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What changed in VirTra, Inc's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of VirTra, Inc's 2024 and 2025 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 2025 report.

+123 added−113 removedSource: 10-K (2026-03-26) vs 10-K (2025-03-27)

Top changes in VirTra, Inc's 2025 10-K

123 paragraphs added · 113 removed · 97 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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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.
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.
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.
The V-ST PRO™ is also capable of displaying 1 to 30 lanes of marksmanship featuring real world, accurate ballistics. 5 ● 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.
Management is uncertain whether we might encounter future delays with suppliers that would have a material impact on us. Competition and Competitive Landscape We compete against a number of established companies that provide similar products and services, some of which have financial, technical, marketing, sales, manufacturing, distribution and other resources significantly greater than ours.
Management is uncertain whether we might encounter future delays with suppliers that would have a material impact on us. 6 Competition and Competitive Landscape We compete against a number of established companies that provide similar products and services, some of which have financial, technical, marketing, sales, manufacturing, distribution and other resources significantly greater than ours.
For additional information related to export regulations, see Item 1A, “Risk Factors – Risks Related to Our Business.” Government Contracts The U.S. government, and other governments, may terminate any of our government contracts at their convenience, as well as for default, based on our failure to meet specified performance requirements.
For additional information related to export regulations, see Item 1A, “Risk Factors – Risks Related to Our Business.” 8 Government Contracts The U.S. government, and other governments, may terminate any of our government contracts at their convenience, as well as for default, based on our failure to meet specified performance requirements.
“Risk Factors – Risks Related to Our Business.” 8 Environmental We are subject to various federal, state, local and non-U.S. laws and regulations relating to environmental protection, including the discharge, treatment, storage, disposal and remediation of hazardous substances and wastes.
“Risk Factors – Risks Related to Our Business.” Environmental We are subject to various federal, state, local and non-U.S. laws and regulations relating to environmental protection, including the discharge, treatment, storage, disposal and remediation of hazardous substances and wastes.
Military Engagement Skills mode supplies realistic scenario training taken from real world events. 5 ○ 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.
In the latter instance, our customer is the relevant U.S. government agency. The government agency may then distribute our products to third parties within the particular country. Regulatory Matters Our business is regulated in most of our markets.
In the latter instance, our customer is the relevant U.S. government agency. The government agency may then distribute our products to third parties within that particular country. Regulatory Matters Our business is regulated in most of our markets.
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.
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 highly effective simulators and critical in-house integration components.
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.
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.
We believe that our products and services are superior to those offered by our competitors based on our association with industry experts, the strength in developing a more effective training solution ecosystem, our patented products and our extensive library of training content that would require time and a substantial investment by a competitor to offer a comparable product. 6 VirTra buys and tests new headsets on a regular basis and has made some software and content preparations to add a headset-based product to our offerings.
We believe that our products and services are superior to those offered by our competitors based on our association with industry experts, the strength in developing a more effective training solution ecosystem, our patented products and our extensive library of training content that is certified by IADELST that would require time and a substantial investment by a competitor to offer a comparable product.
We plan to release revolutionary new products and services, as well as to 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 new products and services, as well as continue incremental improvements to existing product lines. In certain cases, the Company may enter new market segments through the introduction of new types of products or services.
V-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.
V-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. ● True-Fire™ is the improved version of VirTra’s patented drop-in recoil kits that greatly increases reliability of laser activation.
In addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect the content of our products and the formulations for such products. This Annual Report on Form 10-K may also contain trademarks, service marks and trade names of other companies, which are the property of their respective owners.
This Annual Report on Form 10-K may also contain trademarks, service marks and trade names of other companies, which are the property of their respective owners.
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.
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.
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. 4 ● Increase Total Addressable Market . We plan to increase the size of our total addressable market.
We plan to selectively expand our management and technical teams as needed to support anticipated demand and increased marketing and sales activities. 4 ● Increase Total Addressable Market . We plan to increase the size of our total addressable market.
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.
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. We believe alternative sources generally exist for the components used in our products.
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.
In 2022 we opened a facility in Orlando, Florida to support east coast operations. 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.
