367			2,632,257

Gross profit		5,196,880			4,714,164

Operating expenses:
General and administrative		3,219,950			3,370,422
Research and development		609,127			693,380

Net operating expense		3,829,077			4,063,802

Income from operations		1,367,803			650,362

Other income (expense):
Other income		72,010			396,693
Other (expense)		(73,753	)		(67,422	)

Net other income (expense)		(1,743	)		329,271

Income before provision for income taxes		1,366,060			979,633

Provision for income taxes		102,000			511,437

Net income	$	1,264,060		$	468,196

Net income per common share:
Basic	$	0.11		$	0.04
Diluted	$	0.11		$	0.04

Weighted average shares outstanding:
Basic		11,162,037			10,959,298
Diluted		11,162,037			10,961,188

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
	Preferred Stock				Common Stock				Additional Paid-In		Treasury		Accumulated
	Shares		Amount		Shares		Amount		Capital		Stock		Earnings		Total
Three Months Ended March 31, 2025

Balance at December 31, 2024		-	$	-		11,255,709	$	1,125	$	32,915,112	$	-	$	12,774,651	$	45,690,888
Stock reserved for future services		-		-		-		-		29,514		-		-		29,514
RSUs issued (stock for services)		-		-		4,500		1		-		-		-		1
Net income		-		-		-		-		-		-		1,264,060		1,264,060
Balance at March 31, 2025		-	$	-		11,260,209	$	1,126	$	32,944,626	$	-	$	14,038,711	$	46,984,463

	Preferred Stock				Common Stock				Additional Paid-In		Treasury		Accumulated Earnings
	Shares		Amount		Shares		Amount		Capital		Stock		(Restated)		Total

Three Months Ended March 31, 2024

Balance at December 31, 2023		-	$	-		11,107,230	$	1,109	$	31,957,765	$	-	$	11,410,970	$	43,369,844
Balance		-	$	-		11,107,230	$	1,109	$	31,957,765	$	-	$	11,410,970	$	43,369,844
Stock options exercised		-		-		2,500		1		10,749		-		-		10,750
Stock reserved for future services		-		-		-		-		139,999		-		-		139,999
Net income		-		-		-		-		-		-		468,196		468,196
Balance at March 31, 2024		-	$	-		11,109,730	$	1,110	$	32,108,513	$	-	$	11,879,166	$	43,988,789
Balance		-	$	-		11,109,730	$	1,110	$	32,108,513	$	-	$	11,879,166	$	43,988,789

See accompanying notes to unaudited condensed financial statements.

F-3

VIRTRA, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	2025			2024
	Three Months Ended March 31
	2025			2024
				(Restated)
Cash flows from operating activities:
Net income (loss)	$	1,264,060		$	468,196
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		316,640			236,547
Right of use amortization		41,864			127,893
Employee stock compensation		29,514			139,999
Bad debt expense		(15,334	)		245,089
Changes in operating assets and liabilities:
Accounts receivable, net		(884,782	)		5,926,870
Inventory, net		(404,091	)		112,420
Deferred taxes		(516,055	)		(33,203	)
Unbilled revenue		461,463			(571,759	)
Prepaid expenses and other current assets		(343,571	)		74,091
Accounts payable and other accrued expenses		448,503			(246,905	)
Operating lease right of use		(43,223	)		(137,291	)
Deferred revenue		(289,297	)		(1,205,438	)
Net cash provided by operating activities		65,691			5,136,509

Cash flows from investing activities:
Purchase of intangible assets		-			-
Purchase of property and equipment		(428,371	)		(1,546,772	)
Net cash (used in) investing activities		(428,371	)		(1,546,772	)

Cash flows from financing activities:
Principal payments of debt		(65,521	)		(35,152	)
Stock issued for options exercised		-			10,750
Net cash (used in) financing activities		(65,521	)		(24,402	)

Net increase (decrease) in cash		(428,201	)		3,565,335
Cash and restricted cash, beginning of period		18,040,827			18,849,842
Cash and restricted cash, end of period	$	17,612,626		$	22,415,177

Supplemental disclosure of cash flow information:
Income taxes paid (refunded)	$	20,951		$	24,002
Interest paid	$	56,974		$	61,552

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, firearms training simulators and driving 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.

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, 2024 included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on March 27, 2025. 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 March 31, 2025, and the results of our operations and cash flows for the periods presented. We derived the December 31, 2024 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 three months ended March 31, 2025, 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 credit losses and notes receivable, inventory reserves, accrual for warranty reserves, the carrying value of long-lived assets and intangible assets, income tax valuation allowances, the carrying value of cost basis investments, 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.

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.

Restatement of year over year revenue numbers for Q1

During the audit of the 2024 financial statements, it was discovered that due to issues in the implementation of new accounting software, a revenue line was missing in 2023. This occurred when a deposit from a 2021 customer was not accurately entered into the 2021 initial launch of the new accounting system. $747,977 of revenue was recorded in the first quarter of 2024 instead of in 2023. This indicates that Q1 of 2024 was overstated by the $747,977, this adjustment was made in the audited financials of year ending 2024. This means that Q1 comparatives of 2024 to 2025 will continually show the decrease in YOY of $747,977.

