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What changed in VirTra, Inc's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of VirTra, Inc's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+101 added−112 removedSource: 10-K (2025-03-27) vs 10-K (2024-04-01)

Top changes in VirTra, Inc's 2024 10-K

101 paragraphs added · 112 removed · 78 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe also have copyright protection for our intellectual property produced for use in our products. We rely on the laws of unfair competition and trade secrets to protect our proprietary rights. We attempt to protect our trade secrets and other proprietary information through confidentiality and non-disclosure agreements with customers, suppliers, employees and consultants, and through other security measures.
Biggest changeWe attempt to protect our trade secrets and other proprietary information through confidentiality and non-disclosure agreements with customers, suppliers, employees and consultants, and through other security measures. However, we may be unable to detect the unauthorized use of or take appropriate steps to enforce our intellectual property rights.
In addition, VirTra has formulated the unique ArmorGen(TM) coating to certain recoil kit parts to increase durability and reduce maintenance requirements beyond any other coating we have tested. ● Return Fire Device – the patented Threat-Fire™ device which applies real-world stress on the trainees during simulation training . ● VirTra has installed a volumetric video capture studio in order to create training scenarios that could work in either screen-based simulators or in headset-based simulators.
In addition, VirTra has formulated the unique ArmorGen(TM) coating to certain recoil kit parts to increase durability and reduce maintenance requirements beyond any other coating we have tested. ● Return Fire Device – the patented Threat-Fire™ device which applies real-world stress on the trainees during simulation training. ● VirTra has installed a volumetric video capture studio in order to create training scenarios that could work in either screen-based simulators or headset-based simulators.
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.
Our focus is to expand the market share and scope of our training simulator 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.
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.
This effort will focus on new marketing and new products and/or service offerings for the purpose of widening the number of customer types 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.
The length of time required by the licensing processes can vary, potentially delaying the shipment of products and the recognition of the corresponding revenue. Any restrictions on the export of our products could have a material adverse effect on our competitive position, results of operations, cash flows, or financial condition.
The length of time required by the licensing processes can vary, potentially delaying the shipment of products and the recognition of the corresponding revenue. Any restrictions on the export of our products could have a material adverse effect on our competitive position, results of operations, cash flow, or financial condition.
We do not currently have any employees internationally; however, our U.S.-based sales force works to secure contracts to supply our products in U.S. and foreign markets. As of December 31, 2023, we have performed sales contracts and warranty service obligations in the U.S. and various foreign countries.
We do not currently have any employees internationally; however, our U.S.-based sales force works to secure contracts to supply our products in U.S. and foreign markets. As of December 31, 2024, we have performed sales contracts and warranty service obligations in the U.S. and various foreign countries.
The instructor is able to 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, namely, law enforcement, and military. These are different markets and require different sales and marketing programs as well as personnel.
The instructor is able to teach and remediate 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, namely, law enforcement, and military. These are different markets and require different sales and marketing programs as well as personnel.
We believe alternative sources generally exist for the components used in our products. 7 Our manufacturing, assembly, warehouse and shipping facilities are in Chandler, Arizona. See Item 2 – Properties. Employees As of March, 22, 2024, we employed 112 full-time employees.
We believe alternative sources generally exist for the components used in our products. Our manufacturing, assembly, warehouse and shipping facilities are in Chandler, Arizona. See Item 2 – Properties. Employees As of March 18, 2025, we employed 111 full-time employees.
Further, we seek to expand and improve the technological base and individual features of our products through ongoing research and development programs. Our patent portfolio includes seven issued U.S. patents, which expire between 2025 and 2037.
Further, we seek to expand and improve the technological base and individual features of our products through ongoing research and development programs. Our patent portfolio includes seven issued U.S. patents, which expire between 2025 and 2037. In 2019, VirTra completed an Asset Purchase Agreement with Tiberius Technology, LLC, that included purchase of a patent and two pending patents.
By using this studio, along with outside filming, we are able to offer customers the ability to purchase custom scenarios to meet their specific needs. ● TASER©, OC spray and low-light training devices that interact with VirTra’s simulators for training. Operations and Suppliers We produce some of our own products. We also rely on a variety of suppliers.
By using this studio, along with outside filming, we are able to offer customers the ability to purchase custom scenarios to meet their specific needs. ● 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.
Sources and Availability of Raw Materials/Manufacturing and Assembly We obtain the key components of our products from a variety of sources that we purchase on a purchase order basis from local suppliers at market prices based on our production requirements.
Research and Development During the years ended December 31, 2024, and 2023, our research and product development expenses were $3,003,302 and $2,794,314, respectively. 7 Sources and Availability of Raw Materials/Manufacturing and Assembly We obtain the key components of our products from a variety of sources that we purchase on a purchase order basis from local suppliers at market prices based on our production requirements.
However, we may be unable to detect the unauthorized use of or take appropriate steps to enforce our intellectual property rights. Effective trade secret protection may not be available in every country in which we offer or intend to offer our products and services to the same extent as in the United States.
Effective trade secret protection may not be available in every country in which we offer or intend to offer our products and services to the same extent as in the United States. Failure to adequately protect our intellectual property could harm or even destroy our brands and impair our ability to compete effectively.
In 2022, we submitted patent applications that will remain confidential until awarded or will remain confidential if not awarded or abandoned. We own the trademarks for “VirTra,” “VirTra Systems”, “Threat-Fire”, “ArmorGen” and many other branding trademarks. These trademarks are registered in the United States. We consider the protection of our trademarks to be important to our business.
All patent ownership was transferred effective March 13, 2019, and the two pending patents were issued as patents. In 2022, we submitted patent applications that will remain confidential until awarded or will remain confidential if not awarded or abandoned. We own the trademarks for “VirTra,” “VirTra Systems”, “Threat-Fire”, “ArmorGen” and many other branding trademarks.