VirTra recoil kits, return fire devices and other accessories would likely also work with a headset-based product. Intellectual Property We own or have rights to trademarks or trade names that we use in connection with the operation of our business, including our corporate names, logos and website names.
Intellectual Property We own or have rights to trademarks or trade names that we use in connection with the operation of our business, including our corporate names, logos and website names. In addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect the content of our products and the formulations for such products.
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.
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.
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.
This helped to further reduce the rare chance of laser activation when the weapon is manipulated, tapped, or dropped during simulation training. ● 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 are used in either screen-based simulators or headset-based simulators.
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.
Further, we seek to expand and improve the technological base and individual features of our products through ongoing research and development programs. As of the end of 2025, VirTra owns 8 issued patents, one of which was granted in 2025.
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.
Our manufacturing, assembly, warehouse and shipping facilities are in Chandler, Arizona. See Item 2 – Properties. Employees As of March 23, 2026, we employed 94 full-time employees and 4 part-time employees. We maintain a satisfactory working relationship with our employees Operations Our operations are conducted from our principal executive office in Chandler, Arizona.
Through disciplined growth in our business, we have achieved a solid balance sheet by increasing our working capital and limiting our bank debt.
We focus on delivering integrated solutions that enhance performance, reliability, and scalability for our customers. Through disciplined execution, we have strengthened our financial position by increasing working capital and limiting bank debt.
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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.
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We also intend to leverage advancements in artificial intelligence and large language models to enhance realism, improve user interaction and client relatability, and reduce development time and costs across our product portfolio. ● Partners and Acquisitions. We try to spend our time and funds wisely and not tackle tasks that can be done more efficiently with partners.
Removed
These drop-in conversion kits fit into real weapons but safely simulate the most powerful recoil on the market and even lock-back when out-of-ammunition or simulating a dud. True-Fire™ is a patented solution that uniquely empowers VirTra customers with such reliable and accurate firing events so they can perform simulator-based weapon qualification and courses of fire (COF).
Added
VirTra’s experienced engineering team introduced proprietary mechanical enhancements and upgraded firmware/software to enable more accurate differentiation of intentional versus unintentional activation of the recoil kit laser.
Removed
During 2022, VirTra’s engineering team further enhanced True-Fire™ technology with new patent pending features.
Added
VirTra buys and tests new headsets on a regular basis and has made some software and content preparations to add a variety of commercial off the shelf headset-based product to our offerings. VirTra recoil kits, return fire devices and other accessories would likely also work with a headset-based product in an indirect way.
Removed
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.
Added
Three previously filed patent applications are under USPTO examination and awaiting determination, a process that can take up to 30 months from the application date, and longer in some cases. In addition, two patent applications were filed with the USPTO in 2025.
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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.
Added
Finally , VirTra is in the drafting phase of five patent applications that have not yet been filed with USPTO. 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.
Removed
We maintain a satisfactory working relationship with our employees Operations Our operations are conducted from our principal executive office in Chandler, Arizona. In 2022 we opened a facility in Orlando, Florida to support east coast operations.
Added
Although we intend to protect our rights vigorously, there can be no assurance that these measures will be successful. 7 Research and Development During the years ended December 31, 2025, and 2024, our research and product development expenses were $2,383,595 and $3,003,302, respectively.
Added
The decrease in research and development costs in 2025 was primarily attributable to the capitalization of certain significant development initiatives rather than expensing those costs as incurred. The Company continues to invest in new product offerings and innovative ideas to enhance and expand its product portfolio.
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As of December 31, 2025, we have performed sales contracts and warranty service obligations in the U.S. and various foreign countries.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeYou 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.
Biggest changeOther 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 including those national and international events that adversely affect markets Any of these factors could have a significant and adverse impact on the market price of our Common Stock.
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.
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; 9 ● 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; ● 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.
In addition, we do not carry broadly applicable patent liability insurance and any lawsuits regarding patent rights, regardless of their success, could be expensive to resolve and would divert the time and attention of our management and technical personnel. Our business is dependent on proprietary rights that may be difficult to protect and could affect our ability to compete effectively.
