For the transition period from ~~__________________~~_____________ to ~~_________________~~______________

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

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

Indicate by check mark whether the ~~registrant:~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~~[ ]~~ ☐ No ~~[X]~~ ☒

Indicate by a check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive ~~Date~~Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ~~[X]~~ ☐ No ~~[ ]~~ ☒

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

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

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

As of ~~March 30, 2018,~~August 4, 2022, the registrant had ~~7,904,307~~17,200,133 shares of common stock outstanding.


~~Item 4.~~	~~Mine Safety Disclosures~~	9

~~Item 5.~~	~~Other Information~~	9

~~Item 6.~~	~~Exhibits~~	9

~~SIGNATURES~~		10

~~Part~~

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

~~Item 1. Financial Statements~~

VIRTRA, INC.

~~CONDENSED~~ BALANCE SHEETS

~~(Unaudited)~~

								March 31, 2022		December 31, 2021
	September 30, 2017			December 31, 2016				(Unaudited)

ASSETS
CURRENT ASSETS

Current assets:
Cash and cash equivalents	$	5,106,205		$	3,703,579			$	15,686,234	$	19,708,565
Accounts receivable, net		3,011,610			3,244,852				5,139,012		3,896,739
Inventory, net		1,689,149			1,319,944				6,948,061		5,014,924
Unbilled revenue		1,724,642			107,297				5,834,406		3,946,446
Prepaid expenses and other current assets		660,288			250,066				961,278		940,887

Total current assets		12,191,894			8,625,738				34,568,991		33,507,561

Long-term assets:
Property and equipment, net		693,206			814,323				13,474,263		12,864,766
Investment in MREC		1,988,174			471,928
Operating lease right-of-use asset, net									704,453		784,306
Intangible assets, net									566,159		535,079
Security deposits, long-term									19,712		19,712
Other assets, long-term									376,461		189,734
Deferred tax asset, net									1,737,444		1,674,234

TOTAL ASSETS	$	14,873,274		$	9,911,989
Total long-term assets									16,878,492		16,067,831

Total assets								$	51,447,483	$	49,575,392

LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Current liabilities:
Accounts payable	$	730,302		$	467,679			$	1,342,578	$	789,394
Accrued compensation and related costs		1,109,734			617,582				932,797		1,062,078
Accrued expenses and other current liabilities		227,688			194,668				1,172,589		991,744
Notes payable, current		11,250			11,250
Deferred revenue		2,753,337			2,065,905
Note payable, current									235,144		236,291
Operating lease liability, short-term									354,496		347,772
Deferred revenue, short-term									4,680,653		4,135,565

Total current liabilities		4,832,311			3,357,084				8,718,257		7,562,844

Long-term liabilities:
Deferred rent liability		87,861			122,126
Notes payable, long-term		11,250			22,500
Deferred revenue, long-term									2,245,856		1,992,625
Note payable, long-term									8,222,666		8,280,395
Operating lease liability, long-term									415,260		505,383
Other long term liabilities									5,436		5,436

Total long-term liabilities		99,111			144,626				10,889,218		10,783,839

Total liabilities		4,931,422			3,501,710				19,607,475		18,346,683

Commitments and contingencies
Commitments and contingencies (See Note 9)									-		-

STOCKHOLDERS’ EQUITY
Preferred stock $0.0001 par value; 2,500,000 authorized; no shares issued or outstanding		-			-
Common stock $0.0001 par value; 50,000,000 shares authorized; 7,927,774 shares issued and 7,906,835 shares outstanding as of September 30, 2017 and 7,927,774 issued and outstanding as of December 31, 2016.		793			793
Class A common stock $0.0001 par value; 2,500,000 shares authorized; no shares issued or outstanding		-			-
Class B common stock $0.0001 par value; 7,500,000 shares authorized; no shares issued or outstanding		-			-
Treasury stock at cost; 20,939 shares and no shares outstanding as of September 30, 2017 and December 31, 2016, respectively		(96,633	)		-
Stockholders’ equity:

Preferred stock $0.0001 par value; 2,500,000 authorized; 0 shares issued or outstanding									-		-
Common stock $0.0001 par value; 50,000,000 shares authorized; 10,809,630 shares issued and outstanding as of March 31, 2022 and 10,807,130 shares issued and outstanding as of December 31, 2021									1,081		1,081
Class A common stock $0.0001 par value; 2,500,000 shares authorized; 0 shares issued or outstanding									-		-
Class B common stock $0.0001 par value; 7,500,000 shares authorized; 0 shares issued or outstanding									-		-
Common stock value									1,081		1,081
Additional paid-in capital		14,964,939			14,128,837				30,957,616		30,923,391
Accumulated deficit		(4,927,247	)		(7,719,351	)
Retained earnings									881,311		304,237

Total stockholders’ equity		9,941,852			6,410,279				31,840,008		31,228,709

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	14,873,274		$	9,911,989
Total liabilities and stockholders’ equity								$	51,447,483	$	49,575,392

See accompanying notes to unaudited ~~condensed~~ financial statements.

~~F-1~~

F- 1

VIRTRA, INC.

~~CONDENSED~~ STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			Three Months Ended
REVENUES
													March 31, 2022			March 31, 2021

Revenues:
Net sales	$	4,645,593		$	2,993,872		$	13,902,215		$	12,602,134		$	6,753,228		$	4,441,909
Royalties/licensing fees		40,852			47,829			245,082			47,829
Total revenue		4,686,445			3,041,701			14,147,297			12,649,963			6,753,228			4,441,909

Cost of sales		1,573,384			1,345,180			4,853,796			4,856,906			3,066,138			1,873,404

Gross profit		3,113,061			1,696,521			9,293,501			7,793,057			3,687,090			2,568,505

OPERATING EXPENSES
Operating expenses:
General and administrative		2,050,395			1,401,547			5,515,455			4,632,048			2,296,392			1,710,233
Research and development		310,848			299,288			931,954			731,630			679,395			294,217

Net operating expense		2,361,243			1,700,835			6,447,409			5,363,678			2,975,787			2,004,450

Income/(loss) from operations		751,818			(4,314	)		2,846,092			2,429,379
Income from operations														711,303			564,055

OTHER INCOME (EXPENSE)
Other income (expense):
Other income		14,813			5,626			52,410			8,406			54,323			16,379
Other expense		(221	)		(2,981	)		(4,113	)		(2,981	)		(64,552	)		(2,434	)

Net other income/(loss)		14,592			2,645			48,297			5,425
Net other income (expense)														(10,229	)		13,945

Income/(loss) before income taxes		766,410			(1,669	)		2,894,389			2,434,804
Income before provision for income taxes														701,074			578,000

Provision for income taxes		24,285			8,414			102,285			73,618
Provision (Benefit) for income taxes														124,000			(77,163	)

NET INCOME/(LOSS)	$	742,125		$	(10,083	)	$	2,792,104		$	2,361,186
Net income													$	577,074		$	655,163

Earnings per common share
Net income (loss) per common share:
Basic	$	0.09		$	(0.00	)	$	0.35		$	0.30		$	0.05		$	0.08
Diluted	$	0.09		$	(0.00	)	$	0.33		$	0.28		$	0.05		$	0.08

Weighted average shares outstanding
Weighted average shares outstanding:
Basic		7,918,114			7,916,730			7,924,475			7,914,093			10,807,269			7,775,212
Diluted		8,337,377			7,916,730			8,418,275			8,552,275			10,850,376			7,835,830

See accompanying notes to unaudited ~~condensed~~ financial statements.

~~F-2~~

F- 2

VIRTRA, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

~~VIRTRA, INC.~~

~~CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY~~

~~(Unaudited)~~

	Shares		Amount		Shares		Amount		Paid-In Capital		Treasury  Stock		Accumulated Deficit		Total
	For the Three Months Ended March 31, 2022
	Preferred Stock				Common Stock				Additional
	Shares		Amount		Shares		Amount		Paid-In Capital		Treasury  Stock		Accumulated Earnings		Total

Balance at December 31, 2021		-	$	-		10,807,130	$	1,081	$	30,923,391	$	-	$	304,237	$	31,228,709
Stock options exercised		-		-		2,500		-		7,975		-		-		7,975
Stock reserved for future services		-		-		-		-		26,250		-		-		26,250
Net income		-		-		-		-		-		-		577,074		577,074
Balance at March 31, 2022		-	$	-		10,809,630	$	1,081	$	30,957,616	$	-	$	881,311	$	31,840,008

Preferred stock Common stock Additional
paid-in Treasury Accumulated
Shares Amount Shares Amount capital Stock Deficit Total

Balance at December 31, 2016 - $ - 7,927,774 $ 793 $
14,128,837
$ - $ (7,719,351 ) $ 6,410,279

Stock based compensation - - - - 160,351 - - 160,351

Stock options repurchased - - - - (67,000 ) - - (67,000 )

Stock warrants vested-MREC Investment - - - - 1,516,246 - - 1,516,246

Stock warrants repurchased-MREC Inv. - - - - (773,495 ) - - (773,495 )

Treasury stock - - - - - (96,633 ) - (96,633 )

Net income - - - - - - 2,792,104 2,792,104

Balance at September 30, 2017 - $ - 7,927,774 $ 793 $
14,964,939
$ (96,633 ) $ (4,927,247 ) $ 9,941,852

	For the Three Months Ended March 31, 2021
	Preferred Stock				Common Stock				Additional
	Shares		Amount		Shares		Amount		Paid-In Capital		Treasury Stock		Accumulated Deficit			Total

Balance at December 31, 2020		-	$	-		7,745,030	$	778	$	13,893,660	$	-	$	(2,235,852	)	$	11,658,586
Stock options exercised		-		-		2,500		-		3,620		-		-			3,620
Net income		-		-		-		-	$	-	$	-		655,163			655,163
Balance at March 31, 2021		-	$	-		7,747,530	$	778	$	13,897,280	$	-	$	(1,580,689	)	$	12,317,369

See accompanying notes to unaudited ~~condensed~~ financial statements.

~~F-3~~

F- 3

VIRTRA, INC.