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. ● 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™ Software allows users to create, edit, and train with content specific to agency’s objectives and environments.
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.
Failure to adequately protect our intellectual property could harm or even destroy our brands and impair our ability to compete effectively. Further, enforcing our intellectual property rights could result in the expenditure of significant financial and managerial resources and may not prove successful.
Further, enforcing our intellectual property rights could result in the expenditure of significant financial and managerial resources and may not prove successful. Although we intend to protect our rights vigorously, there can be no assurance that these measures will be successful.
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In 2019, VirTra completed an Asset Purchase Agreement with Tiberius Technology, LLC, that included purchase of a patent and two pending patents, all patent ownership was transferred effective March 13, 2019, and the two pending patents were issued as patents.
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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™ Software allows users to create, edit, and train with content specific to agency’s objectives and environments.
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Although we intend to protect our rights vigorously, there can be no assurance that these measures will be successful. Research and Development During the years ended December 31, 2023, and 2022, our research and product development expenses were $2,794,314 and $2,606,840, respectively.
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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. Operations and Suppliers We produce some of our own products. We also rely on a variety of suppliers.
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These trademarks are registered in the United States. We consider the protection of our trademarks to be important to our business. We also have copyright protection for our intellectual property produced for use in our products. We rely on the laws of unfair competition and trade secrets to protect our proprietary rights.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur Chief Executive Officer, John Givens, has unique expertise and long-standing relationships in the military simulation market that could have a material impact on our company’s future. If they were to leave us or become incapacitated, we might suffer in our planning and execution of business strategy and operations, impacting our financial results.
Biggest changeWe rely upon the accumulated knowledge, skills and experience of our executive officers and significant employees. Our Chief Executive Officer, John Givens, has unique expertise and long-standing relationships in the military simulation market that could have a material impact on our Company’s future.
The factors that could cause us to lose these contracts and could decrease our backlog or otherwise materially harm our business, prospects, financial condition or results of operations include: ● budget constraints affecting government spending generally, or specific departments or agencies such as U.S. or foreign defense and transit agencies and regional transit agencies, and changes in fiscal policies or a reduction of available funding; ● re-allocation of government resources as the result of actual or threatened terrorism or hostile activities or for other reasons; ● increasing customers’ demands for broad uncapped indemnifications provisions with no termination date and unwillingness to agree to request to remove such clauses when possible or negotiate caps and a defined end point to our obligations; ● disruptions in our customers’ ability to access funding from capital markets; ● curtailment of governments’ use of outsourced service providers and governments’ in-sourcing of certain services; ● the adoption of new laws or regulations pertaining to government procurement; ● government appropriations delays or blanket reductions in departmental budgets; 9 ● suspension or prohibition from contracting with the government or any significant agency with which we conduct business; ● increased use of shorter duration awards, which increases the frequency we may need to recompete for work; ● impairment of our reputation or relationships with any significant government agency with which we conduct business; ● decreased use of small business set asides or changes to the definition of small business by government agencies; ● increased use of lowest-priced, technically acceptable contract award criteria by government agencies; ● increased aggressiveness by the government in seeking rights in technical data, computer software, and computer software documentation that we deliver under a contract, which may result in “leveling the playing field” for competitors on follow-on procurements; ● impairment of our ability to provide third-party guarantees and letters of credit; ● delays in the payment of our invoices by government payment offices; and ● national or international health emergencies, such as the COVID-19 public health pandemic.
The factors that could cause us to lose these contracts and could decrease our backlog or otherwise materially harm our business, prospects, financial condition or results of operations include: ● budget constraints affecting government spending generally, or specific departments or agencies such as U.S. or foreign defense and transit agencies and regional transit agencies, and changes in fiscal policies or a reduction of available funding; ● re-allocation of government resources as the result of actual or threatened terrorism or hostile activities or for other reasons; ● increasing customers’ demands for broad uncapped indemnifications provisions with no termination date and unwillingness to agree to request to remove such clauses when possible or negotiate caps and a defined end point to our obligations; ● disruptions in our customers’ ability to access funding from capital markets; ● curtailment of governments’ use of outsourced service providers and governments’ in-sourcing of certain services; ● the adoption of new laws or regulations pertaining to government procurement; 9 ● government appropriations delays or blanket reductions in departmental budgets; ● suspension or prohibition from contracting with the government or any significant agency with which we conduct business; ● increased use of shorter duration awards, which increases the frequency we may need to recompete for work; ● impairment of our reputation or relationships with any significant government agency with which we conduct business; ● decreased use of small business set asides or changes to the definition of small business by government agencies; ● increased use of lowest-priced, technically acceptable contract award criteria by government agencies; ● increased aggressiveness by the government in seeking rights in technical data, computer software, and computer software documentation that we deliver under a contract, which may result in “leveling the playing field” for competitors on follow-on procurements; ● impairment of our ability to provide third-party guarantees and letters of credit; ● delays in the payment of our invoices by government payment offices; and ● national or international health emergencies, such as the COVID-19 public health pandemic.
For us to export certain products, technical data or services, we are required to obtain licenses from the U.S. government, often on a transaction-by-transaction basis. These licenses are generally required for the export of the military versions of our products and technical data and for defense services.
For us to export certain products, technical data or services, we are required to obtain licenses from the U.S. government, often on a transaction-by-transaction basis. These licenses are generally required for the export of military versions of our products and technical data and for defense services.
Our ability to compete effectively will depend on our ability to maintain the proprietary nature of our technology and content through a combination of patent, trademark, copyright and trade secret protection, non-disclosure agreements and licensing arrangements. Litigation, or participation in administrative proceedings, may be necessary to protect our proprietary rights.
Our ability to compete effectively will depend on our ability to maintain the proprietary nature of our technology and content through a combination of patent, trademark, copyright and trade secret protection, non-disclosure agreements and licensing arrangements. 13 Litigation, or participation in administrative proceedings, may be necessary to protect our proprietary rights.