In addition, we do not carry broadly applicable patent liability insurance and any lawsuits regarding patent rights, regardless of their success, could be expensive to resolve and would divert the time and attention of our management and technical personnel. 13 Our business is dependent on proprietary rights that may be difficult to protect and could affect our ability to compete effectively.
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.
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.
If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations. 11 We may face competition from providers of comparable products.
If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations. We may face competition from providers of comparable products.
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.
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.
We may generally issue shares of Common Stock and Common Stock issuable upon exercise of stock options and warrants to pay for debt or services, without further approval by our stockholders based upon such factors as our Board of Directors may deem relevant at that time.
We may issue shares of Common Stock and Common Stock issuable upon exercise of stock options and warrants to pay for debt or services, without further approval by our stockholders based upon such factors as our Board of Directors may deem relevant at that time.
It is possible that we will issue additional shares of Common Stock under circumstances we may deem appropriate at the time. Shares eligible for future sale may adversely affect the market.
It is possible that we will issue additional shares of Common Stock under circumstances we may deem appropriate at the time. 16 Shares eligible for future sale may adversely affect the market.
Our Board of Directors may, without stockholder approval, issue additional series of preferred stock with dividends, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our Common Stock. We have never paid dividends on our Common Stock and have no plans to do so in the future.
Our Board of Directors may, without stockholder approval, establish and issue series of preferred stock with dividends, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our Common Stock. We have never paid dividends on our Common Stock and have no plans to do so in the future.
In addition, any new products that we market may not generate sufficient revenues to recoup their identification, development, acquisition, marketing, selling and other costs. 10 Decline in federal, state, or local government spending would likely negatively affect our product revenues and earnings.
In addition, any new products that we market may not generate sufficient revenues to recoup their identification, development, acquisition, marketing, selling and other costs. Decline in federal, state, regional or local government spending would likely negatively affect our product revenues and earnings.
Our compliance with Section 404 of the Sarbanes-Oxley Act could require that we incur substantial accounting expense and expend significant management efforts including the potential of hiring additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.
Our compliance with Section 404 of the Sarbanes-Oxley Act could require that we incur substantial accounting expenses and expend significant management efforts including the potential of hiring additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.
Government spending priorities and terms may change in a manner adverse to our businesses. A significant percentage of our revenue comes from domestic or foreign police and military forces.
Government spending priorities and terms may change in a manner adverse to our business. A significant percentage of our revenue comes from domestic or foreign police and military forces.
As a result, these competitors may be better equipped than we are to influence customer preferences or otherwise increase their market share by: ● quickly adapting to changes in customer requirements; ● readily taking advantage of acquisition and other opportunities; ● discounting excess inventory that has been written down or written off; ● devoting resources to the marketing and sale of their products, including significant advertising, media placement and product endorsement; ● adopting aggressive pricing policies; and ● engaging in lengthy and costly intellectual property and other disputes.
As a result, these competitors may be better equipped than we are to influence customer preferences or otherwise increase their market share by: ● quickly adapting to changes in customer requirements; ● readily taking advantage of acquisition and other opportunities; ● discounting excess inventory that has been written down or written off; ● devoting resources to the marketing and sale of their products, including significant advertising, media placement and product endorsement; ● adopting aggressive pricing policies; and ● engaging in lengthy and costly intellectual property and other disputes. 12 Disruptions could negatively impact revenue and results of operation.
Risks Related to Our Business We depend on government contracts for substantially all of our revenues and the loss of government contracts or a delay or decline in funding of existing or future government contracts could decrease our backlog or adversely affect our sales and cash flows and our ability to fund our growth.
Risks Related to Our Business We depend on international, federal, state, regional and local contracts for substantially all of our revenues and the loss of government contracts or a delay or decline in funding of existing or future government contracts could decrease our backlog or adversely affect our sales and cash flows and our ability to fund our growth.
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.
Our revenues from contracts, directly or indirectly, with foreign and U.S. Federal, state, regional and local governmental agencies represented approximately 79% of our total revenues in fiscal year 2025. 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 Board of Directors will have the sole right to make all decisions with respect to our management. Investors will not have an opportunity to evaluate the specific projects that will be financed with future operating income. You should not purchase our securities unless you are willing to entrust all aspects of our management to our officers and directors.