F-5

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

The Company’s primary sources of revenue are derived from simulator and accessories sales, training and installation, the sale of customizable software, the sale of customized content scenarios, and the sale of extended service-type warranties. 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

Simulator and accessories		Upon transfer of control

STEP Program		Deferred and recognized over the life of the contract

Installation and training		Upon completion or over the period of services being rendered

Extended service-type warranty		Deferred and recognized over the life of the extended warranty

Customized software and content		Upon transfer of control or over the period services are performed depending on the terms of the contract

Customized content scenario		As performance obligation is transferred over time (input method using time and materials expended)

Design and prototyping		Recognized at the completion of each agreed upon milestone

Sales-based royalty exchanged for license of intellectual property		Recognized as the performance obligation is satisfied over time – which is as the sales occur

The Company recognizes revenue upon transfer of control or upon completion of the services for the simulator and accessories; for the installation and training and customized software performance obligations as the customer has the right and ability to direct the use of these products and services and the customer obtains substantially all of the remaining benefit from these products and services at that time. Revenue from certain customized content contracts may be recognized over the period the services are performed based on the terms of the contract. For the sales-based royalty exchanged for license of intellectual property, the Company recognized revenue as the sales occur over time.

The Company recognizes revenue on a straight-line basis over the period of services being rendered for the extended service-type warranties as these warranties represent a performance obligation to “stand ready to perform” over the duration of the warranties. As such, the warranty service is performed continuously over the warranty period.

Each contract states the transaction price. The contracts do not include variable consideration, significant financing components or noncash consideration. The Company has elected to exclude sales and similar taxes from the measurement of the transaction price. The contract’s transaction price is allocated to the performance obligations based upon their stand-alone selling prices. Discounts on the stand-alone selling prices, if any, are allocated proportionately to each performance obligation.

Disaggregation of Revenue

Under ASC 606, disaggregated revenue from contracts with customers depicts the nature, amount, timing, and uncertainty of revenue and cash flows affected by economic factors. The Company has evaluated revenues recognized and the following table illustrates the disaggregation disclosure by customer’s location and performance obligation.

F-6

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Schedule of Disaggregation of Revenue

	Commercial		Government		International		Total		Commercial		Government		International		Total
	Three Months Ended March 31
	2025								2024
	Commercial		Government		International		Total		Commercial		Government		International		Total
Simulators and accessories	$	24,378	$	1,971,324	$	1,768,635	$	3,764,337	$	75,780	$	3,811,257	$	530,280	$	4,417,317
Extended Service-type warranties		35,925		913,321		20,865		970,111		-		870,803		4,202		875,005
Customized software and content				66,781		101,832		168,613		-		265,406		-		265,406
Installation and training		4,388		179,266		17,050		200,704		-		236,339		5,164		241,503
Design & Prototyping				1,115,890				1,115,890		-		583,326		-		583,326
STEP		1,753		908,820		30,019		940,592		-		954,349		9,515		963,864
Total Revenue	$	66,444	$	5,155,402	$	1,938,401	$	7,160,247	$	75,780	$	6,721,480	$	549,161	$	7,346,421

Commercial customers include selling through prime contractors for military or law enforcement contracts, domestically. Government customers are defined as directly selling to government agencies. For the three months ended March 31, 2025, governmental customers comprised $5,155,402, or 72% of total net sales, commercial customers comprised $66,444 or 1% of total net sales and international customers comprised $1,938,401 or 27% of total net sales. By comparison, for the three months ended March 31, 2024, governmental customers comprised $6,721,480, or 91% of total net sales, commercial customers comprised $75,780 or 1% of total net sales and international customers comprised $549,161, or 7% of total net sales. For the three months ended March 31, 2025, and 2024, the Company recorded $940,592 and $963,864, respectively, in STEP revenue, or 13% and 12%, respectively, of total net sales.

Segment Information

Information related to the Company’s reportable operating business segments is shown below. The Company’s reportable segments are reported in a manner consistent with the way management evaluates the businesses. The results of operations are regularly reviewed by the Company’s chief operating decision maker (“CODM”), the Chief Executive Officer. The Company identifies its reportable business segments based on differences in products and services. The accounting policies of the business segments are the same as those described in the summary of significant accounting policies. To evaluate each reportable segment’s performance, the CODM uses income from operations as a measure of profit and loss. The CODM compares operational performance against management expectations when making decisions regarding allocation of operating and capital resources to each segment.

The Company has identified the following business segments

	●	Simulators and Accessories- These include all variations of the VirTra simulator, Simulated recoil kits, Return first devices, Taser©, OC Spray, low light devices and refill options.
	●	Extended Service-type warranties – Warranties on all products past 1 or more years
	●	Customized software and Custom content- Contracts with specific suppliers who have ask for content related directly to their situations that we design and film or specific software request for there system only
	●	Installation and Training – Installation of our simulators at the specific sites as well as extra training classes preformed onsite, virtually or at the VirTra Training Center
	●	Design and Prototyping – Specific contracts related to hardware development for specific customers
	●	Subscription Training Equipment Partnership (STEP)™ is a program that allows agencies to utilize VirTra’s simulator products, accessories, and V-VICTA interactive coursework on a subscription basis.