~~CONDENSED~~ STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended
September 30, 2017 September 30, 2016

Cash flows from operating activities:
Net income $ 2,792,104 $ 2,361,186
Adjustments to reconcile net income to net cash provided (used) in operating activities
Depreciation and amortization 204,527 160,768
Stock compensation 160,351 93,990
Cash settlement of stock options 115,550 315,224
Changes in operating assets and liabilities:
Accounts receivable 233,241 (670,444 )
Inventory (369,206 ) (142,313 )
Unbilled revenue (1,617,346 ) -
Prepaid expenses and other current assets (410,221 ) (192,024 )
Accounts payable and other accrued expenses 787,795 33,776
Deferred revenue and deferred rent 653,168 609,473

Net cash provided by operating activities 2,549,964 2,569,636

Cash flows from investing activities:
Purchase of property and equipment (83,410 ) (468,115 )

Net cash used in investing activities (83,410 ) (468,115 )

Cash flows from financing activities:

Repayment of debt (11,250 ) (11,250 )
Common stock issued for option exercise - 16,350
Purchase of treasury stock (96,633 ) 2,981
Repurchase of stock options (182,550 ) (505,224 )
Repurchase of stock warrants (773,495 ) -

Net cash used in financing activities (1,063,928 ) (497,143 )

Net increase in cash 1,402,626 1,604,378
Cash, beginning of period 3,703,579 3,317,020

Cash, end of period $ 5,106,205 $ 4,921,398

Supplemental disclosure of cash flow information:
Cash paid:
Taxes $ 78,000 $ 142,930

Supplemental disclosure of non-cash investing and financing activities:
Investment in MREC $ 1,516,246 $ -


	Three Months Ended March 31,
	2022			2021

Cash flows from operating activities:
Net income	$	577,074		$	655,163
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		215,746			97,290
Right of use amortization		79,853			76,209
Employee stock compensation		26,250			-
Changes in operating assets and liabilities:
Accounts receivable, net		(1,242,273	)		(1,271,775	)
Inventory, net		(1,933,137	)		(675,480	)
Unbilled revenue		(1,887,960	)		(850,422	)
Deferred taxes		(63,210	)		-
Prepaid expenses and other current assets		(20,391	)		(321,781	)
Other assets		(186,727	)		-
Security deposits, long-term		-			66,788
Accounts payable and other accrued expenses		603,601			777,457
Operating lease liability		(83,399	)		(77,077	)
Deferred revenue		798,319			(224,800	)

Net cash used in operating activities		(3,116,254	)		(1,748,428	)

Cash flows from investing activities:
Purchase of intangible assets		(51,644	)		(48,205	)
Purchase of property and equipment		(804,433	)		-

Net cash used in investing activities		(856,077	)		(48,205	)

Cash flows from financing activities:
Principal payments of debt		(57,975	)		-
Stock options exercised		7,975			3,620
Note payable-PPP Loan		-			(8,566	)
Net cash used in financing activities		(50,000	)		(4,946	)

Net decrease in cash and restricted cash		(4,022,331	)		(1,801,579	)
Cash and restricted cash, beginning of period		19,708,565			6,841,984
Cash and restricted cash, end of period	$	15,686,234		$	5,040,405

Supplemental disclosure of cash flow information:
Cash (refunded) paid:
Income taxes paid (refunded)	$	99,035		$	(77,163	)
Interest paid		63,776			2,434

Supplemental disclosure of non-cash investing and financing activities:
Conversion of inventory to property and equipment	$	75,976		$	-

See accompanying notes to unaudited ~~condensed~~ financial statements.

~~F-4~~

F- 4

VIRTRA, INC.

~~Notes To CONDENSED Financial Statements~~NOTES TO FINANCIAL STATEMENTS

(~~Unaudited~~)(Unaudited)

~~NOTE~~Note 1.~~ORGANIZATION AND BUSINESS OPERATIONS~~Organization and Significant Accounting Policies

Organization and Business Operations

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

Effective as of October 1, 2016 (the “Effective Date”), the Company completed a conversion from a Texas corporation to a Nevada corporation pursuant to a Redomestication Plan of Conversion (the “Plan of Conversion”) that was approved by the Company’s Board of Directors on June 23, 2016 and its shareholders on September 16, 2016. On the Effective Date, 7,927,688 shares of common stock of VirTra Systems, Inc., a Texas corporation, were converted into 7,927,688 shares of common stock of VirTra, Inc., a Nevada corporation. ~~No shareholders exercised appraisal rights~~

During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The pandemic has significantly impacted the economic conditions in the U.S., accelerating during half of March and April as federal, state and local governments react to the public health crisis, creating significant uncertainties in the U.S. economy. On March 30, 2020, the Governor for the State of Arizona issued a stay-at-home order which expired on May 15, 2020, upon which Arizona entered Phase I of reopening. The Company carefully reviewed all rules and regulations of the government orders and determined it met the requirements of an essential business to remain open. The Company had the majority of its staff begin working remotely in mid-March, with only essential personnel continue working at the manufacturing and production facilities and currently remains in Arizona’s Phase I of reopening. This situation is rapidly changing and additional impacts to the business may arise that we are not aware of currently. While the disruption is currently expected to be temporary, there is uncertainty around the duration. The ultimate impact of the pandemic on the Company’s results of operations, financial position, liquidity or ~~dissenters’ rights~~capital resources cannot be reasonably estimated at this time. To date, the COVID-19 restrictions have resulted in reduced customer shipments and customer system installations. These recent developments are expected to result in lower recognized revenue and possibly lower gross margin when they occur. To date, there have been no order cancellations; rather, there have only been delays in when orders ship or installations occur and all delayed orders remain in backlog. Any future impact cannot be reasonably estimated at this time. The Company is no longer investing in Certificates of Deposits as a precautionary measure to increase its liquid cash position and preserve financial flexibility considering uncertainty in the U.S. and global markets resulting from COVID-19. Additionally, the Company’s stock repurchase program was suspended as a result of interim rulings for ~~such shares~~public-company recipients of a PPP loan under the CARES Act. The stock repurchase suspension remained in ~~accordance~~effect for the duration of the outstanding PPP loan and continues to remain in effect even though the PPP loan has been forgiven and is no longer outstanding.

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

Basis of Presentation

The unaudited financial statements included herein have been prepared by us without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our audited financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the ~~Texas Business Organization Code.~~

~~As part of the Plan of Conversion, the Company filed Articles of Incorporation~~SEC on August 2, 2022. Certain information and footnote disclosures normally included in Nevada whereby it changed its name from VirTra Systems, Inc. to VirTra, Inc. and revised its capitalization. The Company’s Articles of Incorporation filed in Nevada authorized the Company to issue 62,500,000 shares, of which (1) 60,000,000 shares shall be common stock, par value $0.0001 per share (the “common stock”), of which (a) 50,000,000 shares shall be common stock, par value $0.0001, (b) 2,500,000 shares shall be Class A common stock, par value $0.0001 per share (the “Class A common stock”), and (c) 7,500,000 shares shall be Class B common stock, par value $0.0001 per share (the “Class B common stock”) and (2) 2,500,000 shares shall be Preferred Stock, par value $0.0001 per share, which may, at the sole discretion of the Board of Directors be issued in one or more series (the “Preferred Stock”). The Company also adopted new bylaws as part of the Plan of Conversion.

Effective October 20, 2016, the Company effected a 1 for 10 reverse stock split of its issued and outstanding Common Stock and effective February 12, the Company effected a 1 for 2 reverse stock split of its issued and outstanding Common Stock (together the “Reverse Stock Splits”). All references to shares of the Company’s common stock in this report refer to the number of shares of common stock after giving effect to the Reverse Stock Splits.

~~The Company’s corporate office is located in Tempe, Arizona. All transactions in the~~ financial statements ~~and accompanying notes are presented in US Dollars.~~

~~Basis of Presentation~~

~~The accompanying unaudited condensed financial statements have been~~ prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) ~~for interim financial information. Certain information and note disclosures normally included in complete annual financial statements prepared in accordance with GAAP~~ have been condensed or ~~omitted. However,~~omitted as permitted by the ~~Company believes that~~SEC, although we believe the disclosures ~~included in these unaudited condensed financial statements~~that are made are adequate to make the information presented herein not misleading. ~~In the opinion of management, the~~

The accompanying unaudited ~~condensed~~ financial statements reflect, in our opinion, all ~~adjustments, which include~~ normal recurring adjustments ~~considered~~ necessary to present fairly our financial position at March 31, 2022 and the results of our operations and cash flows for ~~a fair presentation~~the periods presented. We derived the December 31, 2021 condensed balance sheet data from audited financial statements; however, we did not include all disclosures required by GAAP.

F- 5

Interim results are subject to seasonal variations, and the results of ~~such interim results. The results~~operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 are not necessarily indicative of the results ~~for any subsequent period. These unaudited condensed financial statements should~~to be ~~read in conjunction with the audited financial statements and notes~~expected for the year ended December 31, 2016 included in the Company’s Post-Qualification Offering Circular Amendment No. 1 to Form 1-A filed with the Securities and Exchange Commission (the “SEC”) on February 21, 2018.full year.

~~Certain prior period amounts have been reclassified to conform with current period presentation. These reclassifications have no impact on net income/(loss).~~

Use of Estimates

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

Revenue Recognition

~~F-5~~

~~Recent Accounting Pronouncements~~

~~Between May 2014 and December 2016,~~The Company adopted the Financial Accounting Standards ~~Board~~Board’s (the “FASB”) ~~issued several~~ Accounting ~~Standard Updates~~Standards Codification (“~~ASUs”~~ASC”) on606, Revenue from Contracts with ~~Customers~~Customer (Topic 606)~~. These updates will supersede nearly all existing revenue recognition guidance under current GAAP. The core principle is~~ (“ASC 606”) on January 1, 2018 and the Company elected to ~~recognize revenues when promised goods or services are transferred to customers in an amount that reflects~~use the ~~consideration to~~modified retrospective transition method which an entity expects to be entitled for those goods or services. A five-step process has been defined to achieve this core principle, and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standards are effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting therequires application of ~~the standards in each prior reporting period with the option~~ASC 606 to ~~elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting the standards recognized~~uncompleted contracts at the date of ~~adoption (which includes additional footnote disclosures).~~adoption. The ~~Company is currently evaluating the impact of its pending~~ adoption of these standards on its financial statements and expects to adopt the modified retrospective approach. However, the adoption of these new standards will not have a material impact on its revenue recognition as it pertains to current revenue streams, the Company’s financial position or results of operations

In February 2016, the FASB issued ASU No. 2016-02 – “Leases (Topic 842)”, which requires leases to put most leases on their balance sheets by recognizing lease assets and lease liabilities for those leases classified as operating leases under previous guidance. This ASU will be effective for the Company on January 1, 2019, with early adoption permitted. The Company is currently in the process of assessing the impact of this ASU on its financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires that equity investments, except for those accounted for under the equity method or those that result in consolidation of the investee, be measured at fair value, with subsequent changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. ASU 2016-01 also impacts the presentation and disclosure requirements for financial instruments. ASU 2016-01 is effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted only for certain provisions. As the Company wrote-down its Investment in Modern Round to fair value in 2017, the Company believes that the adoption of ASU 2016-01 will not have a material impact on its financial statements, however, the Company will change from the cost method of accounting.