We cannot predict or estimate the amount of additional costs we will incur to meet our additional disclosure obligations under the Exchange Act or the timing of such costs. 15 The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures.
We cannot predict or estimate the amount of additional costs we will incur to meet our additional disclosure obligations under the Exchange Act or the timing of such costs. The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures.
No holders of any shares of our Common Stock have the right to require us to file registration statements for the public resale of such shares. 17 The provisions of our Articles of Incorporation and Bylaws may delay or prevent a takeover which may not be in the best interests of our stockholders.
No holders of any shares of our Common Stock have the right to require us to file registration statements for the public resale of such shares. The provisions of our Articles of Incorporation and Bylaws may delay or prevent a takeover which may not be in the best interests of our stockholders.
Given the limited trading of our Common Stock, resale of even a small number of shares of our Common Stock pursuant to Rule 144 or an effective registration statement may adversely affect the market price of our Common Stock. Our equity incentive plan allows us to issue stock options and award shares in our Common Stock.
Given the limited trading of our Common Stock, resale of even a small number of shares of our Common Stock pursuant to Rule 144 or an effective registration statement may adversely affect the market price of our Common Stock. 16 Our equity incentive plan allows us to issue stock options and award shares in our Common Stock.
To the extent any of our products are covered by third-party patents, we could need to acquire a license under such patents to develop and market our products. 13 Despite our efforts to safeguard and maintain our proprietary rights, we may not be successful in doing so.
To the extent any of our products are covered by third-party patents, we could need to acquire a license under such patents to develop and market our products. Despite our efforts to safeguard and maintain our proprietary rights, we may not be successful in doing so.
Existing laws and regulations are evolving and subject to different interpretations, and various federal and state legislative or regulatory bodies may expand current or enact new laws or regulations. We cannot guarantee you that we are not infringing or violating any third-party intellectual property rights.
Existing laws and regulations are evolving and subject to different interpretations, and various federal and state legislative or regulatory bodies may expand current or enact new laws or regulations. We cannot guarantee that we are not infringing or violating any third-party intellectual property rights.
Our revenues from contracts, directly or indirectly, with foreign and U.S. Federal, state, regional and local governmental agencies represented substantially all of our total revenues in fiscal year 2023. Although these various government agencies are subject to common budgetary pressures and other factors, many of our various government customers exercise independent purchasing decisions.
Our revenues from contracts, directly or indirectly, with foreign and U.S. Federal, state, regional and local governmental agencies represented substantially all of our total revenues in fiscal year 2024. Although these various government agencies are subject to common budgetary pressures and other factors, many of our various government customers exercise independent purchasing decisions.
Other factors that could cause such volatility may include, among other things: ● actual or anticipated fluctuations in our operating results, including the loss of a large or key customer or vendor; ● the absence of securities analysts covering us and distributing research and recommendations about us; ● we may have a low trading volume for a few reasons, including that a large portion of our stock is closely held; ● overall stock market fluctuations; ● announcements concerning our business or those of our competitors; ● actual or perceived limitations on our ability to raise capital when we require it, and to raise such capital on favorable terms; 16 ● conditions or trends in the industry; ● litigation; ● changes in market valuations of other similar companies; ● future sales of Common Stock; ● departure of key personnel or failure to hire key personnel; and ● general market conditions.
You may not be able to resell shares of our Common Stock following periods of volatility because of the market’s adverse reaction to volatility. 15 Other factors that could cause such volatility may include, among other things: ● actual or anticipated fluctuations in our operating results, including the loss of a large or key customer or vendor; ● the absence of securities analysts covering us and distributing research and recommendations about us; ● we may have a low trading volume for a few reasons, including that a large portion of our stock is closely held; ● overall stock market fluctuations; ● announcements concerning our business or those of our competitors; ● actual or perceived limitations on our ability to raise capital when we require it, and to raise such capital on favorable terms; ● conditions or trends in the industry; ● litigation; ● changes in market valuations of other similar companies; ● future sales of Common Stock; ● departure of key personnel or failure to hire key personnel; and ● general market conditions.
Of the approximately 11,109,730 shares of our Common Stock outstanding as of March 29, 2024, 7,500 shares are restricted subject to Rule 144 with the remaining shares tradable without restriction.
Of the approximately 11,260,209 shares of our Common Stock outstanding as of March 24, 2025, 7,500 shares are restricted subject to Rule 144 with the remaining shares tradable without restriction.
We also do not maintain any key man life insurance policies for any of our employees. If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Common Stock may decline.
If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Common Stock may decline.
Disputes with significant suppliers, contract manufacturers, logistics service providers or independent distributors, including disputes regarding pricing or performance, may also adversely affect our ability to manufacture and/or sell our products, as well as our business or financial results. We are actively monitoring the economic instability and its potential impact on our supply chain and operations.
Disputes with significant suppliers, contract manufacturers, logistics service providers or independent distributors, including disputes regarding pricing or performance, may also adversely affect our ability to manufacture and/or sell our products, as well as our business or financial results.
Some of the components of our products contain elements that may pose potential safety risks. In addition to these risks, there can be no assurance that accidents in the facilities that use our products will not occur.
In addition to these risks, there can be no assurance that accidents in the facilities that use our products will not occur.
We also could become subject to investigations by the stock exchange on which the securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources. As an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we are permitted to rely on exemptions from certain disclosure requirements.
We also could become subject to investigations by the stock exchange on which the securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources. 14 We do incur significantly increased costs because of operating as a public company, and our management is required to devote substantial time to new compliance initiatives.
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Although our products are manufactured in North America and we source the significant majority of our ingredients and raw materials from North America, due to current and potential future port closures and other restrictions resulting from the outbreak, global supply may become constrained, which may cause the price of certain ingredients and raw materials used in our products to increase and/or we may experience disruptions to our operations.