F-7

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Schedule of Segment

Sale of product	2025		2024
	Three Months Ending March 31,
Sale of product	2025		2024
Simulators and accessories	$	3,764,337	$	4,417,317
Extended Service-type warranties		970,111		875,005
Customized software and content		168,613		265,406
Installation and training		200,704		241,503
Design & Prototyping		1,115,890		583,326
STEP		940,592		963,864
Total consolidated	$	7,160,247	$	7,346,421
Revenue	$	7,160,247	$	7,346,421

Depreciation and amortization	2025		2024
Simulators and accessories	$	102,862	$	60,804
Extended Service-type warranties		7,664		7,664
Customized software and content		1,581		1,581
Installation and training		1,585		1,585
Design & Prototyping		30,956		18,877
STEP		122,672		122,972
Corporate		47,098		20,840
Total consolidated	$	314,418	$	234,323
Depreciation and amortization	$	314,418.00	$	234,323

Segment income (loss)	2025		2024
Simulators and accessories	$	2,891,320	$	2,230,706
Extended Service-type warranties		1,032,367		875,005
Customized software and content		283,787		291,853
Installation and training		-3,248		4,365
Design & Prototyping		167,303		463,914
STEP		825,351		848,322
Corporate		-3,932,820		-4,245,963
Total	$	1,264,060	$	468,202
Segment income (loss)	$	1,264,060	$	468,202

Expenditures for segment assets	2025		2024
Simulators and accessories	$	12,871	$	1,460,997
Extended Service-type warranties		-		-
Customized software and content		-		-
Installation and training		-		-
Design & Prototyping		-		-
STEP		411,560		59,793
Corporate purchases		3,940		12,187
Expenditures for segment assets	$	428,371	$	1,532,977

Segment assets	2025		2024
Simulators and accessories	$	27,749,997	$	26,186,523
Extended Service-type warranties		-		-
Customized software and content		622,678		401,034
Installation and training		-		-
Design & Prototyping		367,092		637,462
STEP		1,235,650		1,011,546
Corporate Assets		36,821,704		41,139,831
Segment assets	$	66,797,122	$	69,376,396

F-8

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Customer Deposits

Customer deposits consist of prepaid deposits received for equipment purchase orders and for Subscription Training Equipment Partnership (“STEP”) operating agreements that expire annually. Customer deposits are considered a deferred liability until the completion of the customer’s contract performance obligation. When revenue is recognized, the deposit is applied to the customer’s receivable balance. Customer deposits are recorded as both current and long-term liabilities under deferred revenue on the accompanying balance sheet as of March 31, 2025 there was $3,853,491 in current and 18,258 in long term. On December 31,2024 there was only a current liability totaling $3,755,187. Changes in deferred revenue amounts related to customer deposits will fluctuate from year to year based upon the mix of customers required to prepay deposits under the Company’s credit policy.

Warranty

The Company warranties its products from manufacturing defects on a limited basis for a period of one year after purchase but also sells separately priced extended service-type warranties for periods of up to four years after the expiration of the standard one-year warranty. During the term of the initial one-year warranty, if the device fails to operate properly from defects in materials and workmanship, the Company will fix or replace the defective product. Deferred revenue for separately priced extended warranties one year or less totaled $2,382,139 and $2,600,129 on March 31, 2025 and December 31, 2024, respectively. Deferred revenue for separately priced extended warranties longer than one year totaled $2,056,653 and $2,207,950 on March 31, 2025 and December 31, 2024, respectively. The accrual for the one-year manufacturer’s warranty liability totaled $224,000 and $212,000 on March 31, 2025 and December 31, 2024, respectively. During the three months ended March 31, 2025 and 2024, the Company recognized revenue of $970,111 and $875,005, respectively, related to the extended service-type warranties that were amortized from the deferred revenue balance at the beginning of each period. Changes in deferred revenue amounts related to extended service-type warranties will fluctuate from year to year based upon the average remaining life of the warranties at the beginning of the period and new extended service-type warranties sold during the period.

STEP Revenue

The Company’s STEP operations consist principally of leasing its simulator products under operating agreements expiring in one year. At the commencement of a STEP agreement, any lease payments received are deferred and no income is recognized. Subsequently, payments are amortized and recognized as revenue on a straight-line basis over the term of the agreement. The agreements are generally for a period of 12 months and can be renewed for an additional 12-month period up to two additional 12-month period maximum of 36-months for the entire agreement. This is a change from prior years which allowed for renewals up to 48 months for a total of 60 months. Agreements may be terminated by either party upon written notice of termination at least sixty days prior to the end of the 12-month period. The payments are generally fixed for the first year of the agreement, with increases in payments in subsequent years to be mutually agreed upon. The agreements do not include variable lease payments or free rent periods. In addition, the agreements do not provide for the underlying assets to be purchased at their fair market values at interim periods or at maturity. Each STEP agreement comes with full customer support and stand-ready advance replacement parts to maintain each system for the duration of the lease. The amount that the Company expects to derive from the STEP equipment following the end of the agreement term is dependent upon the number of agreement terms renewed. The agreements do not include a residual value guarantee. Management notes with 4-year history of providing this service and additional revenue stream, the Company has only had cancellation of a total of 8 STEP agreements before the 5-year end date of the contract this equates to less than 5% of all agreements.