In July 2015, the FASB issued ASU No. 2015-11 – “Inventory (Topic 330): Simplifying the Measurement of Inventory”. The amendment’s purpose is to simplify the measurement, reduce costs and increase comparability for inventory measured using first-in, first-out (FIFO) or average cost methods. An entity should measure inventory within the scope of this ASU at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This accounting guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This standard was adopted on January 1, 2017 and its adoption did not to have a material significant impact on the Company’s financial statement position and results of operations.

In November 2015, the FASB issued ASU No. 2015-17 – “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”. The ASU’s purpose is to require deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position (Balance Sheet). This accounting guidance will become effective beginning in the first quarter of 2017. Early application is permitted. The Company adopted this pronouncement and such adoptionASC 606 did not have a material impact on the ~~Company’s~~ financial ~~statements and related disclosures.~~statements.

In February 2016, the FASB issued ASU No. 2016-02 – “Leases (Topic 842)”, which requires leases to put most leases on their balance sheets by recognizing lease assets and lease liabilities for those leases classified as operating leases under previous guidance. This ASU will be effective forUnder ASC 606, the Company ~~on January 1, 2019,~~must identify the contract with ~~early adoption permitted. The Company is currently~~a customer, identify the performance obligations in the ~~process of assessing~~contract, determine the ~~impact of this ASU on its financial statements.~~

~~In November 2016,~~transaction price, allocate the ~~FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of~~transaction price to the ~~FASB Emerging Issues Task Force), to provide guidance on the presentation of restricted cash or restricted cash equivalents~~performance obligations in the ~~statement~~contract, and recognize revenue when (or as) the Company satisfies a performance obligation. Significant judgment is necessary when making these determinations.

The Company’s primary sources of ~~cash flow.~~revenue are derived from simulator and accessories sales, training and installation, the sale of customizable software and the sale of extended service-type warranties. The ~~amendments should be applied using a retrospective transition method, and~~Company’s policy is to typically invoice upon completion of installation and/or training, until such time the performance obligations that have been satisfied are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this statement is not expected to have an impact on the Company’s financial position or results of operations.

In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250). The ASU adds SEC disclosure requirements for both the quantitative and qualitative impacts that certain recently issued accounting standards will have onincluded in unbilled. Sales discounts are presented in the financial statements as reductions in determining net revenues. Credit sales are recorded as current assets (accounts receivable and unbilled revenue). Prepaid deposits received at the time of ~~a registrant when such standards~~sale and extended warranties purchased are ~~adopted in a future period. Specially, these disclosure requirements apply to~~recorded as current and long-term liabilities (deferred revenue) until earned. The following briefly summarizes the ~~adoption~~nature of ~~ASU No. 2014- 09, Revenue from Contracts with Customers (Topic 606); ASU No. 2016-02, Leases (Topic 842);~~our performance obligations and ~~ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement~~method of ~~Credit Losses on Financial Instruments. As indicated below, the Company does not believe that the adoption of ASU No. 2014-09 will have a material impact on its~~ revenue ~~recognition as it pertains to current revenue streams.~~recognition:

In February 2017, the FASB issued ASU No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, to clarify the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, and to add guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. The amendments are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, which is the same time as the amendments in ASU No. 2014-09, and early adoption is permitted. The Company does not expect this amendment to have a material impact on its financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Accounting Standards Codification (“ASC”) 718. The amendments are effective for fiscal years beginning after December 15, 2017, and should be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in an interim period. The Company does not expect this amendment to have a material impact on its financial statements.

~~F-6~~Performance Obligation		Method of Recognition

Simulator and accessories		Upon transfer of control

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

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

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

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

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

F- 6

In July 2017, the FASB issued ASU No. 2017-11 – “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815)” I. Accounting for Certain Financial Instruments with Down Round Features and II. Replacement

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

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

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

Disaggregation of Revenue

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

Disaggregation of Revenue

Schedule of Disaggregation of Revenues

	Three Months Ended March 31,
	2022								2021
	Commercial		Government		International		Total		Commercial		Government		International		Total
Simulators and accessories	$	1,580,192	$	3,224,558	$	906,636	$	5,711,386	$	273,796	$	1,677,923	$	1,077,185	$	3,028,904
Extended service-type warranties		31,487		620,361		17,662		669,510		22,074		670,584		20,050		712,708
Customized software and content		-		51,714		83,000		134,714		-		467,413		52,273		519,686
Installation and training		11,865		157,553		68,200		237,618		32,663		119,798		26,350		178,811
Licensing and royalities		-		-		-		-		1,800		-		-		1,800
Total Revenue	$	1,623,544	$	4,054,186	$	1,075,498	$	6,753,228	$	330,333	$	2,935,718	$	1,175,858	$	4,441,909

For the three months ended March 31, 2022, governmental customers comprised $4,054,186, or 60% of total net sales, commercial customers comprised $1,623,544, or 24% of total net sales, and international customers comprised $1,075,498, or 16% of total net sales. By comparison, for the three months ended March 31, 2021, governmental customers comprised $2,935,718, or 66% of total net sales, commercial customers comprised $330,333, or 7% of total net sales, and international customers comprised $1,175,858, or 27% of total net sales.

Customer Deposits

Customer deposits consist of prepaid deposits received for equipment purchase orders and for Subscription Training Equipment Partnership (“STEP”) operating agreements that expire annually. Customer deposits are considered a deferred liability until the completion of the customer’s contract performance obligation. When revenue is recognized, the deposit is applied to customer’s receivable balance. Customer deposits are recorded as a current liability under deferred revenue on the accompanying balance sheet and totaled $3,289,067 and $2,371,531 at March 31, 2022 and December 31, 2021, respectively. Changes in deferred revenue amounts related to customer deposits will fluctuate from year to year based upon the mix of customers required to prepay deposits under the Company’s credit policy.

Warranty

The Company warranties its products from manufacturing defects on a limited basis for a period of one year after purchase, but also sells separately priced extended service-type warranties for periods of up to four years after the expiration of the standard one-year warranty. During the term of the initial one-year warranty, if the device fails to operate properly from defects in materials and workmanship, the Company will fix or replace the defective product. Deferred revenue for separately priced extended warranties one year or less totaled $1,391,586 and $1,764,034 as of March 31, 2022 and December 31, 2021, respectively. Deferred revenue for separately priced extended warranties longer than one year totaled $2,089,195 and $1,815,871 as of March 31, 2022 and December 31, 2021, respectively. The accrual for the one-year manufacturer’s warranty liability totaled $385,000 and $384,000 as of March 31, 2022 and December 31, 2021, respectively. During the three months ended March 31, 2022 and 2021, the Company recognized revenue of $669,510 and $712,708, respectively, related to the extended service-type warranties that was amortized from the deferred revenue balance at the beginning of each period. Changes in deferred revenue amounts related to extended service-type warranties will fluctuate from year to year based upon the average remaining life of the warranties at the beginning of the period and new extended service-type warranties sold during the period.

F- 7

Concentration of Credit Risk and Major Customers and Suppliers

Financial ~~Instruments~~instruments that potentially subject the Company to concentrations of ~~Certain Nonpublic Entities~~credit risk consist of cash and ~~Certain Mandatorily Redeemable Noncontrolling Interests~~cash equivalents, certificates of deposit, accounts receivable and notes receivable.

The Company’s cash, cash equivalents and certificates of deposit are maintained with ~~a Scope Exception. Part I applies~~financial institutions with high credit standings and are FDIC insured deposits. The FDIC insures deposits according to ~~entities~~the ownership category in which the funds are insured and how the accounts are titled. The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. The Company had uninsured cash and cash equivalents of $15,184,899 and $19,207,786 as of March 31, 2022 and December 31, 2021, respectively.

Most sales are to governments that ~~issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down round features. Part II simply replaces~~are typically made on credit and the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception andCompany generally does not ~~impact~~require collateral. Management performs ongoing credit evaluations of its customers’ financial condition and maintains an allowance for estimated losses. Historically, the ~~accounting for these mandatorily redeemable instruments. This ASU is effective for public companies~~Company has experienced minimal charges relative to doubtful accounts.

Historically, the Company primarily sells its products to United States federal and state agencies. For the three months ended March 31, 2022, one foreign agency comprised 16% of total net sales. By comparison, for the ~~annual reporting periods beginning after~~three months ended March 31, 2021, one federal agency comprised 10% and one foreign agency comprised 22% of total net sales.

As of March 31, 2022, one federal agency comprised 14% of total accounts receivable. By comparison, as of December ~~15, 2018, and interim periods within those annual periods. Early adoption is permitted. The~~31, 2021, the Company ~~does~~did not ~~expect this amendment to~~ have ~~a material impact on its financial statements.~~any customer that accounted for more than 10% of total accounts receivable.

~~NOTE~~Net Income (Loss)per Common Share

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

Schedule of Earnings Per Share

	2022		2021
	Three Months Ended March 31,
	2022		2021
Net income	$	577,074	$	655,163

Weighted average common stock outstanding		10,807,269		7,775,212
Incremental shares from stock options		43,107		60,618
Weighted average common stock outstanding diluted		10,850,376		7,835,830
Net income per common share and common equivalent shares
Basic	$	0.05	$	0.08
Diluted	$	0.05	$	0.08

The Company has potentially dilutive securities outstanding that are not included in the diluted earnings per share calculation for the three months ended March 31, 2022 and 2021 because their effect would be anti-dilutive. These potentially dilutive securities, comprised entirely of the Company’s stock options, totaled 0 for the three months ended March 31, 2022 and 2021, respectively.

Note 2. ~~INVENTORY~~Inventory

Inventory consisted of the following as of:

Schedule of Inventory

	September 30, 2017			December 31, 2016			March 31, 2022			December 31, 2021

Raw materials	$	1,718,367		$	1,085,519
Finished goods		-			251,707
Raw materials and work in process							$	7,250,492		$	5,229,636
Reserve		(29,218	)		(17,282	)		(302,431	)		(214,712	)

Total inventory	$	1,689,149		$	1,319,944		$	6,948,061		$	5,014,924

~~F-7~~

The Company regularly evaluates the useful life of its spare parts inventory and as a result, the Company classified $322,968 and $136,241 of spare parts as Other Assets, long-term on the Balance Sheet at March 31, 2022 and December 31, 2021, respectively.