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We are actively monitoring economic instability and its potential impact on our supply chain and operations. 12 Some of the components of our products pose potential safety risks which could create potential liability exposure for us. Some of the components of our products contain elements that may pose potential safety risks.
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While we do not expect that the virus will have a material adverse effect on our business or financial results at this time, we are unable to accurately predict the impact that the coronavirus will have due to various uncertainties, including the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and actions that may be taken by governmental authorities. 12 Some of the components of our products pose potential safety risks which could create potential liability exposure for us.
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If he were to leave us or become incapacitated, we might suffer in our planning and execution of business strategy and operations, impacting our financial results. We also do not maintain any key man life insurance policies for any of our employees.
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We rely upon the accumulated knowledge, skills and experience of our executive officers and significant employees. Our Executive Chairman of the Board, Robert Ferris, built our business from inception and, along with other members of the management team, are responsible for many of the products and clients that we have today.
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We qualify as an “emerging growth company” under the JOBS Act through December 31, 2023. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.
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For so long as we are an emerging growth company, we will not be required to: ● have an auditor report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; 14 ● comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); ● submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency”; and ● disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.
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In addition, Section 102 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. The company has implemented new standards such as the lease and revenue standards without using the extended option.
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Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. As an emerging growth company, our auditor is not required to attest to the effectiveness of our internal controls.
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Our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting while we are an emerging growth company or a smaller reporting company as defined under rules promulgated by the SEC.
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This means that the effectiveness of our financial reporting may differ from our peer companies in that they may be required to obtain independent registered public accounting firm attestations as to the effectiveness of their internal controls over financial reporting and we are not.
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While our management is required to attest to internal control over financial reporting and we will be required to detail changes to our internal controls on a quarterly basis, we cannot provide assurance that the independent registered public accounting firm’s review process in assessing the effectiveness of our internal controls over financial reporting, if obtained, would not find one or more material weaknesses or significant deficiencies.
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Further, once we cease to be an emerging growth company and no longer qualify as a smaller reporting company, we will be subject to independent registered public accounting firm attestation regarding the effectiveness of our internal controls over financial reporting.
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Even if management finds such controls to be effective, our independent registered public accounting firm may decline to attest to the effectiveness of such internal controls and issue a qualified report. We do incur significantly increased costs because of operating as a public company, and our management is required to devote substantial time to new compliance initiatives.
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You may not be able to resell shares of our Common Stock following periods of volatility because of the market’s adverse reaction to volatility.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Management Leadership Team, with oversight from the Board of Directors, plans to implement a comprehensive cybersecurity program, including incident response process, aligned with the National Institute of Standards and Technology (NIST) Cybersecurity Framework and NIST Computer Security Incident Handling Guide (NIST SP 800-61) to assess, identify, address and manage risks from cybersecurity threats that may result in material adverse effects on the confidentiality, integrity and availability of our business and information systems.
Biggest changeOur Management Leadership Team, with oversight from the Board of Directors, plans to further implement a comprehensive cybersecurity program, including incident response process, aligned with the NIST Cybersecurity Framework and NIST Computer Security Incident Handling Guide (NIST SP 800-61) to assess, identify, address and manage risks from cybersecurity threats that may result in material adverse effects on the confidentiality, integrity and availability of our business and information systems. 17 Our Director of Technology reports to our Chief Financial Officer and has operational responsibility for our information security programs, protections, and efforts, along with leading efforts for implementing, monitoring, and maintaining cybersecurity and data security strategy, policy, standards, architecture, and practices across our business.
While we have not experienced any material cybersecurity threats or incidents in recent years, there can be no guarantee that we will not be the subject of future threats or incidents.
While we have not experienced any material cybersecurity incidents in recent years, there can be no guarantee that we will not be the subject of future threats or incidents.
We do not currently have a Cybersecurity Incident Response Plan (“CSIRP”) to provide the organizational and operational structure, processes, and procedures for investigating, containing, documenting and mitigating cybersecurity incidents.
We have a NIST enclave Cybersecurity Incident Response Plan (“CSIRP”), but do not currently have a company-wide CSIRP to provide the organizational and operational structure, processes, and procedures for investigating, containing, documenting and mitigating cybersecurity incidents.
Despite ongoing efforts to continuously improve our and our vendors’ ability to protect against cyber incidents, we may not be able to protect all information systems, and such incidents may lead to reputational harm, revenue and customer loss, legal actions, statutory penalties, among other consequences.
Despite improved data protections and efforts to continuously improve our and our vendors’ ability to protect against cyber incidents, we may not be able to fully protect all information systems from all evolving threats. Such incidents may lead to reputational harm, loss of goodwill, revenue and customer loss, legal actions, and statutory penalties, among other consequences.
We expect to implement a risk-based approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner. 18 We also rely on information technology and third-party vendors to support our operations, including our secure processing of personal, confidential, sensitive, proprietary and other types of information.
We expect to further implement a risk-based approach to identifying, preventing, and mitigating cybersecurity threats and incidents, while also further implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner.
In that regard, we have increased our investment in information systems by hiring a Director of Technology in 2024 to replace limited outsourced services previously utilized. We are currently working towards CMMC certification and expect to be ready for a third-party assessment sometime during the 2025 fiscal year.
We are currently working towards CMMC certification and expect to be ready for a third-party assessment sometime during the 2025 fiscal year.
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Our Director of Technology reports to our Chief Financial Officer and has operational responsibility for our information security programs, protections, and efforts, along with leading efforts for implementing, monitoring, and maintaining cybersecurity and data security strategy, policy, standards, architecture, and practices across our business.
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In that regard, we have increased our investment in information systems by hiring a Director of Technology in 2024 to replace limited outsourced services previously utilized and bolstered our IT department with other hires.