Concentration of Credit Risk and Major Customers and Suppliers

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, certificates of deposit, and accounts receivable.

The Company’s cash, cash equivalents and certificates of deposit are maintained with financial institutions with high credit standings and are FDIC insured deposits. The FDIC insures deposits according to the ownership category in which the funds are insured and how the accounts are titled. The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. The Company had uninsured cash and cash equivalents of $17,112,626 and $17,540,827 as of March 31, 2025, and December 31, 2024, respectively.

F-9

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Sales are typically made on credit and the Company generally does not require collateral. Management performs ongoing credit evaluations of its customers’ financial condition and maintains an allowance for estimated losses. Historically, the Company has experienced minimal charges relative to doubtful accounts.

Historically, the Company primarily sells its products to U.S. federal and state agencies.

As of March 31, 2025, the Company had 3 customers that accounted for 11%, 13%, and 25% respectively, of total accounts receivable. As of December 31, 2024, the Company had two customers that accounted for 28% and 13% of total accounts receivable.

For the three months ended March 31, 2025 and 2024, the Company had one customer accounting for 14% of the total revenue and another accounting for 10%

Net Income per Common Share

The net income per common share is computed by dividing net income by the weighted average of common shares outstanding. Diluted net income per share reflects the potential dilution, using the treasury stock method, that would occur if outstanding stock options and warrants were exercised. Earnings per share computations are as follows:

Schedule of Earnings Per Share


		Three Months End March 31
		*2025*		*2024*
				(restated)
Net Income	$	1,264,060	$	468,196
Weighted average common stock outstanding		11,162,037		10,959,298
Incremental shares from stock options		-		1,890
Weighted average common stock outstanding, diluted		11,162,037		10,961,188

Net Income per common share and common equivalent share
Basic	$	0.11	$	0.04
Diluted	$	0.11	$	0.04

Note 2. Inventory

Inventory consisted of the following as of:

Schedule of Inventory

	March 31, 2025			December 31, 2024

Raw materials, WIP, finished goods and materials being inspected	$	15,474,862		$	15,070,771
Reserve		(487,371	)		(487,371	)

Total Inventory	$	14,987,491		$	14,583,400

The Company regularly evaluates the useful life of its spare parts inventory but did not have any cause to reclassify any this quarter.

Note 3. Property and Equipment

Property and equipment consisted of the following as of:

Schedule of Property and Equipment

		March 31, 2025			December 31, 2024

Land	$	1,778,987		$	1,778,987
Building & building improvements		11,523,813			11,523,813
Computer equipment		1,301,700			1,301,700
Furniture and office equipment		349,669			349,669
Machinery and equipment		4,381,623			4,368,752
STEP equipment		2,973,335			2,561,775
Leasehold improvements		340,703			336,763

Total property and equipment		22,649,830			22,221,459
Less: Accumulated depreciation and amortization		(6,331,215	)		(6,016,796	)

Property and equipment, net	$	16,318,615		$	16,204,663

Depreciation expenses, including STEP depreciation, were $314,418 and $234,324 for the three months ended March 31, 2025 and 2024, respectively.

F-10

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note 4. Intangible Assets

Intangible asset consisted of the following as of:

Schedule of Intangible Assets

	March 31, 2025			December 31, 2024
Patents	$	160,000		$	160,000
Capitalized media content		451,244			451,244
Acquired lease intangible assets		-			-

Total intangible assets		611,244			611,244
Less accumulated amortization		(54,815	)		(52,593	)

Intangible assets, net	$	556,429		$	558,651

Amortization expense was $2,222 and $2,222 for the three months ended March 31, 2025 and 2024, respectively.

Note 5. Leases

From 2016 through March 2019, the Company leased approximately 4,529 rentable square feet of office and industrial space from an unaffiliated third party for our machine shop at 2169 East 5th St., Tempe, Arizona 85284. In April 2019, the Company relocated the machine shop from the 5th St. location to 7910 South Kyrene Road, located within the same business complex as its main office. The Company executed a lease amendment to add an additional 5,131 rentable square feet for the machine shop and extended its existing office lease through April 30, 2024. On June 1, 2022, we entered into a new lease of approximately 9,350 square feet located at 12301 Challenger Parkway, Orlando, Florida, from an unaffiliate third party through May 2027.

The Company’s lease agreements do not contain any residual value guarantees, restrictive covenants, or variable lease payments. The Company has not entered into any financing leases.

In addition to base rent, the Company’s lease generally provides for additional payments for other charges, such as rental tax. The lease includes fixed rent escalations. The Company’s lease does not include an option to renew.

The Company determines if an arrangement is a lease at inception. Operating leases are recorded in operating lease right of use assets, net, operating lease liability – short-term, and operating lease liability – long-term on its balance sheets.

Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate used at adoption was 4.5%. Significant judgment is required when determining the Company’s incremental borrowing rate. The Company uses the implicit rate when readily determinable. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Effective June 1, 2022, the Company obtained a right-of-use asset in exchange for a new operating lease liability in the amount of $840,855. Effective January 1, 2019, the Company obtained a right-of-use asset in exchange for a new operating lease liability in the amount of $1,721,380 and derecognized $46,523 deferred rent for an adjusted operating lease right-of-use asset in the net amount of $1,674,857.