F- 8

~~NOTE~~Note 3.Property and Equipment

Property and equipment consisted of the following as of:

Schedule of Property and Equipment

	September 30, 2017			December 31, 2016			March 31, 2022			December 31, 2021

Land							$	1,778,987		$	1,778,987
Building & Building Improvements								9,038,279			9,005,205
Computer equipment	$	818,155		$	753,987			1,176,400			1,171,319
Furniture and office equipment		196,216			182,969			262,814			262,814
Machinery and equipment		925,495			925,495			2,447,373			1,970,007
STEP equipment								1,572,228			1,496,252
Leasehold improvements		324,313			318,318			334,934			334,934
Construction in Progress								219,936			7,000

Total property and equipment		2,264,178			2,180,768			16,830,951			16,026,518
Less: Accumulated depreciation		(1,570,972	)		(1,366,445	)
Less: Accumulated depreciation and amortization								(3,356,688	)		(3,161,752	)

Property and equipment, net	$	693,206		$	814,323		$	13,474,263		$	12,864,766

Depreciation expense, including STEP depreciation, was ~~$65,570~~$195,031 and ~~$64,591~~$95,068 for the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. ~~Depreciation~~

Note 4. Intangible Asset

Intangible asset consisted of the following as of:

Schedule of Intangible Asset

	March 31, 2022			December 31, 2021
Patents	$	160,000		$	160,000
Capitalized media content		382,872			331,228
Acquired lease intangible assets		83,963			83,963

Total intangible assets		626,835			575,191
Less accumulated amortization		(60,676	)		(40,112	)

Intangible assets, net	$	566,159		$	535,079

Amortization expense was ~~$204,527~~$20,564 and ~~$160,768~~$2,222 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively.

Note 5. Leases

~~F-8~~

The balance sheet classification of lease assets and liabilities as of March 31, 2022 was as follows:

Schedule of Balance Sheet Classification of Lease Assets and Liabilities


Balance Sheet Classification	March 31, 2022
Assets
Operating lease right-of-use assets, December 31, 2021	$	784,306
Amortization for the three months ended March 31, 2022		(79,853	)
Total operating lease right-of-use asset, March 31, 2022	$	704,453
Liabilities
Current
Operating lease liability, short-term	$	354,496
Non-current
Operating lease liability, long-term		415,260
Total lease liabilities	$	769,756

F- 9

Future minimum lease payments as of March 31, 2022 under non-cancelable operating leases are as follows:

Schedule of Future Minimum Lease Payments


2022	$	286,412
2023		390,562
2024		131,152

Total lease payments		808,126
Less: imputed interest		(38,370	)
Operating lease liability	$	769,756

The balance sheet classification of lease assets and liabilities as of December 31, 2021 was as follows:


Balance Sheet Classification	December 31, 2021
Assets
Operating lease right-of-use assets, December 31, 2020	$	1,094,527
Operating lease right-of-use assets, beginning	$	1,094,527
Amortization for the year ended December 31, 2021		(310,221	)
Amortization		(310,221	)
Total operating lease right-of-use asset, December 31, 2021	$	784,306
Total operating lease right-of-use asset, ending	$	784,306
Liabilities
Current
Operating lease liability, short-term	$	347,772
Non-current
Operating lease liability, long-term		505,383
Total lease liabilities	$	853,155

Future minimum lease payments as of December 31, 2021 under non-cancelable operating leases are as follows:


2022	$	379,097
2023		390,562
2024		131,152

Total lease payments		900,811
Less: imputed interest		(47,656	)
Operating lease liability	$	853,155

Rent expense for the three months ended March 31, 2022 and 2021 was $209,252 and $143,757, respectively.

~~NOTE 4.~~Note 6. Accrued Expenses

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

Schedule of Accrued Compensation and Related Costs


	March 31, 2022		December 31, 2021

Salaries and wages payable	$	161,972	$	422,562
Employee benefits payable		27,991		16,523
Accrued paid time off (PTO)		528,152		483,311
Profit sharing payable		214,682		139,682

Total accrued compensation and related costs	$	932,797	$	1,062,078

F- 10

September 30, 2017 December 31, 2016

Salaries and wages payable $ 431,741 $ 93,832
401(k) contributions payable 16,971 25,729
Accrued paid time off 254,211 190,518
Profit sharing payable 406,811 307,503

Total accrued compensation and related costs $ 1,109,734 $ 617,582

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

Schedule of Accrued Expenses and Other Current Liabilities


	March 31, 2022		December 31, 2021

Manufacturer’s warranties	$	385,000	$	384,000
Taxes payable		276,754		113,921
Miscellaneous payable		510,835		493,823

Total accrued expenses and other current liabilities	$	1,172,589	$	991,744

September 30, 2017 December 31, 2016

Manufacturer’s warranties $ 135,000 $ 122,000
Taxes payable 61,045 32,668
Other 31,643 40,000

Total accrued expenses and other current liabilities $ 227,688 $ 194,668

Note 7. Note Payable

~~Profit Sharing~~

~~As part of the benefit package maintained by~~On August 25, 2021, the Company completed the ~~Profit Sharing program pays~~purchase of real property located in Chandler, Arizona (the “Property”) for $10,800,000, paid with cash and proceeds from a ~~percentage of Company annual profits as a cash bonus to active and eligible employees. The cash payment is typically split into two equal payments and distributed pro-rata to employees~~mortgage loan from Arizona Bank & Trust in April and October of the following year. For the nine months ending September 30, 2017 and 2016, the percentage of annual net profit used for estimating the calculations was 15%. Profit sharing expense was $113,976 and $(3,379) for the three months ended September 30, 2017 and 2016, respectively. Profit sharing expense was $403,709 and $325,678 for the nine months ended September 30, 2017 and 2016, respectively.

~~NOTE 5.Collaboration Agreement~~

On January 16, 2015, the Company entered into a Co-Venture Agreement (the “Co-Venture Agreement”) with Modern Round, LLC (“Modern Round”), a wholly owned subsidiary of Modern Round Entertainment Corporation (“MREC”), a related party. MREC is a restaurant and entertainment concept centered on its indoor virtual reality shooting experience. The Co-Venture Agreement provides Modern Round access to certain software and equipment relating to the Company’s products in exchange for royalties.

The Company received 1,365,789 units, representing a 5% ownership interest in Modern Round on the date of the Co-Venture Agreement. The Company recorded the investment at the estimated fair value of the units and which were valued at $0.10 per unit based on Modern Round’s other membership unit sales.~~The Co-Venture Agreement also provides the Company with conditional warrants to purchase an additional 5% of Modern Round as of the date of that agreement, at an exercise price of $0.25.~~

On April 14, 2015, Modern Round issued the Company an option to purchase 125,000 units of Modern Round. The option fully vested and became exercisable on the date of grant at an exercise price equal to $0.50 per unit and terminates on the tenth anniversary of the date of grant, if not earlier pursuant to the terms of the option.

~~On December 31, 2015, Modern Round merged with a subsidiary of MREC pursuant to a Plan of Merger (the “Merger Agreement”) and~~each unit of Modern Round issued and outstanding as of the effective time of the merger automatically converted into the right to receive approximately 1.2277 shares of MREC common stock. As a result of the Merger Agreement, the Company held 1,676,748 shares of MREC common stock, options to purchase 153,459 shares of MREC common stock at an exercise price of $0.41 per share, and conditional warrants to purchase 1,676,747 shares of MREC common stock at an exercise price of $0.20 per share.

~~F-9~~

On October 25, 2016, the Company exercised the conditional warrant and purchased 1,676,747 shares of MREC common stock for $335,349, resulting in the Company’s aggregate holdings of MREC increasing to~~3,353,495 common shares representing approximately 8.9% of the issued and outstanding common shares of MREC. The MREC equity securities have been recorded as a cost method investment as the Company does not have the ability to exercise significant influence over MREC.~~

As part of the Co-Venture Agreement, the Company granted 459,691 conditional warrants to affiliates of MREC to purchase 5% of the Company’s capital stock on a fully diluted basis as of the date of the Co-Venture Agreement. The conditional warrants are exercisable commencing at the earlier of the first anniversary of MREC opening its first range facility utilizing VirTra technology or after MREC opening its first range facility utilizing VirTra technology and the payment to the Company of all required US/Canada minimum royalty payments during the first 12-month period. MREC opened its first location on June 1, 2016.

The Company also granted 459,691 of additional conditional warrants to affiliates of MREC to purchase another 5% of the Company’s capital stock on a fully diluted basis as of the Agreement date. These conditional warrants are exercisable any time subsequent to MREC’s payment of $2.0 million in cumulative license fees (royalty). Both conditional warrant issuances are for a period of five years with an exercise price of $2.72.

These conditional warrants were considered contingent consideration for the equity investment as they did not meet the definition of a derivative under ASC 815. Thus, the contingent consideration was not included in the cost of the equity investment until the contingency was resolved and the warrant became exercisable.

On June 1, 2017, the warrants related to the opening of the facility vested and became exercisable at an exercise price equal to $2.72 per unit and terminate on the fifth anniversary of the date of vesting, if not earlier pursuant to the terms of the option. On June 1, 2017, these warrants were recorded at the Black-Scholes Merton fair value using annual volatility of 91.5%, an annual risk free rate of 1.76%, expected term of five years and a fair value of $4.28 a share for a fair value of $1,516,246 as an additional investment in MREC.

The Co-Venture Agreement grants MREC an exclusive non-transferrable license to use the Company’s technology solely for use at locations to operate the concept, as defined in the Co-Venture Agreement. The license would become non-exclusive if the first U.S. location is not opened within 24 months of the effective date and at least one location is opened outside the U.S. and Canada within five years of the Co-Venture Agreement date, the respective milestone dates. Throughout the duration of the Co-Venture Agreement, MREC will pay the Company a royalty based on gross revenue, as defined and subject to certain minimum royalties commencing with the first twelve-month period subsequent to the respective milestone date of June 1, 2017. If the total royalty payments for locations in the United States and Canada together do not total at least the minimum royalty amoun~~t specified in the agreement, MREC may pay to VirTra the difference between~~ the amount of ~~total royalty~~$8,600,000. The loan terms include interest to be accrued at a fixed rate of 3% per year, 119 regular monthly payments of $40,978, and one irregular payment of $5,956,538 due on the ~~minimum specified~~maturity date of August 23, 2031. The Company began making monthly payments on September 23, 2021. The payment and performance of the loan is secured by a security interest in the ~~agreement to maintain exclusivity.~~ property acquired.