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In 2024 we evaluated and implemented top tier security enhancements across company data systems in the form of new virus, malware, and ransomware protections, SEIM, email and systems security protections, improved systems management, and email/phishing security training for staff. Additionally completing National Institute of Standards and Technology (NIST) 800-171a enclave assessment and requirements.
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We also rely on information technology and third-party vendors to support our operations, including our secure processing of personal, confidential, sensitive, proprietary, and other types of information.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThis will allow us to offer onsite training in the use of our systems and allow us to do remote demos of our systems to our harder to reach departments. On June 1, 2022, we moved into a newly leased space in Orlando, Florida, that is approximately 9,350 square feet.
Biggest changeIn addition to the centralization we were also able to convert the additional space to a dedicated training and demo space. This allows us to offer onsite training in the use of our systems and allows us to do remote demos of our systems to our harder to reach departments.
On August 25, 2021, we purchased an industrial building of approximately 76,650 square feet situated on approximately 4.3 acres at 295 East Corporate Place in Chandler, Arizona.
ITEM 2. PROPERTIES. On August 25, 2021, we purchased an industrial building of approximately 76,650 square feet situated on approximately 4.3 acres at 295 East Corporate Place in Chandler, Arizona.
We believe that this building allows for our expected growth in simulator development and production, recoil kit development and production, training content creation as well as administrative, customer and technology support as we plan to scale.
We believe that this building allows for our expected growth in simulator development and production, recoil kit development and production, training content creation as well as administrative, customer and technology support as we plan to scale, in addition to providing a larger and centralized facility to enhance efficiency.
We believe this space will be instrumental in growing our military business and supporting an east coast customer service
On June 1, 2022, we moved into a newly leased space in Orlando, Florida, that is approximately 9,350 square feet. We believe this space will be instrumental in growing our military business and supporting an east coast customer service
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ITEM 2. PROPERTIES. We lease approximately 37,729 rentable square feet of office and warehouse space from an unaffiliated third party for our corporate office, manufacturing, assembly, warehouse and shipping facility located at 7970 South Kyrene Road, Tempe, Arizona 85284.
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Beginning in April of 2023 we subleased this location for the duration of the contract with the lease term ending in 2024 along with our lease expiration.
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In addition, we lease approximately 5,131 rentable square feet of office and industrial space within the same business complex as our main office from an unaffiliated third party for our machine shop at 7910 South Kyrene Road, Tempe, Arizona 85223. Both properties are under the same lease agreement which expires on April 30, 2024.
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In 2022, the Company moved all the operations from 7970 South Kyrene into the newly purchased building on 295 East Corporate Place. We moved the rest of the operations from 7910 Kyrene into the 295 East Corporate Place location in 2023.
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Approximately 15,000 square feet of the new building housed two pre-existing tenants with multi-year rent agreements, and we canceled the leases of both tenants and took ownership of 11,775 square feet on October 1, 2022. We gave notice to the second tenant, and we took over the additional 5,207 square feet in May 2023.
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Ultimately, we expect this purchase to result in spending less per month on facilities while having access to a larger and centralized facility to enhance efficiency. In addition to the centralization we were also able to convert the additional space to a dedicated training and demo space.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. 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 4. MINE SAFETY DISCLOSURES. Not applicable. 19 PART II
Biggest changeITEM 3. 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 4. MINE SAFETY DISCLOSURES. Not applicable. 18 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our Common Stock is traded on The NASDAQ Capital Market under the stock symbol, “VTSI.” Holders of Common Stock As of March 29, 2024, 11,109,730 shares of our Common Stock were outstanding and held by approximately 39 holders of record.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our Common Stock is traded on The NASDAQ Capital Market under the stock symbol, “VTSI.” Holders of Common Stock As of March 24, 2025, 11,260,209 shares of our Common Stock were outstanding and held by approximately 36 holders of record.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeV-Author™ is an easy-to-use application capable of almost unlimited custom scenarios, skill drills, targeting exercises and firearms courseware proven to be highly effective for users of VirTra simulation products. ● Simulated Recoil Kits - a wide range of highly realistic and reliable simulated recoil kits/weapons ● Return Fire Device – the patented Threat-Fire™ device which applies real-world stress on the trainees during simulation training. ● VirTra has installed a volumetric video capture studio in order to create training scenarios that could work in either screen-based simulators or in headset-based simulators.
Biggest changeV-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.
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. 24 Critical Accounting Policies We have identified the following policies below as critical to our business and results of operations.
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 We have identified the following policies below as critical to our business and results of operations.
To the extent we establish or change a valuation allowance in a period, we include an adjustment within the tax provision of our statements of operations. Deferred tax assets reflect current statutory income tax rates in effect for the period in which the deferred tax assets are expected to be realized.
To the extent we establish or change a valuation allowance in a period, we include an adjustment within the tax provision of our statements of operations. 25 Deferred tax assets reflect current statutory income tax rates in effect for the period in which the deferred tax assets are expected to be realized.
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 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. 19 ● Partners and Acquisitions.
Military Engagement Skills mode supplies realistic scenario training taken from real world events. 21 ○ 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.
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 following discussion provides supplemental information regarding the significant estimates, judgments and assumptions made in implementing the Company’s critical accounting policies. Basis of Presentation and Use of Estimates Our financial statements have been prepared in accordance with GAAP.
The following discussion provides supplemental information regarding the significant estimates, judgments and assumptions made in implementing the Company’s critical accounting policies. 23 Basis of Presentation and Use of Estimates Our financial statements have been prepared in accordance with GAAP.
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. 20 ● Increase Total Addressable Market . We plan to increase the size of our total addressable market.
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.
Forfeitures are recorded in subsequent periods when they occur. 26 Income Taxes We use significant judgment in determining the provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against net deferred tax assets.