Investors will not have an opportunity to evaluate the specific projects that will be financed with future operating income. You should not purchase our securities unless you are willing to entrust all aspects of our management to our officers and directors.
Our failure to comply with the export control rules described above could expose us to significant criminal or civil enforcement action by the U.S. government, and a conviction could result in denial of export privileges, as well as contractual suspension or debarment under U.S. government contracts, either of which could have a material adverse effect on our business, results of operations and financial condition.
Our failure to comply with the export control rules described above could expose us to significant criminal or civil enforcement action by the U.S. government, and a conviction could result in denial of export privileges, as well as contractual suspension or debarment under U.S. government contracts, either of which could have a material adverse effect on our business, results of operations and financial condition. 11 Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.
If we are unable to anticipate customer preferences or to effectively identify, market and sell future products, our future revenues and operating results could be adversely affected. Our future success depends on our ability to effectively identify, market and sell new products that respond to new and evolving customer preferences.
Our future success depends on our ability to effectively identify, market and sell new products that respond to new and evolving customer preferences. Accordingly, our revenues and operating results may be adversely affected if we are unable to identify or acquire rights to new products that satisfy customer preferences.
Disruptions could negatively impact revenue and results of operation. Our ability to manufacture and/or sell our products may be impaired by damage or disruption to our manufacturing, warehousing or distribution capabilities, or to the capabilities of our suppliers, contract manufacturers, logistics service providers or independent distributors.
Our ability to manufacture and/or sell our products may be impaired by damage or disruption to our manufacturing, warehousing or distribution capabilities, or to the capabilities of our suppliers, contract manufacturers, logistics service providers or independent distributors.
Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences. We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business.
We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business.
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.
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 economic instability and its potential impact on our supply chain and operations.
If this were to occur, our stockholders could face significant material adverse consequences, including limited availability of market quotations for our Common Stock and reduced liquidity for the trading of our securities. In addition, we could experience a decreased ability to issue additional securities and obtain additional financing in the future.
If this were to occur, our stockholders could face significant material adverse consequences, including limited availability of market quotations for our Common Stock and reduced liquidity for the trading of our securities.
The introduction by competitors of lower-priced or more innovative products could, however, result in a significant decline in our revenues and have a material adverse effect on our operating results, financial position and cash flow.
The introduction by competitors of lower-priced or more innovative products could, however, result in a significant decline in our revenues and have a material adverse effect on our operating results, financial position and cash flow. 10 If we are unable to anticipate customer preferences or to effectively identify, market and sell future products, our future revenues and operating results could be adversely affected.
Any of these factors could have a significant and adverse impact on the market price of our Common Stock. In addition, the stock market in general has at times experienced extreme volatility and rapid decline that has often been unrelated or disproportionate to the operating performance of companies.
In addition, the stock market in general has at times experienced extreme volatility and rapid decline that has often been unrelated or disproportionate to the operating performance of companies. These broad market fluctuations may adversely affect the trading price of our Common Stock, regardless of our actual operating performance.
Our Common Stock price is likely to be highly volatile because of several factors, including limited public fluctuation. The market price of our Common Stock has been volatile in the past and the market price of our Common Stock could be volatile in the future.
In addition, we could experience a decreased ability to issue additional securities and obtain additional financing in the future. 15 Our Common Stock price is likely to be highly volatile because of several factors, including limited public fluctuation.
In addition to these risks, there can be no assurance that accidents in the facilities that use our products will not occur.
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. In addition to these risks, there can be no assurance that accidents in the facilities that use our products will not occur.
These broad market fluctuations may adversely affect the trading price of our Common Stock, regardless of our actual operating performance. Because our officers and Board of Directors will make all management decisions, you should only invest in our securities if you are comfortable entrusting our directors to make all decisions.
Because our officers and Board of Directors will make all management decisions, you should only invest in our securities if you are comfortable entrusting our directors to make all decisions. Our Board of Directors will have the sole right to make all decisions with respect to our management.