F-11

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Balance Sheet Classification	March 31, 2025			December 31, 2024
Assets
Operating lease right-of-use assets, December 31, 2024	$	437,095		$	716,687
Amortization for the three months ended March 31, 2025		(41,864	)		(279,592	)
Total operating lease right-of-use asset, March 31, 2025	$	395,231		$	437,095
Liabilities
Current
Operating lease liability, short-term	$	192,669		$	192,410
Non-current
Operating lease liability, long-term		221,628			265,111
Total lease liabilities	$	414,297		$	457,520

Future minimum lease payments as of March 31, 2025, under non-cancellable operating leases are as follows:


2025	$	144,204
2026		196,311
2027		99,382

Total Lease Payments		439,897
Less: imputed interest		(25,600	)
Operating Lease Liability	$	414,297

Rent expenses for the three months ended March 31, 2025 and 2024 were $47,205 and $204,235, respectively.

Note 6. Accrued Expenses

Accrued compensation and related costs consist of the following as of:

		March 31, 2025		December 31,2024

Salaries and wages payable	$	248,283	$	545,592
Employee benefits payable		54,099		34,125
Accrued paid time off (PTO)		332,701		322,406
Profit sharing payable		458,970		351,421

Total accrued compensation and related costs	$	1,094,053	$	1,253,544

Accrued expenses and other current liabilities consisted of the following as of:

	March 31, 2025		December 31, 2024
Manufacturer’s warranties	$	224,000	$	212,000
Taxes payable		637,583		-
Miscellaneous payable		145,008		445,114

Total accrued expenses and other current liabilities	$	1,006,591	$	657,114

VirTra settled a lease dispute on the Kyrene Property (signed in 2018) in February 2025. The entire expense was recorded in the 2024 financial statements, but the cash payout was completed in February of 2025.

Note 7. Notes Payable

On August 25, 2021, the Company completed the purchase of real property located in Chandler, Arizona (the “Property”) for $10,800,000 paid with cash and proceeds from a mortgage loan from Arizona Bank & Trust in the amount of $8,600,000. The loan terms include interest to be accrued at a fixed rate of 3% per year, 119 regular monthly payments of $40,978, and one irregular payment of $5,956,538 due on the maturity date of August 23, 2031. The Company began making monthly payments on September 23, 2021. The payment and performance of the loan is secured by a security interest in the property acquired.

F-12

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note payable amounts consist of the following:

Schedule of Notes Payable

	March 31, 2025		December 31, 2024

Short-term liabilities
Note payable, principal	$	217,877	$	218,890
Accrued interest to date		10,575		11,897

Note Payable, short-term	$	228,452	$	230,787

Long-term liabilities
Note payable, principal	$	7,504,157	$	7,567,536

Note payable, long term	$	7,504,157	$	7,567,536

Note 8. Related Party Transactions

None

Note 9. Commitments and Contingencies

Litigation

From time to time, the Company is notified of litigation or that a claim is being made against it. The Company evaluates contingencies on an on-going basis and has established loss provisions for matters in which losses are probable and the amount of loss can be reasonably estimated. There is no pending litigation at this time. The Company settled a lease dispute on the Kyrene property (signed in 2018) in February 2025. See Note 6.

Restricted Stock Unit Grants

There were no awards of Restricted Stock units during the three months ending March 31, 2025.

Profit Sharing

VirTra provides a discretionary profit-sharing program that pays out a percentage of Company profits each year as a cash bonus to eligible employees. The cash payment is typically split into two equal payments and distributed pro-rata in April and October of the following year to only active employees. For the three months ended March 31, 2025 and 2024, $107,549 and $163,500 was expensed to operations for profit sharing.

Note 10. Stockholders’ Equity

Common stock activity

During the three months ended March 31, 2025, the Company settled restricted stock units that had been granted to a director by issuing him 4,500 shares.

Note 11. Subsequent Events

None

F-13

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2024 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2025.

Forward-Looking Statements

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “should,” “could,” “predicts,” “potential,” “continue,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements. All forward-looking statements in this Quarterly Report on Form 10-Q are made based on our current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, you should specifically consider numerous factors, uncertainties and risks that could affect our future results or operations. These factors, uncertainties and risks may cause our actual results to differ materially from any forward-looking statement set forth in this Quarterly Report on Form 10-Q. You should carefully consider these risk and uncertainties described and other information contained in the reports we file with or furnish to the SEC before making any investment decision with respect to our securities. All forward-looking statements attributable to us or people acting on our behalf are expressly qualified in their entirety by this cautionary statement.

Business Overview

VirTra, Inc. (the “Company,” “VirTra,” “we,” “us” and “our”) is a global provider of judgmental use of force training simulators, firearms training simulators and driving 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 VirTra firearms training simulator allows marksmanship and realistic scenario-based training to take place daily without the need for a shooting range, protective equipment, role players, safety officers, or a scenario-based training site. We have developed a higher standard in simulation training including capabilities such as: multi-screen, video-based scenarios, unique scenario authoring ability, superior training scenarios, the patented Threat-Fire® shoot-back system, powerful gas-powered simulated recoil weapons, and more. The simulator also allows students to receive immediate feedback from the instructor without the potential for sustaining injuries by the instructor or the students. The instructor can teach and re-mediate critical issues, while placing realistic stress on the students due to the realism and safe training environment created by the VirTra simulator.