Forfeitures are recorded in subsequent periods when they occur. Income Taxes We use significant judgment in determining the provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against net deferred tax assets.
Off-Balance Sheet Arrangements As of December 31, 2023, 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.
Off-Balance Sheet Arrangements As of December 31, 2024, 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.
Actual results could differ significantly from those estimates. Allowance for Doubtful Accounts The Company only ships products when it has reasonable assurance that it will receive payment from the customer. When such assurance is not available, the Company will require payment in advance. For customers other than United States governmental agencies, the Company generally requires advance deposits prior to shipment.
Actual results could differ significantly from those estimates. Allowance for Credit Losses The Company only ships products when it has reasonable assurance that it will receive payment from the customer. When such assurance is not available, the Company will require payment in advance. For customers other than United States governmental agencies, the Company generally requires advance deposits prior to shipment.
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, 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.
Significant accounting estimates in these financial statements include valuation assumptions for share-based payments, Allowance for Credit Losses, 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.
Revenues include sales of products and services and are in net of discounts. Product sales consist of simulators, upgrade components, scenarios, scenario software, recoil kits, Threat-Fire ® and other accessories. Services include installation, training, limited assurance-type warranties, extended service-type warranty agreements, related support, customer content and design work.
Product sales consist of simulators, upgrade components, scenarios, scenario software, recoil kits, Threat-Fire ® and other accessories. Services include installation, training, limited assurance-type warranties, extended service-type warranty agreements, related support, customer content and design work.
We assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining lives against their respective carrying amounts.
We assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets.
We periodically perform reviews to determine whether facts and circumstances exist which indicate that the carrying amount of assets may not be recoverable or that the useful life of assets is shorter or longer than originally estimated.
In determining the depreciation rate, historical disposal experience, holding periods and trends in the market are reviewed. We periodically perform reviews to determine whether facts and circumstances exist which indicate that the carrying amount of assets may not be recoverable or that the useful life of assets is shorter or longer than originally estimated.
Volumetric video realism far exceeds that of computer-generated avatars which likely gives VirTra a strategic advantage for highly desired de-escalation training, especially when simulating human interaction is required. ● TASER©, OC spray and low-light training devices that interact with VirTra’s simulators for training. Results of operations for the years ended December 31, 2023, and December 31, 2022 Revenues.
Volumetric video realism far exceeds that of computer-generated avatars which likely gives VirTra a strategic advantage for highly desired de-escalation training, especially when simulating human interaction is required. ● 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.
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. The Company had $18,849,842 and $13,483,597 of cash and cash equivalents as of December 31, 2023, and 2022, respectively. Working capital was $33,240,516 and $24,339,089 as of December 31, 2023, and 2022, respectively.
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. The Company had $18,040,827 and $18,849,842 of cash and cash equivalents as of December 31, 2024 and 2023, respectively. Working capital was $34,826,680 and $33,988,492 as of December 31, 2024 and 2023, respectively.
We evaluated the distinct performance obligations and the pattern of revenue recognition of our contracts upon adoption of the standard. Consequently, after our review of contracts, we concluded that the impact of adopting the standard did not have a significant effect on our balance sheets, statements of operations, changes in stockholders’ equity, or cash flows.
Consequently, after our review of contracts, we concluded that the impact of adopting the standard did not have a significant effect on our balance sheets, statements of operations, changes in stockholders’ equity, or cash flows. 24 Revenues include sales of products and services and are in net of discounts.
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. ● 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™ Software allows users to create, edit, and train with content specific to agency’s objectives and environments.
The V-ST PRO™ is also capable of displaying 1 to 30 lanes of marksmanship featuring real world, accurate ballistics. 20 ● 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.
Net cash provided by operating activities was $6,682,616 for the year ended December 31, 2023, as compared to $2,693,351 of cash used in operating activities for the year ended December 31, 2022.
Net cash provided by operating activities was $1,257,266 for the year ended December 31, 2024, as compared to $6,682,616 of cash provided by operating activities for the year ended December 31, 2023. The decrease in cash provided by operating activities was mostly due to the lower net income.
Income tax expense was $1,818,812 for the year ended December 31, 2023, compared to an expense of $571,642 for the same period in 2022, representing an increase in expense of $1,247,170 or 218%. Net Income.
Income tax expense was $887,286 for the year ended December 31, 2024, compared to an expense of $1,818,812 for the same period in 2023, representing a decrease in expense of $931,526 or 51%. 21 Net Income.
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 also includes non-cash stock option expense, impairment expense and bad debt 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.
Net operating expense was $17,029,508 for the year ended December 31, 2023, compared to $13,661,173 for the same period in 2022, representing an increase of $3,368,335, or 25%, with general and administrative expenses increasing by $3,180,861 or 29% and research and development expenses increasing by $187,474 or 7%.
Net operating expense was $17,416,184 for the year ended December 31, 2024, compared to $17,029,508 for the same period in 2023, representing an increase of $386,676, or 2%, with general and administrative expenses increasing by $177,688 or 1% and research and development expenses increasing by $208,988 or 7%.
Depreciation is provided using the straight-line method over the estimated economic lives of the assets or for leasehold improvements, over the shorter of the estimated useful life or the remaining lease term. In determining the depreciation rate, historical disposal experience, holding periods and trends in the market are reviewed.
Property and Equipment Property and equipment are carried at cost, net of depreciation. Depreciation commences at the time the assets are placed in service. Depreciation is provided using the straight-line method over the estimated economic lives of the assets or for leasehold improvements, over the shorter of the estimated useful life or the remaining lease term.
Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. 25 Revenue Recognition We account for revenue recognition in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018, using the modified retrospective transition method.
Revenue Recognition We account for revenue recognition in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018, using the modified retrospective transition method. We evaluated the distinct performance obligations and the pattern of revenue recognition of our contracts upon adoption of the standard.