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.
Of the approximately 11,303,885 shares of our Common Stock outstanding as of March 23, 2026, no shares, other than those held by persons who are “control persons”, are restricted subject to Rule 144.
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Accordingly, our revenues and operating results may be adversely affected if we are unable to identify or acquire rights to new products that satisfy customer preferences.
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Uncertainty in the development, deployment, and use of AI in our products and services, as well as our business more broadly, could adversely affect our business and reputation. ● Rapid evolution and integration challenges — In particular, AI and machine learning technologies are rapidly developing and as these technologies are incorporated into our products and the operations of our customers, the pace of change has in the past and may in the future continue to accelerate.
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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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As with many new and emerging technologies, AI presents numerous risks and challenges to our internal business operations and our customers.
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For example, unexpected failures or inaccuracies in AI-driven systems could expose our customers to operational risks, particularly in high-stakes use cases such as law enforcement or public safety. ● Generative AI immaturity and defects — The development, adoption, integration and use of generative AI technology remains in the early stages and consequently, our AI technology may contain material defects or errors.
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Thoroughly testing generative AI models is both financially and operationally challenging due to their complexity and the unpredictability of outputs. ● Inherited risks from acquisitions and models — Anticipated benefits of such transactions may not materialize due to factors such as: inability to integrate or profitably benefit from acquired products, technologies (including AI and machine learning models), or businesses; inherited risks associated with AI or machine learning models (including model performance limitations, bias, explainability challenges, or reliance on training data) that may be incomplete, inaccurate, or subject to regulatory restrictions. ● Regulatory and privacy implications — We are subject to evolving U.S. and foreign laws governing the collection, processing, storage, and transfer of personal and sensitive information, as well as the development and deployment of AI systems.
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AI capabilities are integrated across our product portfolio, and we market AI-enabled functionality to customers as part of our long-term product strategy. As a result, regulatory developments affecting AI systems may directly impact our products and services.
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The market price of our Common Stock has been volatile in the past and the market price of our Common Stock could be volatile in the future. 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 changeWe are currently working towards CMMC certification and expect to be ready for a third-party assessment sometime during the 2025 fiscal year.
Biggest changeAdditionally, we have completed implementation of the requirements to meet National Institute of Standards and Technology (NIST) SP 800-171, including enclave assessment and compliance requirements .We are currently working towards CMMC certification and expect to be ready for a third-party assessment sometime during the 2026 fiscal year.
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.
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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOn 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
Biggest changeOn June 1, 2022, we moved into a newly leased 9,350-square-foot facility in Orlando, Florida. This location has been instrumental in expanding our military business and strengthening our customer service presence on the East Coast. On October 23, 2025, we signed a letter of intent to purchase this Orlando property for $5 million.
In 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.
In addition to the centralization, we were also able to convert the additional space to a dedicated training and demonstration space. This allows us to offer onsite training in the use of our systems and allows us to do remote demonstrations of our systems to our harder to reach departments.
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On March 6, 2026, we executed the Purchase and Sale Agreement, with the transaction expected to close in the second quarter of 2026. The property includes the 9,350-square-foot building currently occupied by VirTra, as well as a second 15,000-square-foot building divided into two suites.
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One suite is leased through 2028, and the other suite is leased through 2027 with two optional three-year renewal periods.

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. 18 PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS. There are 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 24, 2025, 11,260,209 shares of our Common Stock were outstanding and held by approximately 36 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 23, 2026, 11,303,885 shares of our Common Stock were outstanding and held by approximately 34 holders of record.

Item 7. Management's Discussion & Analysis

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

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Biggest changeOther 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.
Biggest changeThe Company continues to invest in new product offerings and innovative ideas to enhance and expand its product portfolio. Other Income (Expense). Other net expense was $290,307 for the year ended December 31, 2025, compared to other income of $254,636 for the same period in 2024, representing a decrease of $544,943.
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.
This feature, among others, supports our value proposition to our customers is that best practices are 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.
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.
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, respectively, that are deferred revenue recognized on a straight-line basis over the life of each respective agreement.
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.