Business Strategy

We have two main customer groups, law enforcement and military with a plan to expand our product into the complementary markets of hospitals and private security. Our focus is to expand the market share and scope of our training simulators sales to these identified customer groups by pursuing the following key growth strategies:

	●	*Build Our Core Business*. Our goal is to profitably grow our market share by continuing to develop, produce and market the most effective simulators possible. Through disciplined growth in our business, we have achieved a solid balance sheet by increasing our working capital and limiting our bank debt. We plan to add staff to our experienced management team as needed to meet the expected increase in demand for our products and services as we increase our marketing and sales activities.

	●	Increase Total Addressable Market. We plan to increase the size of our total addressable market. This effort will focus on new marketing and new product and/or service offerings for the purpose of widening the number of types of customers who might consider our products or services uniquely compelling.

	●	Broaden Product Offerings. Since its formation in 1993, our company has had a proud tradition of innovation in the field of simulation and virtual reality. We plan to release revolutionary new products and services as well as continue incremental improvements to existing product lines. In some cases, the company may enter a new market segment via the introduction of a new type of product or service.

	●	*Partners and Acquisitions.* We try to spend our time and funds wisely and not tackle tasks that can be done more efficiently with partners. For example, international distribution is often best accomplished through a local distributor or agent. We are also open to the potential of acquiring additional businesses or of being acquired ourselves, based on what is expected to be optimal for our long-term future and our stockholders.

Product Offerings

Our simulator products include the following:

●

V-300™ Simulator – a 300° wrap-around screen with video capability is the higher standard for simulation training

	○	The V-300™ is the higher standard for decision-making simulation and tactical firearms training. Five screens and a 300-degree immersive training environment ensures that time in the simulator translates into real world survival skills. The system reconfigures to support 15 individual firing lanes.

	○	A key feature of the V-300™ shows how quickly judgment decisions must be made, and, sometimes, if they are not made immediately and accurately, it can lead to the possible loss of lives. This feature, among others, supports our value proposition to our customers is that best practices is being prepared enough for the surprises that could be around every corner and the ability to safely neutralize any life-threatening encounters.

●

V-180™ Simulator – a 180° screen with video capability is for smaller spaces or smaller budgets

○

The V-180™ is the higher standard for decision-making simulation and tactical firearms training. Three screens and a 180-degree immersive training environment ensure that time in the simulator translates into real world survival skills.

●

V-100™ Simulator & V-100™ MIL – a single-screen based simulator systems

	○	The V-100™ is the higher standard among single-screen firearms training simulators. Firearms training mode supports up to 4 individual firing lanes at one time. The optional Threat-Fire™ device safely simulates enemy return fire with an electric impulse (or vibration version), reinforcing performance under pressure. We offer an upgrade path, so a V-100™ firearms training and force options simulator can affordably grow into an advanced multi-screen trainer in upgraded products that we offer customers for future purchase.

	○	The V-100™ MIL is sold to various military commands throughout the world and can support any local language. The system is extremely compact and can even share space with a standard classroom or fits into almost any existing facility. If a portable firearms simulator is needed, this model offers the most compact single-screen simulator on the market today – everything organized into one standard case. The V-100™ MIL is the higher standard among single-screen small arms training simulators. Military Engagement Skills mode supplies realistic scenario training taken from real world events.

○

The V-ST PRO™ a highly realistic single screen firearms shooting and skills training simulator with the ability to scale to multiple screens creating superior training environments. The system’s flexibility supports a combination of marksmanship and use of force training on up to 5 screens from a single operator station. The V-ST PRO™ is also capable of displaying 1 to 30 lanes of marksmanship featuring real world, accurate ballistics.

	●	Virtual Interactive Coursework Training Academy (V-VICTA)™ enables law enforcement agencies, to effectively teach, train, test and sustain departmental training requirements through nationally accredited coursework and training scenarios using our simulators.

	●	VirTra’s Red Dot Optic Training, a 4-hour nationally-certified course developed with Victory First and Aimpoint, equips law enforcement officers with the skills to transition from iron sights to pistol-mounted red dot sights through 21 practical drills. Part of the V-VICTA program, it enhances accuracy and target acquisition while addressing optic failures, offered free to VirTra customers with an annual service agreement

	●	Subscription Training Equipment Partnership (STEP)™ is a program that allows agencies to utilize VirTra’s simulator products, accessories, and V-VICTA interactive coursework on a subscription basis.

	●	V-Author^®proprietary software allows users to create, edit, and train with content specific to the agency’s objectives and environments. V-Author is an easy-to-use application capable of almost unlimited custom scenarios, skill drills, targeting exercises, and firearms courses of fire. It also allows panoramic photos of any local location so users can train in their actual reality.

	●	Simulated Recoil Kits - a wide range of highly realistic and reliable simulated recoil kits/weapons made in the USA. VirTra’s True-Fire® recoil kits do not allow for faulty extra shots. Recoil kits use either CO2 or HPA greatly reducing the need for costly ammunition.