The assessment of a customer’s creditworthiness is reliant on management’s judgment regarding such factors as previous payment history, credit rating, credit references and market reputation.
The assessment of a customer’s creditworthiness is reliant on management’s judgment regarding such factors as previous payment history, credit rating, credit references and market reputation. The Company has decided to take a more conservative approach to the bad debt reserve by calculating a percentage of all outstanding AR and updating the reserve quarterly based-on the age of the accounts receivable.
Work in progress and finished goods inventory includes an allocation for capitalized labor and overhead. Provision is made for obsolete, slow moving or defective items where appropriate. This estimated valuation requires that management make certain judgments about the likelihood that specific inventory items may have minimal or no realizable value in the future.
Inventory Valuation Inventory is stated at the lower of cost or net realizable value with cost being determined on the average cost method. Work in progress and finished goods inventory includes an allocation for capitalized labor and overhead. Provision is made for obsolete, slow moving or defective items where appropriate.
As of December 31, 2023, the Company’s backlog was $10.5 million in Capital, $6.3 million in Service and $2.6 million in STEP for a total of $19.4 million.
As of December 31, 2024, the Company’s backlog was $10.6 million in Capital, $6.6 million in Service and $4.8 million in STEP for a total of $22 million. Management estimates the majority of the new bookings received in the fourth quarter of 2024 will be converted to revenue in 2025.
Explanation and Use of Non-GAAP Financial Measures: Earnings (loss) 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, impairment expense and bad debt expense. Other companies may calculate adjusted EBITDA differently.
We continue to improve our margins, which offset some of the decrease in revenues. Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (AEBITDA). Explanation and Use of Non-GAAP Financial Measures: Earnings (loss) before interest, income taxes, depreciation and amortization and before other non-operating costs and income (“EBITDA”) and adjusted EBITDA are non-GAAP measures.
Backlog The Company defines bookings as the total number of newly signed contracts and purchase orders received in a defined period. The Company received bookings totaling $13.5 million for the three months ended December 31, 2023. This brings the total booking for the year ended 2023 to $33.6 million.
Financing activities in both years consisted of principal payments of debt, offset by proceeds from the exercise of stock options. 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 $12.2 million for the three months ended December 31, 2024.
Cost of sales were $11,378,264 for the year ended December 31, 2023, compared to $12,047,366 for the same period in 2022, representing a decrease of $669,102 or 6%.
This contract is ongoing, but only $2.8 million of this contract was recognized in 2024. Cost of Sales. Cost of sales were $6,938,304 for the year ended December 31, 2024, compared to $11,378,264 for the same period in 2023, representing a decrease of $4,439,960 or 39%. The year-over-year decrease was due to lower revenues. Gross Profit.
Other income was $586,082 for the year ended December 31, 2023, compared to other expense of $66,165 for the same period in 2022, representing a positive change of $652,247. This increase is due to subleasing one of the Kyrene buildings along with making cash moves to increase our interest earnings Income Tax Expense.
Other net income was $254,636 for th e year ended December 31, 2024, compared to other income of $586,082 for the same period in 2023, representing a decrease of $331,446. This decrease is due to seven fewer months of rental income, partially offset by an increase in interest income. Income Tax Expense.
These judgments are based on the current quantity of the item on hand compared to historical sales volumes, potential alternative uses of the products and the age of the inventory item. Property and Equipment Property and equipment are carried at cost, net of depreciation. Depreciation commences at the time the assets are placed in service.
This estimated valuation requires that management make certain judgments about the likelihood that specific inventory items may have minimal or no realizable value in the future. These judgments are based on the current quantity of the item on hand compared to historical sales volumes, potential alternative uses of the products and the age of the inventory item.
Gross profit was $26,665,096 for the year ended December 31, 2023, compared to $16,254,878 for the same period in 2022, representing an increase of $10,410,218 or 64%. The gross profit margin was 70% for the year ended December 31, 2023, and 57% for the same period in 2022.
Gross profit was $19,412,515 for the year ended December 31, 2024, compared to $27,413,073 for the same period in 2023, representing a decrease of $8,000,558 or 29%. The gross profit margin was 74% for the year ended December 31, 2024, and 71% for the same period in 2023. The gross profit decrease was mainly due to the decrease in revenue.
Net cash used in financing activities was $188,184 for the year ended December 31, 2023, as compared to $190,419 used in financing activities for the year ended December 31, 2022. Financing activities in 2023 consisted mainly of debt repayment offset by proceeds from the exercise of stock options. Financing activities in 2022 consisted mainly of debt repayments.
Investing activities for both years consisted of increases to property, plant and equipment, through the addition of the machine shop in 2024 and remodeling the Chandler office and opening a training center in 2023. 22 Net cash used in financing activities was $220,709 for the year ended December 31, 2024, as compared to $188,184 used in financing activities for the year ended December 31, 2023.
A reconciliation of net income to adjusted EBITDA is provided in the following table: For the Years Ended December 31, December 31, Increase % 2023 2022 (Decrease) Change Net Income $ 8,402,858 $ 1,955,898 $ 6,446,960 330 % Adjustments: Provision for income taxes 1,818,812 571,642 1,247,170 218 % Depreciation and amortization 928,545 887,118 41,427 5 % Interest (net) (20,440 ) 190,772 (211,212 ) (111 )% EBITDA $ 11,129,775 $ 3,605,430 $ 7,524,345 209 % Right of use amortization 496,127 412,335 83,792 20 % Adjusted EBITDA $ 11,625,902 $ 4,017,765 $ 7,608,137 189 % 23 Liquidity and Capital Resources.
