Leases

6 Months Ended

Jun. 30, 2025

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 its 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 head 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 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 judgement 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 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.

Based on the requirements to move and leave the building in compliance with the company’s lease term, VirTra chose to use the holdover option in the lease agreement for the period of one additional month. The cost of this was split with the subtenant, this extended the lease through May 31, 2024, at which time VirTra entirely vacated the property.

The balance sheet classification of lease assets and liabilities as of June 30, 2025, are as follows:

Balance Sheet Classification	June 30, 2025			December 31, 2024
Assets
Operating lease right-of-use assets, December 31, 2024	$	437,095		$	716,687
Operating lease right-of-use assets	$	437,095		$	716,687
Amortization for the six months ended June 30, 2025		(84,365	)		(279,592	)
Amortization		(84,365	)		(279,592	)
Total operating lease right-of-use asset, Jun 30, 2025	$	352,730		$	437,095
Total operating lease right-of-use asset	$	352,730		$	437,095
Liabilities
Current
Operating lease liability, short-term	$	194,917		$	192,410
Non-current
Operating lease liability, long-term		174,696			265,111
Total lease liabilities	$	369,613		$	457,521

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Future minimum lease payments as of June 30, 2025, under non-cancellable operating leases are as follows:

NON-Cancelable operating leases

2025	$	97,634
2026		196,664
2027		99,382

Total Lease Payments		393,680
Less: imputed interest		(24,067	)
Operating Lease Liability	$	369,613

Rent expenses for the six months ended June 30, 2025, and 2024 were $93,624 and $335,316, respectively.

VirTra, Inc 10-Q