	●	Return Fire Device – the patented Threat-Fire® device applies real-world stress on the trainees during simulation training. Stress inoculation is a key component of training exercises. VirTra holds a patent for electronic simulation in simulation making the pairing of the device and the simulators a sourced item.

	●	TASER©, OC spray and low-light training devices that interact with VirTra’s simulators for training.

	●	V-XR is an extended reality headset-based training solution. It comes ready to use out of the box with two headsets, a trainer tablet, charging stations, a router, a casting device, and cables in a portable hard case, with a 3-year manufacturer’s warranty.

Results of operations for the three months ended March 31, 2025, and March 31, 2024

Revenues. Net sales were $7,160,247 for the three months ended March 31, 2025, compared to the restated $7,346,421 for the same period in 2024, a decrease of $186,174 or 3%. The decrease in revenue is due to a number of customers from our 4^th quarter bookings that were not able to accept delivery in the first quarter. A large portion of the 2024 backlog will convert to revenue throughout the 2025 year.

Cost of Sales. Cost of sales was $1,963,367 for the three months ended March 31, 2025, compared to $2,632,257 for the same period in 2024, a decrease of $668,890, or 25%. This decrease in cost of sales reflected our ability to streamline our operations to help increase our margin.

Gross Profit. Gross profit was $5,196,880 for the three months ended March 31, 2025, compared to $4,714,164 for the same period in 2024, an increase of $482,716, or 10%. The gross profit margin for the three months ended March 31, 2025 and 2024 was 73% and 64%, respectively. This increase in margin is solely driven by the decrease in cost of sales as stated above.

Operating Expenses. Net operating expense was $3,829,077 for the three months ended March 31, 2025, compared to $4,063,802 for the same period in 2024, a decrease of $234,725, or 6%. This decrease is occurring because of our drive to maintain or lower our overhead costs this year as we navigate the challenges that will come with the government pauses in contracts.

Operating Income. Operating income was $1,367,803 for the three months ended March 31, 2025, compared to operating income of $650,362 for the same period in 2024, an increase of 717,441 or 110%. This year over year increase is attributed to our savings in cost of goods and operating expenses while maintaining close revenues results.

Other Income. Other expense net of other income was $1,743 for the three months ended March 31, 2025, compared to net other income of $329,271 for the same period in 2024, a decrease of $331,014, or 101%, primarily because we no longer have a sublessee paying rental income in 2025.

Provision (Benefit) for Income Tax. Provision for income tax was $102,000 for the three months ended March 31, 2025, compared to $511,437 for the same period in 2024, a decrease of $409,437, or 80%. Provision for income tax is estimated quarterly applying both federal and state tax rates.

Net Income. Net income was $1,264,060 for the three months ended March 31, 2025, compared to a restated net income of $468,196 for the same period in 2024, an increase of $795,864 or 170%. The fluctuation in net income relates to each respective section discussed above.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization. Explanation and Use of Non-GAAP Financial Measures:

Earnings before interest, income taxes, depreciation, and amortization and before other non-operating costs and income (“EBITDA”) and adjusted EBITDA are non-GAAP measures. Adjusted EBITDA also includes non-cash stock option expense. Other companies may calculate adjusted EBITDA differently. The Company calculates its adjusted EBITDA to eliminate the impact of certain items it does not consider to be indicative of its performance and its ongoing operations. Adjusted EBITDA is presented herein because management believes the presentation of adjusted EBITDA provides useful information to the Company’s investors regarding the Company’s financial condition and results of operations and because adjusted EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Company’s industry, several of which present EBITDA and a form of adjusted EBITDA when reporting their results. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under accounting principles generally accepted in the United States of America (“GAAP”). Adjusted EBITDA should not be considered as an alternative for net income (loss), cash flows from operating activities and other income or cash flow statement data prepared in accordance with GAAP or as a measure of profitability or liquidity. A reconciliation of net loss to adjusted EBITDA is provided in the following table:

	For the Three Months Ended
	March 31,			March 31,		Increase			%
	2025			2024 (restated)		(Decrease)			Change

Net Income (Loss)	$	1,264,060		$	468,196	$	795,864			170	%
Adjustments:
Provision for income taxes		102,000			511,437		(409,437	)		(80	)%
Depreciation and amortization		316,640			236,547		80,093			34	%
Interest (net)		(21,251	)		54,575		75,826			139	%
EBITDA		1,661,449			1,270,755		390,694			31	%
Right of use amortization		41,864			127,893		(86,029	)		(67	)%

Adjusted EBITDA	$	1,703,313		$	1,398,648	$	304,665			22	%

Liquidity and Capital Resources. Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. The Company had $17,612,626 and $18,040,827 of cash and cash equivalents as of March 31 2025, and December 31, 2024, respectively. Working capital was $35,257,860 and $34,826,680 as of March 31, 2025, and December 31, 2024, respectively.

Net cash provided by operating activities was $65,691 and $5,136,509 for the three months ended March 31, 2025 and 2024, respectively. Net cash provided by operating activities resulted primarily from an increase in accounts receivable and inventory, offset by decreased unbilled revenue and increased accounts payable.