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. Revenues include sales of products and services and are net of discounts.
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.
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.
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.
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.
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.
Forfeitures are recorded in subsequent periods when they occur. 25 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.
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.
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, 2025, and December 31, 2024 Revenues.
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.
Off-Balance Sheet Arrangements As of December 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.
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.
We continue to decrease our operating expenses, 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.
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.
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 are used in either screen-based simulators or headset-based simulators.
To determine when the performance obligation had been transferred to the customer, the Company considered control of the performance obligation transferred once the customer had the right and ability to direct the use of the product or service and the customer obtained substantially all the remaining benefit from the products and services.
To determine when the performance obligation had been transferred to the customer, the Company considers control of the performance obligation transferred once the customer has the right and ability to direct the use of the product or service and the customer obtains substantially all the remaining benefit from the products and services.
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 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 highly effective simulators and critical in-house integration components.
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.
As of December 31, 2025, the Company’s backlog was $13.8 million in Capital, $5.1 million in Service and $6.7 million in STEP, for a total of $25.6 million. Management estimates the majority of the new bookings received in the fourth quarter of 2025 will be converted to revenue in 2026.
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.
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.
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.
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.
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.
Net income was $258,446 for the year ended December 31, 2025, compared to net income of $1,363,681 for the same period in 2024, representing a decrease of $1,105,235 or 81%. All the factors discussed above played a role in the net result, with our main issue being the year-over-year decrease in revenue.
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.
Therefore, with this change, we believe there are $2.5 million in renewable STEP contract options still outstanding, and based on current renewal rates, the Company believes 95% of those options will be exercised.
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.
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. The Company had $18,594,598 and $18,040,827 of cash and cash equivalents as of December 31, 2025 and 2024, respectively. Working capital was $30,793,890 and $34,328,543 as of December 31, 2025 and 2024, respectively.
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.
We plan to release new products and services, as well as continue incremental improvements to existing product lines. In certain cases, the Company may enter new market segments through the introduction of new types of products or services.
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.
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. ● 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.
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.
Income tax benefit was $111,258 for the year ended December 31, 2025, compared to an expense of $887,286 for the same period in 2024, representing a decrease in expense of $998,544 or 113%. Net Income.
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.
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.
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.
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.
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.
Gross Profit. Gross profit was $15,202,626 for the year ended December 31, 2025, compared to $19,412,515 for the same period in 2024, representing a decrease of $4,209,889 or 22%. The gross profit margin was 68% for the year ended December 31, 2025, and 74% for the same period in 2024.
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.
The Company has made one change to the booking qualifications. As previously disclosed, in 2024 we strengthened the language in the STEP contract Terms and Conditions to guarantee the agreement for the full three-year term. This change was done to secure future revenue and lower our risk of unsigned or cancelled contracts.
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.
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 $7.3 million for the three months ended December 31, 2025. This brings the total bookings for the year ended 2025 to $26.7 million.
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 Annual Report.
Management’s estimate for the conversion of backlog is based on current contract delivery dates; however, contract terms and installation dates are subject to modification and are routinely changed at the request of the customer or due to factors outside the Company’s control. 23 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 Annual Report.
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%.
Net operating expense was $14,765,131 for the year ended December 31, 2025, compared to $17,416,184 for the same period in 2024, representing a decrease of $2,651,053 or 15%, with general and administrative expenses decreasing by $2,031,346 or 14% and research and development expenses decreasing by $619,707 or 21%.
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.
We plan to selectively expand our management and technical teams as needed to support anticipated demand and increased marketing and sales activities 19 ● Increase Total Addressable Market . We plan to increase the size of our total addressable market.
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.
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.
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.
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.
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.
Net cash used in investing activities was $3,780,744 for the year ended December 31, 2025, and net cash used in investing activities was $1,845,572 for the year ended December 31, 2024. The cash used in 2025 was driven by the creation of an intangible asset for our VXR product and purchase of additional property and equipment in 2025.
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.
Revenues were $22,402,188 for the year ended December 31, 2025, compared to $26,350,819 for the same period in 2024, representing a decrease of $3,948,631 or 15%.
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.
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.
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.