The ~~Company recognized $245,082 and $47,829 for license fees (royalties) for~~note payable amounts consist of the ~~nine months ended September 30, 2017 and 2016, respectively.~~following:

Schedule of Notes Payable

~~F-10~~


	March 31, 2022		December 31, 2021

Short-term liabilities:
Note payable, principal	$	230,689	$	231,871
Accrued interest on note		4,455		4,420

Note payable, short-term	$	235,144	$	236,291

Long-term liabilities:
Note payable, principal	$	8,222,666	$	8,280,395

Note payable, long term	$	8,222,666	$	8,280,395

Note 6. 8. Related Party Transactions

During the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, the Company redeemed 8,750 and 8,750 previously awarded stock options nearing expiration from the Company’s CEO and COO. The redemption eliminated the stock options and resulted in a total of $24,150 and $57,067 in additional compensation expense in 2022 and 2021, respectively.

During the three months ended March 31, 2022 and 2021, the Company issued ~~13,750~~2,500 and ~~11,250~~2,500 shares of common stock, ~~options~~$0.0001 par value per share (the “Common Stock”), to ~~the CEO, COO and members~~one member of the Board of Directors ~~to purchase shares of common~~for previously awarded stock options at ~~a weighted average purchase~~an exercise price of ~~$3.76~~$7,975 and ~~$4.20,~~$3,620, respectively. During the nine months ended September 30, 2017 and 2016, the Company issued 41,250 and 33,750 stock options to the CEO, COO and members of the Board of Directors to purchase shares of common stock at a weighted average purchase price of $4.42 and $3.08, respectively. All options are exercisable within seven years of grant date.

F- 11

During the three and nine months ended September 30, 2017 and 2016, the Company redeemed stock options from the CEO and COO that had previously been awarded. As a result, the Company recorded additional compensation expense as follows:

Three Months Ending September 30, Nine Months Ending September 30,
2017 2016 2017 2016
Number of stock options redeemed 30,000 12,500 55,000 237,500
Redemption value $ 97,300 $ 37,500 $ 182,550 $ 505,224
Amount previously expensed (2010 and 2009) (32,000 ) (12,500 ) (67,000 ) (190,000 )

Additional compensation expense $ 65,300 $ 25,000 $ 115,550 $ 315,224

Mr. Mitch Saltz, a member of the Company’s Board of Directors, is also Chairman of the Board of Directors and a majority stockholder of MREC. The Company entered into the Co-Venture Agreement with MREC as disclosed in Note 5. Through the terms of that agreement, the Company owns 3,353,495 shares of MREC common stock representing approximately 9.3% of the issued and outstanding shares of MREC common stock. In addition, the Company recognized license fees (royalties) from MREC of $40,852 and $47,829 for the three months ended September 30, 2017 and 2016, respectively, and $245,082 and $47,829 for the nine months ended September 30, 2017 and 2016, respectively, pursuant to the terms of the Co-Venture Agreement.

Note 7. 9. Commitments and Contingencies

The Company’s operating lease obligations relate to the leasing of the Company’s corporate office space located at 7970 South Kyrene Road, Tempe, Arizona 85284, which expires in April 2019, unless renewed and the leasing of the machine shop building located at 2169 East Fifth St., Tempe, Arizona 85284, which expires in March 2018, unless renewed.

~~Future minimum lease payments under non-cancelable operating leases are as follows:~~

Building Lease Schedule

2017 $ 87,651
2018 324,353
2019 105,542

Total $ 517,546

The Company has a deferred rent liability of $87,861 and $122,126 as of September 30, 2017 and December 31, 2016, respectively, relative to the increasing future minimum lease payments. Rent expense was $92,910 and $86,578 for the three months ended September 30, 2017 and 2016, respectively. Rent expense was $229,198 and $146,564 for the nine months ended September 30, 2017 and 2016, respectively.

General or Threatened Litigation

From time to time, the Company is notified of threatened litigation or that a claim is being made against it. The Company evaluates contingencies on an on-going basis and has established loss provisions for matters in which losses are probable and the amount of loss can be reasonably estimated. There is no threatened litigation at this time.

Restricted Stock Unit Grants

The Company granted 224,133 and 168,090 performance-based restricted stock units (“RSUs”) in August 2021 to its Chief Executive Officer and Chief Operating Officer, respectively. It is the Company’s policy is to ~~not disclose~~estimate the ~~specifics~~fair value of ~~any claim or threatened lawsuit until such complaint is actually served~~the RSU’s on the ~~Company.On October 20, 2016,~~date of the grant and evaluate the probability of achieving the net profit (net income under GAAP) tranches quarterly. If the target is deemed probable, the expense is amortized on a former employee filed a lawsuit in the U.S. District Court, District of Arizona alleging the Company’s failure and/or refusal to pay overtime in violation of 29 U.S.C. Sec. 201, et. seq. and a claim for wrongfully withheld wages under A.R.S. Sec. 23-350 et. seq. The complaint seeks certification of class action status, declaratory relief, damages, interest, attorneys’ fees and such other relief the Court deems just and proper. Additionally, two former and one current employee opted-in to the class action.

~~On September 18, 2017, VirTra entered into a Settlement Agreement and Release of Claims with two parties and on November 30, 2017, VirTra entered into a Settlement Agreement and Release of Claims with~~straight-line basis over the remaining ~~two parties in~~time period. The Company determined based on the outstanding lawsuit agreeing to payments totaling $100,300 in full dismissal of all outstanding complaints against VirTra. The agreement does not constitute an admission that VirTra violated any local, state or federal regulations or engaged in any improper or unlawful conduct or wrongdoing. The US District Court of Arizona, District of Arizona approved Joint Motion Requesting Approval of Settlements on September 25, 2017 and December 7, 2017, respectively, for each settlement agreement. All required settlement payments were completed in accordance with the Settlement Agreements on September 29, 2017 and December 13, 2017. Management believesvesting terms described above that the ~~ultimate outcome~~net profit (net income under GAAP) for the twelve months ending June 30, 2022, of ~~this matter did not have~~$2,500,000 is probable, the expense for the three months ending March 31, 2022, was $26,250.

Profit Sharing

VirTra provides a ~~material effect on its earnings,~~discretionary profit-sharing program that pays out a percentage of Company profits each year as a cash ~~flows, or financial position.~~bonus to eligible employees. The cash payment is typically split into two equal payments and distributed pro-rata in April and October of the following year to only active employees. For the three months ended March 31, 2022, the amount expensed to operations was $75,000. For the three months ended March 31, 2021, no amount was credited to operations due to uncertainty related to on-going COVID restrictions.

~~F-11~~

Note 8. 10. Stockholders’ Equity

Stock Repurchase

On October 25, 2016, the Company’s Board of Directors authorized the repurchase of up to ~~$1,000,000~~$1 million of its common stock ~~through December 31, 2017.~~under Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. Purchases made pursuant to this authorization ~~were to~~will be made in the open market, in privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with the Rule ~~10b-18 of the SEC.~~10b-18. The timing, manner, price and amount of any repurchases ~~were to~~will be determined by the Company atin its discretion and ~~were to~~will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. On January 9, 2019, VirTra’s Board of Directors authorized an additional $1 million be allocated for the repurchase of VirTra’s stock under the existing 10b-18 plan. The stock repurchase program was suspended as a result of interim rulings for public-company recipients of a PPP loan under the CARES Act. The stock repurchase suspension remained in effect until the PPP loan was forgiven on July 20, 2021, and has continued to remain in effect.

Treasury Stock

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, the Company ~~repurchased 20,939 shares at a cost of $96,633.~~purchased no additional treasury shares.

F- 12

For the three month period ending September 30, 2017, VirTra repurchased 17,489 shares of stock to hold in treasury at a total cost basis of $82,834, and for the nine month period ending September 30, 2017 VirTra repurchased 20,939 shares of stock to hold in treasury at a total cost basis of $96,634 pursuant to its Repurchase Program. On October 18, 2017, VirTra suspended its Repurchase Program indefinitely due to its pending Regulation A Offering. The repurchased shares will remain in treasury for future sale.

Non-qualified Stock Options

The Company has periodically ~~issues~~issued non-qualified ~~incentive~~ stock options to key employees, officers and directors under a ~~Stock Option Compensation~~stock option compensation plan approved by the Board of Directors in 2009. Terms of ~~the~~ option grants are at the discretion of the Board of Directors ~~but historically have been~~and are generally seven years. ~~During~~Upon the exercise of these options, the Company expects to issue new authorized shares of its common stock. The following table summarizes all non-qualified stock options as of:

Schedule of Non-qualified Stock Options

	March 31, 2022					March 31, 2021
	Number of			Weighted		Number of			Weighted
	Stock Options			Exercise Price		Stock Options			Exercise Price
Options outstanding, beginning of year		112,500		$	3.51		164,167		$	3.13
Granted		-			-		-			-
Redeemed		(8,750	)		3.19		(8,750	)		1.45
Exercised		(2,500	)		3.19		(2,500	)		1.45
Expired / terminated		-			-		-			-
Options outstanding, end of period		101,250		$	3.55		152,917		$	3.25
Options exercisable, end of period		101,250		$	3.55		152,917		$	3.25

The Company did not have any non-vested stock options outstanding as of March 31, 2022 and December 31, 2021. The weighted average contractual term for options outstanding and exercisable at March 31, 2022 and 2021 was 7 years. The aggregate intrinsic value of the options outstanding and exercisable at March 31, 2022 and 2021 was $258,077 and $443,036, respectively. The total intrinsic value of options exercised and redeemed during the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021 was $30,675 and $52,898, respectively. For the three months ended March 31, 2022 and 2021, the Company ~~issued 13,750~~received payments related to the exercise of options in the amount of $7,975 and ~~11,250 stock options, with a weighted average~~$3,620, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price of ~~$3.76~~the underlying options and ~~$4.20 per share, respectively. During~~ the ~~nine months ended September 30, 2017 and 2016, the Company issued 41,250 and 33,750 stock options, with a weighted average exercise price of $4.42 and $3.08 per share, respectively.~~

~~On July 1, 2017, the Company granted to members of its Board of Directors options to purchase 13,750 shares~~fair value of the Company’s common stock atfor those stock options that have an exercise price lower than the fair value of ~~$3.76 and a term~~the Company’s common stock. Options with an exercise price above the fair value of ~~seven years.~~the Company’s common stock are considered to have no intrinsic value.