Net cash used in investing activities was $428,371 for the three months ended March 31, 2025, compared to net cash used in investing activities of $1,546,772 for the three months ended March 31, 2024. Investing activities in 2025 and 2024 consisted of purchases of property and equipment,

Net cash used in financing activities was $65,521 for the three months ended March 31, 2025, compared to $24,402 used in the three months ended March 31, 2024. In both periods, cash was used primarily for principal payment of debt. In 2024, this was also offset by the proceeds from the issuance of stock options which we no longer have.

Bookings and Backlog

The Company defines bookings as the total of newly signed contracts, awarded RFP’s and purchase orders received in a defined time period. The Company received bookings totaling $6.4 million for the three months ended March 31, 2025. The Company has made one change to the booking qualifications in 4^th Q 2024. We have strengthened the language in the STEP contract Terms and Conditions to guarantee the agreement for the full three-year term. This change secures future revenue and lowers our risk of unsigned or cancelled contracts. Since the change was only made in Q4 of 2024, we still estimate that there are $5 million in renewable STEP contract options still outstanding. Based on current renewal rates, the Company believes 95% of those options will be exercised.

The Company defines backlog as the accumulation of bookings from signed contracts and purchase orders that are not started, or have uncompleted performance objectives, and cannot be recognized as revenue until delivered in a future quarter. The Company splits the backlog into three categories. The first is capital which includes sales of all the simulators, corresponding accessories, installs, training custom content and custom design work. The second and third are extended warranty agreements and STEP agreements that are deferred revenue recognized on a straight-line basis over the life of each respective agreement. As of March 31, 2025, the Company’s backlog was $21.2 million, consisting of $9.9 million in Capital, $5.8 million in Service and $5.5 million in STEP.

Management estimates that most new capital bookings received in the first quarter of 2025 will be converted to revenue in 2025. Management recognizes that there are a percentage of capital contracts that will extend into 2026 by request of the customers. Management’s estimate for the conversion of backlog is based on current contract delivery dates; however, contract terms and install dates are subject to modification and are routinely changed at the request of the customer or due to factors outside the Company’s control.

With a new federal administration in place at the beginning of 2025, it is unknown what impact that will have on our bookings for the remainder of 2025. Budget cuts have been discussed and we have seen some grants and other federal funding frozen for most of the first quarter, but nothing definitive has occurred as of the date of this report.

Cash Requirements

Our management believes that our current capital resources will be adequate to continue operating our Company and maintaining our current business strategy for more than 12 months from the filing of this Quarterly Report. We are, however, open to raising additional funds from the capital markets, at a fair valuation, to purchase a business or assets, expand our production capacity, expand our product and services, to enhance our sales and marketing efforts and effectiveness, and to aggressively take advantage of market opportunities. There can be no assurance, however, that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, when it is needed, we will be forced to scale down our plans for expanded marketing and sales efforts.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our unaudited financial statements, which have been prepared in accordance with GAAP. The preparation of our unaudited financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. Significant accounting estimates in these financial statements include valuation assumptions for share-based payments, allowance for doubtful accounts and notes receivable, inventory reserves, accrual for warranty reserves, the carrying value of long-lived assets, income tax valuation allowances, the carrying value of cost basis investments, and the allocation of the transaction price to the performance obligations in our contracts with customers. We base our estimates on historical experience, our observance of trends in particular areas, and information or valuations and various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Actual amounts could differ significantly from amounts previously estimated. For a discussion of our critical accounting policies, refer to Part I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024. Management believes that there have been no changes in our critical accounting policies during the three months ended March 31, 2025.

Recent Accounting Pronouncements

See Note 1 to our financial statements, included in Part I, Item 1., Financial Information of this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

As of March 31, 2025, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guaranteed contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures

We maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Exchange Act. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officers and principal financial officer, to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officers and principal financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our principal executive officers and principal financial officer concluded that as of March 31, 2025, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to material weaknesses, which we identified in our report on internal control over financial reporting contained in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 27, 2025 These weaknesses were (i) lack of multiple levels of management review on complex business, accounting, and financial reporting issues and (ii) failure to implement adequate system and manual controls. As noted in 10-K, until such time as we expand our staff to include additional accounting and executive personnel and accounting systems and procedures, it is likely the first material weakness will continue. With respect to the second material weakness, our Board of Directors has directed management to implement more effective system and manual controls.

Change in internal control over financial reporting

There has been no change in our internal control over financial reporting that occurred during the quarterly period ended March 31, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, during the quarter ended March 31, 2025, and continuing through 2025, we are implementing more formal review and documentation of workflow processes and increased our ERP training for our staff. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There is no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we are a party or of which any of our property is the subject.

ITEM 1A. RISK FACTORS

Not required for smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

	(a)	None

	(b)	There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors since the filing with the SEC of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

(c)

None

ITEM 6. EXHIBITS

Exhibit No.		Exhibit Description

31.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of the Principal Executive Officers and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

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.

	VIRTRA, INC.

Date: May 12, 2025	By:	/s/ John F. Givens II
		John F. Givens II
		Chief Executive Officer
		(principal executive officer)

	By:	/s/ Alanna Boudreau
		Chief Financial Officer
		(principal financial officer)

VirTra, Inc 10-Q