A reconciliation of net income to adjusted EBITDA is provided in the following table: For the Year Ended Dec 31, Dec 31, 2023 Increase % 2024 (Restated) (Decrease) Change Net Income (Loss) $ 1,363,681 $ 9,150,835 $ (7,787,154 ) -85 % Adjustments: Provision for income taxes 887,286 1,818,812 $ (931,526 ) -51 % Depreciation and amortization 1,136,812 928,545 $ 208,267 22 % Interest (net) (182,018 ) (20,440 ) $ (161,578 ) 790 % EBITDA $ 3,205,761 $ 11,877,752 $ (8,671,991 ) -73 % Right of use amortization (279,592 ) 496,127 $ (775,719 ) Adjusted EBITDA $ 2,926,169 $ 12,373,879 $ (9,447,710 ) -76 % Liquidity and Capital Resources.
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Revenues were $38,043,360 for the year ended December 31, 2023, compared to $28,302,244 for the same period in 2022, representing an increase of $9,741,116 or 34%. The increase was the result of increases in sales of simulators, STEP sales, accessories, custom content, custom design work, curriculum, and training, and recurring extended warranty revenue in 2023. Cost of Sales.
Added
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.
Removed
The year-over-year decrease was due to a significant increase in capitalized labor as multiple projects are set to complete in 2024 as well as our ability to decease our cost of items going into our production builds and an increase in STEP contract renewals that have minimal costs associated in future years. Gross Profit.
Added
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.
Removed
The gross profit increase was mainly due to the increase in simulator system sales and recurring STEP revenue that helped increase revenue while decreasing the cost of goods sold.
Added
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.
Removed
Also contributing to this increase was an unusual event of signed contract for custom work that included a large $3 million kickoff milestone payment for which no significant costs are associated Operating Expenses.
Added
VirTra holds a patent for electronic simulation in simulation making the pairing of the device and the simulators a sourced item. ● VirTra has installed a volumetric video capture studio in order to create training scenarios that could work in either screen-based simulators or in headset-based simulators.
Removed
The increase in general and administrative expenses was driven by an increase in labor costs, cost associated with the final move into the Chandler building, the costs associated with the relaunch of the ERP system, a full year of costs from the Orlando office and additional travel expenses for tradeshows and international sales. 22 Income from Operations.
Added
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 years ended December 31, 2024, and December 31, 2023 Revenues.
Removed
Income from operations was $9,635,588 for the year ended December 31, 2023, compared to $2,593,705 for the same period in 2022, representing an increase of $7,041,883, or 271%, resulting from an increase in revenue, and a decrease in cost of goods despite an increase in operating expenses. Other Income.
Added
Revenues were $26,350,819 for the year ended December 31, 2024, compared to $38,791,337 for the same period in 2023, representing a decrease of $12,440,518 or 32%. The decrease was primarily the result of a challenging booking year in a continuing resolution environment which started at the beginning of 2024.
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Net income was $8,402,858 for the year ended December 31, 2023, compared to $1,955,898 for the same period in 2022, representing an increase of $6,446,960 or 330%.
Added
This delayed the signing of multiple contracts until Q3 and mainly Q4 2024, As a result, we were unable to convert these bookings to revenue by the end of the year. Also contributing to the decrease was a particularly large contract in 2023, for which revenues of approximately $7.1 million were recognized.
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All the factors above played a role in the final numbers finished, including our attention to improving COGS dollars and increasing our revenue by having better production to turn bookings directly into sales and managing our larger contracts in a way to maximize profits Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (AEBITDA).
Added
The Company, however, was able to slightly increase its margins as it continues to optimize its processes. Operating Expenses.
Removed
The net cash increase is driven by our changes in terms and condition where we are collecting more money upfront and at a quicker speed than in years past which is allowing us to decrease our unbilled and increase our while also increasing our deferred revenue Net cash used in investing activities was $1,128,187 for the year ended December 31, 2023, and net cash used by investing activities was $3,341,198 for the year ended December 31, 2022.
Added
The increase in general and administrative expenses was driven by an increase in travel costs, IT infrastructure to prep VirTra for NIST compliance, and increased labor costs. R&D costs increased as VirTra continues to improve its systems, processes and tools as to remain competitive in its space. Other Income.
Removed
Investing activities in 2023 consisted of the increasing our plant, property and equipment by finishing the remodel of the Chandler office including opening a training center. In 2022, this amount was higher as the bulk of the remodeling work was completed during this period.
Added
Net income was $1,363,681 for the year ended December 31, 2024, compared to $9,150,835 for the same period in 2023, representing a decrease of $7,787,154 or 85%. All the factors above played a role in the net result, with our main issue being the revenue year over year decrease.
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In addition to the signed STEP contracts, there are $6.9 million in renewable STEP contract options in which it has been calculated that we only have a 5% of option years that do not renew. Management estimates the majority of the new bookings received in the fourth quarter of 2023 will be converted to revenue in 2024.
Added
Net cash used in investing activities was $1,845,572 for the year ended December 31, 2024, and net cash used by investing activities was $1,128,187 for the year ended December 31, 2023.
Removed
The company has decide to take a more conservative approach to the bad debt reverse by calculating a percentage of all outstanding AR and updating the reverse quarterly base-on AR buckets Inventory Valuation Inventory is stated at the lower of cost or net realizable value with cost being determined on the average cost method.
Added
This brings the total booking for the year ended 2024 to $29.6 million. The Company has made one change to the booking qualifications. We have strengthened the language in the STEP contract Terms and Conditions to guarantee the agreement for the full three-year term.
Added
This means beginning in Q4 we had 8 STEP contracts with the full contract 3-year value recorded as bookings amounting to an additional $1.9 million. This change also secures future revenue and lowers our risk of unsigned or cancelled contracts.
Added
Since the change was only made in Q4 we still estimate, there are $5.3 million in renewable STEP contract options still outstanding, based on current renewal rates the Company believes 95% of those options will be exercised.
Added
With a new federal administration in place at the beginning of 2025, it is unknown what impact that will have on our bookings for 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.

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