On July 1, 2017, the Company redeemed from the CEO and COO 12,500 previously awarded expiring stock options for cash totaling $34,000, of which $12,500 had been previously expensed in 2010 with the balance of $21,500 being recognized as additional compensation cost in July 2017. On September 30, 2017, the Company redeemed from the CEO and COO 12,500 previously awarded expiring stock options for cash totaling $50,000, of which $12,500 had been previously expensed in 2010 with the balance of $37,500 being recognized as additional compensation cost in September 2017.

2017 Equity Incentive Plan

On August 23, 2017, our board approved, subject to shareholder approval at the annual meeting of shareholders on October 6, 2017, the 2017 Equity Incentive Plan (the “Equity Plan”). The Equity Plan is intended to make available incentives that will assist us to attract, retainThrough March 31, 2022, 224,133 and ~~motivate employees, including officers, consultants and directors. We may provide these incentives through the grant of stock options, stock appreciation rights,~~168,090 restricted stock awards and 14,057 and 10,543restricted ~~stock units, performance~~ shares ~~and units and other cash-based or stock-based awards.~~

A total of 1,187,500 shares of our common stock will be initially authorized and reserved for issuance under the Equity Plan. This reserve will automatically increase on January 1, 2018 and each subsequent anniversary through 2027, by an amount equal to the smaller of (a) 3% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the board.

~~Awards may be~~have been granted under the Equity Plan to our employees, including officers, directors or consultants or those of any present or future parent or subsidiary corporation or other affiliated entity. All awards will be evidenced by a written agreement between us and the holder of the award and may include any of the following: stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units and cash-based awards and other stock-based awards.

~~The assumptions used for the periods ended September 30, 2017 and 2016, and the resulting estimates of weighted-average fair value per share of options granted during those periods, are as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016

Volatility 96% to 98% 103% to 105% 96% to 101% 103% to 107%
Risk-free interest rate 1-2% 1-2% 1-2% 1-2%
Expected term 7 years 7 years 7 years 7 years

~~F-12~~

~~The following table summarizes all compensation plan stock options as of September 30:~~

September 30, 2017 September 30, 2016
Number of Weighted Number of Weighted
Stock Options Exercise Price Stock Options Exercise Price
Options outstanding, beginning of year 557,917 $ 1.60 833,967 $ 1.20
Granted 41,250 4.42 33,750 3.08
Redeemed (55,000 ) (1.28 ) (237,500 ) (0.82 )
Exercised - - (15,000 ) (1.10 )
Expired / terminated - - (57,717 ) (1.08 )
Options outstanding, end of period 544,167 $ 2.10 557,500 $ 2.46
Options exercisable, end of period 524,167 $ 2.08 537,500 $ 2.44

Stock compensation expense was $42,376 and $30,000 for the three months ended September 30, 2017 and 2016, respectively. Stock compensation expense was $160,351 and $93,990 for the nine months ended September 30, 2017 and 2016, respectively. There are 20,000 non-vested stock options as of September 30, 2017. Of that amount, 10,000 options will vest equally in Octo ~~ber 2017 and October 2018.~~

~~Warrants~~

~~As part of the Co-Venture Agreement, the Company granted 459,691 conditional warrants to affiliates of MREC, a related party, to purchase 5% of~~ the Company’s capital stock on a fully diluted basis. The conditional warrants are exercisable commencing at the earlier of the first anniversary of MREC opening its first range facility utilizing the Company’s technologyCEO and the payment of all required minimum royalty/licensing fee payments during the first 12- month period. The Company also granted 459,691 conditional warrants to affiliates of MREC to purchase 5% of the Company’s capital stock on a fully diluted basis, which are exercisable any time subsequent to MREC’s payment of $2.0 million in royalty fees. The conditional warrants have a contractual term of five years and an exercise price of $2.72. On June 1, 2017, the one-year anniversary of MREC opening its first range facility occurred, and the associated warrants were vested. See Note 5.COO, respectively.

~~Warrant Redemptions and Co-Venture Agreement Amendment~~

On July 28, 2017, the Company received Notices of Exercise for all 459,691 warrants currently exercisable (the “Tranche 1 Warrants”) from all the MREC affiliate holders electing to purchase warrants pursuant to the terms of the net exercise provision set forth in the Warrant Agreement. Mr. Saltz, a director of the Company and a substantial shareholder of MREC, held 778,243 of the Tranche 1 Warrants prior to the assignment of the warrants to MREC on August 11, 2017. Under the net exercise provision, in lieu of exercising the warrant for cash, the holder may elect to receive shares equal to the value of the warrant (or the portion thereof being exercised) by surrender of the warrant and the Company issuing to holder the number of computed shares. Using the July 28, 2017 OTCQX closing price at $4.36 as fair value and the $2.72 warrant exercise price, upon conversion the 459,691 warrants entitle the holders to receive 172,912 shares of the Company’s common stock without payment of any additional consideration pursuant to the net exercise terms of the Tranche 1 Warrants that are currently exercisable.

Effective August 16, 2017, the Company and the MREC affiliate holders entered into an agreement (the “Warrant Buyout Agreement”) whereby the Company acknowledged the assignment of the Tranche 1 Warrants to MREC and agreed to repurchase them at a price of $3.924 per share of common stock issuable by the Company pursuant to the net exercise terms of the Warrants for a total of $678,505.

In addition, the Company agreed to repurchase from MREC an additional 459,691 warrants held by MREC that are not currently exercisable (the “Tranche 2 Warrants”). Mr. Saltz held 728,243 of the Tranche 2 Warrants prior to their assignment to MREC on August 11, 2017. The Warrant Buyout Agreement amends the Tranche 2 Warrants to provide for the immediate exercise on a net exercise basis of 48,415 shares of the Company’s common stock. The purchase price for the Tranche 2 Warrants of a total of $94,990 is based on a price of $3.924 per share of common stock issuable on a net exercise basis based on 24,208 shares of the Company’s common stock. The aggregate purchase price of the Tranche 1 Warrants and the Tranche 2 Warrants was $773,495.

~~F-13~~

MREC agreed that proceeds of the warrant redemption, net of applicable taxes, would be used to fund the development of a second stand-alone Modern Round location. In addition, MREC agreed that the minimum royalty due to us during the first 12-month royalty period in order to maintain exclusivity is $118,427. Further, MREC acknowledged that the second 12-month minimum royalty calculation period provided for in the Co-Venture Agreement began on June 1, 2017 and ends on May 31, 2018. Total minimum royalty payments due during this period required to maintain MREC’s exclusive rights under the Co-Venture Agreement are $560,000 including any shortfalls for prior periods being due no later than June 30, 2018. By fully funding the Minimum Royalty Payment, MREC will retain its exclusive license to use the Company’s shooting scenario content and other intellectual property in MREC’s facilities for a future 12-month period in accordance with the Co-Venture Agreement.

In addition, on August 16, 2017, we entered into an amendment to the Co-Venture Agreement to permit MREC to sublicense the VirTra Technology to third party operators of stand-alone location-based entertainment companies. MREC agreed to pay us royalties for any such sublicenses in an amount equal to 10% of the revenue paid to MREC in cases where MREC pays for the cost of the equipment for such location or 14% of the revenue paid to MREC in cases where it does not pay for the cost of the equipment.

On August 17, 2017, VirTra paid the aggregate purchase price of Tranche 1 Warrants and Tranche 2 Warrants of $773,495 reduced by the minimum royalty payment of $118,427 for net cash payment to MREC totaling $655,068.

Note 9. 11. Subsequent Events

~~Other~~On May 2, 2022, VirTra, Inc. announced the appointment of John F. Givens II as its co-Chief Executive Officer, effective April 11, 2022. Mr. Givens has been serving as a director of VirTra since November 2020.

~~On September 18, 2017,~~ VirTra ~~entered into~~has agreed to pay Mr. Givens an initial annual base salary of $298,990, subject to annual review. VirTra issued Mr. Givens a ~~Settlement Agreement and Release~~signing bonus of ~~Claims~~64,815 shares of common stock which are restricted from transfer until the earlier of: i) 12 months of employment having lapsed or ii) the Company terminating employment with ~~two parties and on November 30, 2017, VirTra entered into a Settlement Agreement and Release of Claims with the remaining two parties in the outstanding lawsuit agreeing~~Mr. Givens without cause.

Mr. Givens was also granted 288,889 performance-based restricted stock units pursuant to payments totaling $106,030 in full dismissal of all outstanding complaints against VirTra. The agreement does not constitute an admission that VirTra violated any local, state or federal regulations or engaged in any improper or unlawful conduct or wrongdoing. The US District Court of Arizona, District of Arizona approved Joint Motion Requesting Approval of Settlements on September 25, 2017 and December 7, 2017, respectively, for each settlement agreement. All required settlement payments were completed in accordance with the Settlement Agreements on September 29, 2017 and December 13, 2017. Management believes that the ultimate outcome of this matter did not have a material effect on its earnings, cash flows, or financial position. (See Note 7. Commitments and Contingencies – General or Threatened Litigation)

On October 6, 2017, VirTra held its Annual General Meeting and the shareholders approved, in line with the Board of Directors’ recommendations, all proposals presented at the meeting. Shareholders voted to elect all five of the director nominees: Robert D. Ferris, Matthew D. Burlend, Mitchell A. Saltz, Jeffrey D. Brown and Jim Richardson. Additionally, the shareholders approved the VirTraVirTra’s 2017 Equity Incentive Plan.

On October 9, 2017, VirTra’s Board of Directors appointed Robert D. Ferris, CEO to continue to serve as the Chairman of the Board of Directors. Additionally, the Board of Directors elected the following officers of the Company: Robert D. Ferris as Chief Executive Officer and President; Matthew D. Burlend as Chief Operating Officer and Vice President; and Judy A. Henry as Chief Financial Officer, Secretary and Treasurer.