Net cash provided by operating activities was $4,587,967 for the year ended December 31, 2025, as compared to $1,257,266 of cash provided by operating activities for the year ended December 31, 2024. The increase in cash provided was primarily driven by efforts made by the team to collect accounts receivable and lowering our on-hand inventory and work-in-process accounts.
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.
A reconciliation of net income to adjusted EBITDA is provided in the following table: For the Year Ended December 31, December 31, Increase % 2025 2024 (Decrease) Change Net Income (Loss) $ 258,446 $ 1,363,681 $ (1,105,235 ) -81 % Adjustments: Provision for income taxes (111,258 ) 887,286 (998,544 ) -113 % Depreciation and amortization 1,762,468 1,136,812 625,656 55 % Interest (net) (139,516 ) (182,018 ) (42,502 ) -23 % EBITDA 1,770,140 3,205,761 (1,434,621 ) -45 % Right of use amortization (168,988 ) (279,592) 110,604 40 % Adjusted EBITDA $ 1,601,152 $ 2,926,169 $ (1,325,017 ) -45 % 22 Liquidity and Capital Resources.
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.
Net cash used in financing activities was $253,452 for the year ended December 31, 2025, as compared to $220,709 used in financing activities for the year ended December 31, 2024. This cash was used primarily to fund our mortgage payments.
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.
Cost of sales were $7,199,562 for the year ended December 31, 2025, compared to $6,938,304 for the same period in 2024, representing an increase of $261,258 or 4%. The year-over-year increase was primarily attributable to the completion of several content creation and engineering enhancement projects for existing products.
Through disciplined growth in our business, we have achieved a solid balance sheet by increasing our working capital and limiting our bank debt.
We focus on delivering integrated solutions that enhance performance, reliability, and scalability for our customers. Through disciplined execution, we have strengthened our financial position by increasing working capital and limiting bank debt.
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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.
Added
We also intend to leverage advancements in artificial intelligence and large language models to enhance realism, improve user interaction and client relatability, and reduce development time and costs across our product portfolio. ● Partners and Acquisitions. We try to spend our time and funds wisely and not tackle tasks that can be done more efficiently with partners.
Removed
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.
Added
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.
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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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The decrease was primarily attributable to a particularly challenging sales year in which VirTra faced significant external headwinds, including government shutdowns and a transition in federal leadership that resulted in notable reductions to Department of Defense related program funding.
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The Company, however, was able to slightly increase its margins as it continues to optimize its processes. Operating Expenses.
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These factors were further compounded by the composition of our 2025 bookings, the majority of which originated from international customers operating under extended 6 to 12-month delivery timelines, thereby delaying revenue recognition and contributing to an increase in backlog and a year-over-year decline in revenue.
Removed
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.
Added
Additionally, widespread delays in federal funding and grant disbursements affected numerous domestic departments, limiting their ability to initiate or complete purchases and reducing our opportunity to close and convert local sales during the period. Cost of Sales.
Removed
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
This increase reflects the Company’s continued focus on delivering new content to customers on a recurring basis. These costs were not offset in the current period by expenditures related to the development of new projects, as they were in the prior year for the VXR, SVT, and VAMIS products, which would otherwise have been captured as work in progress.
Removed
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.
Added
The gross profit decrease was mainly due to the decrease in revenue and the increase in cost of sale described above. 21 Operating Expenses.
Removed
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.
Added
The decrease in operating and general and administrative expenses reflects management’s continued efforts to appropriately align overhead costs with current revenue levels. The decrease in research and development costs in 2025 was primarily attributable to the capitalization of certain significant development initiatives rather than expensing those costs as incurred.
Added
This decrease is due to large foreign exchange expenses related to 2023 contracts that finalized, where the payment ended up being significantly lower due to the major shift in exchange rate. Income Tax Expense (Benefit).
Added
The Company has decided to take a more conservative approach to the bad debt reserve by calculating a percentage of all outstanding accounts receivable and updating the reserve quarterly based on the age of the accounts receivable. 24 Inventory Valuation Inventory is stated at the lower of cost or net realizable value with cost being determined on the average cost method.

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