~~On October 10, 2017, VirTra applied to list its common stock~~Beginning on the ~~Nasdaq Capital Market upon qualification by~~last business day of August 2022, a tranche of restricted stock units, having an approximate value of $40,000, based on current grant day prices, may vest if the ~~SEC~~Company has achieved net profit for the twelve months ending June 30, 2022 of ~~its planned Regulation A+ offering~~at least $2,500,000. For every $500,000 earned in excess of ~~common~~$2,500,000 another tranche will vest. If the maximum net profit of $7,000,000 is achieved, ten tranches would vest. Similarly, on the last business day of August 2023, a tranche of restricted stock units may vest if the Company has achieved a net profit of at least $3,000,000, with ~~a minimum of $5,000,000 and~~the potential to have additional tranches vest up to a maximum of ~~$10,000,000 pursuant to an Offering Statement filed~~$9,000,000 in net profit. This vesting arrangement continues with the ~~SEC on September 11, 2017, as amended.~~

~~On December 1, 2017, the Company redeemed from the CEO and COO 12,500 previously awarded expiring stock options for cash totaling $62,000,~~last business day of ~~which $17,500 had been previously expensed in 2011~~August 2024, with the ~~balance of $44,500~~minimum net profit threshold being ~~recognized as additional compensation cost in December 2017.~~

On February 12, 2018, VirTra’s Board of Directors unanimously approved a 1-for-2 reverse stock split of the Company’s common stock, par value $0.0001 per share with resulting fractional shares to be rounded up to the next higher whole number of shares. The record date for shareholders entitled to participate in the Reverse Split shall be the market effective date as established by FINRA, which was effectuated on March 2, 2018. Except as otherwise indicated, all references to common stock, share data, per share data and related information depict the 1-for-2 Reverse Stock Split as if it was effective and as if it had occurred at the beginning of the earliest period presented.

On March 29, 2018, pursuant to an Offering Circular on Form 1-A, as amended, pursuant to Regulation A, we offered on a “best efforts” basis a minimum of 714,286 shares of common stock and a maximum of 1,428,571 shares of common stock (the “Offered Shares”), par value of $0.0001 per share (the “Common Stock”), at a price per share of Common Stock of $7.00. The minimum offering amount (“Minimum Offering Amount”) was $5,000,000$3,500,000 and the maximum ~~offering~~net profit being $11,000,000.

The vesting schedule notwithstanding, the Compensation Committee shall have the discretion to declare the vesting of any number of restricted stock units should the Company experience unusual results of operations, such as falling below the net profit threshold one year and exceeding the maximum net profit the following year, so long as the total number of restricted stock units declared to be vested does not exceed the amount ~~(“Maximum Offering Amount”) was $10,000,000. We terminated~~awarded. Additionally, while a maximum net profit per year has been set for allocation of the ~~offering on March 29, 2018. No~~available shares ~~were sold pursuant~~at this time, it is very possible that the Company will exceed these levels during the next 3 years and if such performance occurs, the Compensation Committee will meet to determine if additional compensation is in the ~~offering.~~best interests of the Company at that time.

~~On March 29, 2018, our shares of Common Stock began trading on the Nasdaq Capital Market under the symbol, “VTSI.”~~

~~F-14~~

F- 13

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, ~~2016~~2021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Company’s ~~Post-Qualification Offering Circular Amendment No. 1 to~~Annual Report on Form ~~1-A~~10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on ~~February 21, 2018.~~August 2, 2022.

Forward-Looking Statements

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

~~OVERVIEW~~Business Overview

~~We develop, sell~~VirTra, Inc. (the “Company,” “VirTra,” “we,” “us” and ~~support~~“our”) is a global provider of judgmental use of force training ~~and marksmanship~~simulators, firearms training ~~systems~~simulators and ~~accessories~~driving simulators for the law enforcement, military, ~~or civilian use. Our simulators use~~educational and commercial markets. The Company’s patented technologies, software, ~~hardware~~ and ~~content~~scenarios provide intense training for de-escalation, judgmental use-of-force, marksmanship and related training that mimics real-world situations. VirTra’s mission is to ~~create uniquely effective~~save and improve lives worldwide through practical and highly-effective virtual reality and simulator technology.

The VirTra firearms training simulator allows marksmanship and realistic scenario-based training ~~that does not require live ammunition~~to take place on a daily basis without the need for a shooting range, protective equipment, role players, safety officers, or ~~less-than-lethal munitions, which can both save money and provide certain~~a scenario-based training ~~capabilities unavailable to live fire exercises.~~site. We have developed a higher standard in simulation training including capabilities such as: multi-screen, ~~video based~~video-based scenarios, unique scenario authoring ability, superior training scenarios, the patented ~~Threat-Fire™~~Threat-Fire® shoot-back system, powerful gas-powered simulated recoil weapons, and more. The simulator also allows students to receive immediate feedback from the instructor without the potential for sustaining injuries by the instructor or the students. The instructor 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 ~~also~~have two main customer groups, namely, law enforcement, and military. These are ~~engaged in licensing~~very different markets and require different sales and marketing programs as well as personnel. Our focus is to expand the market share and scope of our ~~technology~~training simulators sales to ~~Modern Round Entertainment Corporation (“MREC”), a developer and operator of a combined dining and entertainment concept centered on an indoor shooting experience.~~these identified customer groups by pursuing the following key growth strategies:

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

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

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

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

~~Simulator~~ Product Offerings

Our simulator products include the following:

●

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

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

●	~~V-180™~~ ○	A key feature of the V-300®shows how quickly judgment decisions have to be made, and if they are not made immediately and quickly, it can lead to the possible loss of lives. This feature, among others, supports our value proposition to our customers that you cannot put a dollar value on being prepared enough for the surprises that could be around every corner and the ability to safely neutralize any life-threatening encounters.

●

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

○

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

●

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

○

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

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

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

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

	●	~~Top Subject Matter Expert Content – content supplied with our simulators~~Subscription Training Equipment Partnership (STEP)™ is ~~approved by top firearms training experts~~a program that allows agencies to utilize VirTra’s simulator products, accessories, and V-VICTA™ interactive coursework on a subscription basis.

	●	~~V-Author™~~V-Author® Software – allows users to create, edit, and train with content specific to agency’s objectives and environments. V-Author® is an easy to use application capable of almost unlimited custom scenarios, skill drills, targeting exercises and firearms course-ware 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. 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.

	●	Return Fire Device – the patented ~~Threat-Fire™~~Threat-Fire® device which applies real-world stress on the trainees during simulation training.

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

Recent Developments

During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The pandemic has significantly impacted the economic conditions in the U.S., accelerating during half of March and April as federal, state and local governments react to the public health crisis, creating significant uncertainties in the U.S. economy. On March 30, 2010, the Governor for the State of Arizona issued a stay-at-home order, currently in effect until May 15, 2020. The Company carefully reviewed all rules and regulations of the government orders and determined it met the requirements of an essential business to remain open. The Company had the majority of its staff begin working remotely in mid-March, with only essential personnel continue working at the manufacturing and production facilities. This situation is rapidly changing and additional impacts to the business may arise that we are not aware of currently. While the disruption is currently expected to be temporary, there is uncertainty around the duration. The ultimate impact of the pandemic on the Company’s results of operations, financial position, liquidity or capital resources cannot be reasonably estimated at this time. To date, the COVID-19 restrictions have resulted in reduced customer shipments and customer system installations. These recent developments are expected to result in lower recognized revenue and possibly lower gross margin when they occur. To date, there have been no order cancellations only delays in when orders ship or installations occur and all delayed orders remain in backlog. Although not a material component of our company, a significant adverse change in the business climate could affect the value of the Company’s long-term investment in TEC, currently there has not been a negative impact and any future impact cannot be reasonably estimated at this time. The Company is no longer investing in Certificates of Deposits as a precautionary measure to increase its liquid cash position and preserve financial flexibility considering uncertainty in the U.S. and global markets resulting from COVID-19. Additionally, the Company’s stock repurchase program was suspended as a result of interim rulings for public-company recipients of a PPP loan under the CARES Act. The stock repurchase suspension has continued in effect, even though the PPP loan has been forgiven and is no longer outstanding.

~~RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017~~

~~Revenues.~~~~Revenues were $4,686,445~~Results of operations for the three months ended ~~September 30, 2017~~March 31, 2022 and March 31, 2021

Revenues. Revenues were $6,753,228 for the three months ended March 31, 2022 compared to ~~$3,041,701~~$4,441,909 for the same period in ~~2016 and $14,147,297~~2021, an increase of $2,311,319, or 52%. The increase in revenues for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 resulted from an increase in the number of simulators and accessories completed, delivered and revenue recognized compared to ~~$12,649,963~~the same period in 2021.

Cost of Sales. Cost of sales were $3,066,138 for the three months ended March 31, 2022 compared to $1,873,404 for the same period in ~~2016. The~~2021, an increase ~~was primarily due to additional sales~~ of ~~simulators, accessories, warranties and other services, with a portion of the increase as a result of increased royalty revenue.~~

~~Cost of Sales.~~Cost of sales was $1,573,384 for the three months ended September 30, 2017 compared to $1,345,181 for the same period in 2016 and $4,853,796 for the nine months ended September 30, 2017 compared to $4,856,906 for the same period in 2016.$1,192,734, or 64%. The increase was due to additional sales volume partially offset by a reduction in the cost of manufacturing system and product components in our recently acquired machine shop, an increase in sales of mix of higher margin products including training, service and warranty sales, and a reduction in material costs due to higher quantities of simulator systems and accessories sold. The cost of sales on a dollar basis varies from quarter-to-quarter as a result of sales volume ~~purchases~~ and ~~more favorable pricing of raw materials and systems components in 2017 compared to the same period in 2016.~~product mix.

Gross Profit.Gross profit was ~~$3,113,061~~$3,687,090 for the three months ended ~~September 30, 2017~~March 31,2022 compared to ~~$1,696,521~~$2,568,505 for the same period in ~~2016 with a~~2021, an increase of $1,118,585, or 44%. The gross profit margin ~~of 66%~~was 55% for the three months ended ~~September 30, 2017 compared to 56%~~March 31, 2022 and 58% for the same period in ~~2016. Gross~~2021. The increase in gross profit in terms of dollars was ~~$9,293,503~~due to the increase in revenues, while the decrease in gross profit margin as a percentage of revenues can be attributed to increased costs, and the product mix of systems, accessories and services sold.

Operating Expenses. Net operating expense was $2,975,787 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 compared to ~~$7,793,057~~$2,004,450 for the same period in ~~2016, with a gross profit margin~~2021, an increase of ~~66%~~$971,337, or 48%. The increase was mainly due to increases in marketing, research and development, and professional services expenses.

Operating Income (Loss). Operating income was $711,303 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 compared to ~~62%~~an operating income of $564,055 for the same period in ~~2016. The gross profit improvement was a result of a reduction in the cost of manufacturing system and product components in our recently acquired machine shop,~~2021, an increase ~~in sales~~ of ~~mix~~$147,248, or 26%.

Other Income. Other expense net of higher margin products including training, service and warranty sales and a reduction in material costs due to higher volume purchases and more favorable pricing of raw materials and systems components in 2017 compared to the same period in 2016.

~~Operating Expenses.~~ ~~Net operating expense~~other income was ~~$2,361,243~~$10,229 for the three months ended ~~September 30, 2017~~March 31, 2022 compared to ~~$1,700,835~~other income net of other expense of $13,945 for the same period in ~~2016. Net operating~~2021, a decrease of $24,174, or 173%, primarily from an increase in interest expense related to the note payable.

Provision for Income Tax Benefit. Provision for income tax was ~~$6,447,409~~$124,000 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 compared to ~~$5,363,678~~a provision for income tax benefit of $77,163 for the same period in ~~2016. The three month~~2021, an increase of $201,163, or 261%. Provision (benefit) for income tax is estimated quarterly applying both federal and nine month year over year increases were due to expanding staffing levels, annual increases in payroll and benefits for current staff, sales and marketing expansion, new research and development work, and IT infrastructure upgrades.state tax rates.

Net ~~Income.~~Income (Loss). Net income was ~~$742,125~~$577,074 for the three months ended ~~September 30, 2017~~March 31, 2022 compared to a net ~~loss~~income of ~~$10,083~~$655,163 for the same period in ~~2016. Net income was $2,792,104 for the nine months ended September 30, 2017 compared to $2,361,186 for the same period in 2016.~~2021, a decrease of $78,089, or 12%. The ~~increase~~fluctuations in net income ~~resulted from increases in revenue and gross profit partially offset by an increase in operating expenses as noted~~(loss) relates to each respective section discussed above.

Adjusted Earnings Before Interest, Taxes, Depreciation and ~~Amortization (AEBITDA)~~Amortization.

Explanation and Use of Non-GAAP Financial Measures:

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

	For the Three Months Ended
	March 31,		March 31,			Increase			%
	2022		2021			(Decrease)			Change

Net Income (Loss)	$	577,074	$	655,163		$	(78,089	)		-12	%
Adjustments:
Provision (Benefit) for income taxes		124,000		(77,163	)		201,163			-261	%
Depreciation and amortization		215,746		97,290			118,456			122	%
EBITDA	$	916,820	$	675,290		$	241,530			36	%

Right of use amortization		79,853		76,209			3,644			5	%

Adjusted EBITDA	$	996,673	$	751,499		$	245,174			33	%

~~RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA~~

Three Months Ended Nine Months Ended
September 30, September 30, Increase % September 30, September 30, Increase %
2017 2016 (Decrease) Change 2017 2016 (Decrease) Change

Net Income/(Loss) $ 742,125 $ (10,083 ) $ 752,208 -7460.2 % $ 2,792,104 $ 2,361,186 $ 430,918 18.3 %
Adjustments:
Depreciation and amortization 65,570 64,591 979 1.5 % 204,527 160,768 43,759 27.2 %
Non-cash stock option expense 42,376 30,000 12,376 41.3 % 160,351 93,990 66,361 70.6 %
Provision for income taxes 24,285 8,414 15,871 188.6 % 102,285 73,618 28,667 38.9 %

Adjusted EBITDA $ 874,356 $ 92,922 $ 781,434 841.0 % $ 3,259,267 $ 2,689,562 $ 569,705 21.2 %

Liquidity and Capital ~~Resources~~

Resources. Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. The Company had ~~$5,106,205~~$15,686,234 and ~~$3,703,579 in~~$19,708,565 of cash and cash equivalents as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, respectively. ~~The working~~Working capital was ~~$7,359,583~~$25,850,734 and ~~$5,268,654 for the periods ended September 30, 2017~~$25,944,717 as of March 31, 2022 and December 31, ~~2016,~~2021, respectively.

Net cash ~~provided by~~used in operating activities was ~~$2,549,964~~$3,116,254 and ~~$2,569,636~~$1,748,428 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016, respectively, resulting~~2021, respectively. Net cash used in operating activities resulted primarily from ~~an increase~~increases in ~~net income~~accounts receivable, inventory, and ~~significant~~unbilled revenues, offset by increases in trade accounts payable, accrued compensation, and deferred revenues, as well as other changes in ~~accounts receivables, unbilled revenue, inventory, prepaid expense~~operating assets and ~~other current assets, accounts payable and other accrued expenses.~~liabilities.

Net cash used in investing activities was ~~$83,410~~$856,077 and ~~$468,115~~$48,205 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016, respectively, resulting from a reduction in purchases~~2021, respectively. Investing activities consisted of ~~property~~the purchase of intangible assets and equipment.

Net cash used in financing activities was ~~$1,063,928~~$50,000 and ~~$497,143~~$4,946 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016, respectively, resulting from the purchase~~2021, respectively. Financing activities in 2022 consisted of ~~treasury~~principal payments on note payable offset by stock ~~repurchase~~options exercised. Financing activities in 2021 consisted of stock ~~warrants which~~options exercised and redeemed.

Bookings and Backlog

The Company defines bookings as the total of newly signed contracts and purchase orders received in a defined time period. The Company received bookings totaling $6.4 million for the three months ended March 31, 2022. The Company defines backlog as the accumulation of bookings that have not started or are uncompleted performance objectives and cannot be recognized as revenue until delivered in a future quarter. Backlog also includes extended warranty agreements and STEP agreements that are deferred revenue recognized on a straight-line basis over the life of each respective agreement. As of March 31, 2022, the Company’s backlog was ~~offset by~~$21.0 million, net of a $1.8 million reduction due to budgetary cuts and government de-funding. Management estimates the majority of the new bookings received in ~~repurchase~~the first quarter of ~~stock options.~~2022 will be converted to revenue in 2022. Management estimates the conversion of backlog based on current contract delivery dates; however, contract terms and dates are subject to modification and are routinely changed at the request of the customer. Additionally, due to the impact of COVID-19, management’s estimates will change in accordance with federal and state guidelines. To date, the COVID-19 restrictions have resulted in reduced customer shipments and customer system installations. These recent developments are expected to result in lower recognized revenue and possibly lower gross margin when they occur. To date, there have been no order cancellations, only delays in when orders ship or installations occur and all delayed orders remain in backlog.

Cash Requirements

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

~~CRITICAL ACCOUNTING POLICIES~~Critical Accounting Policies and Estimates

~~We have identified the following policies below as critical to~~Our discussion and analysis of our ~~business~~financial condition and results of ~~operations. Our reported results~~operations are impacted by the application of the following accounting policies, certain of which require management to make subjective or complex judgments. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely require adjustment. Specific risks associated with these critical accounting policies are described in the following paragraphs.

~~Basis of Presentation and Use of Estimates~~

~~Our~~based on our unaudited condensed financial statements, which have been prepared in accordance with ~~GAAP, unless otherwise noted.~~GAAP. The preparation of our unaudited condensed financial statements ~~in conformity with GAAP~~ requires ~~management~~us to make estimates and ~~assumptions~~judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and ~~liabilities and~~related disclosure of contingent assets and ~~liabilities as~~liabilities. On an ongoing basis, we evaluate our estimates, including those related to areas that require a significant level of ~~the date~~judgment or are otherwise subject to an inherent degree of ~~the financial statements and the reported amounts of revenues and expenses during the reporting period.~~uncertainty. Significant accounting estimates in these financial statements include valuation assumptions for share-based payments, allowance for doubtful accounts and notes receivable, inventory reserves, accrual for warranty reserves, the carrying value of long-lived assets, income tax valuation allowances, ~~and~~ the carrying value of cost basis ~~investments.~~investments, and the allocation of the transaction price to the performance obligations in our contracts with customers. We base our estimates on historical experience, our observance of trends in particular areas, and information or valuations and various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Actual ~~results~~amounts could differ significantly from ~~those estimates.~~

~~Fair Value~~amounts previously estimated. For a discussion of our critical accounting policies, refer to Part I, Item 7, “Management’s Discussion and Analysis of Financial ~~Instruments~~

~~The fair value~~Condition and Results of ~~financial instruments approximates their carrying values at September 30, 2017 and~~Operations” in our Annual Report on Form 10-K for the year ended December 31, ~~2016 due to their short maturities. These financial instruments consist of cash and cash equivalents, accounts receivable, investment in MREC, accounts payable, and accrued liabilities.~~

~~Cash and Cash Equivalents~~

~~We consider all highly liquid investments with a maturity of 90 days or less at the time of purchase to be cash equivalents.~~

~~Accounts Receivable and Allowance for Doubtful Accounts~~

We recognize an allowance for losses on accounts receivable based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. Accounts receivable are charged off after all reasonable collection efforts2021. Management believes that there have been ~~taken. As of September 30, 2017 and December 31, 2016, we maintained an allowance for doubtful accounts of $12,008 and $20,000, respectively.~~

~~Inventories~~

~~Inventories are stated at the lower of cost or market with cost being determined on the average cost method. Work~~no changes in progress and finished goods inventory includes an allocation for capitalized labor and overhead. The Company routinely evaluates the carrying value of inventory and provides reserves when appropriate to reduce inventory to the lower of cost or market to reflect estimated net realizable value. As of September 30, 2017, and December 31, 2016, the Company maintained reserves of $29,218 and $17,282, respectively

~~Investments in Other Companies~~

~~Minority investments in other companies are accounted for under the cost method of~~our critical accounting because we do not have the ability to exercise significant influence over the companies’ operations. Under the cost method of accounting, investments in private companies are carried at cost and are only adjusted for other-than-temporary declines in fair value and distribution of earnings.Management regularly evaluates the recoverability of its investment. During the periods ended September 30, 2017 and December 31, 2016 , the Company did not recognize any losses due to other-than-temporary declines of the value of the investments.

~~Property and Equipment~~

Property and equipment are carried at cost, net of depreciation. Gains or losses related to retirements or disposition of fixed assets are recognized in operations in the period incurred. Costs of normal repairs and maintenance are charged to expense as incurred, while betterments or renewals are capitalized. 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, which are summarized as follows:

~~Computer equipment~~	~~3-5 years~~
~~Furniture and office equipment~~	~~5-7 years~~
~~Leasehold improvements~~	~~7 years~~

~~Revenue Recognition and Deferred Revenue~~

~~Net revenues include sales of products and services and are 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 warranties, service agreements and related support. Certain components of our sales include multiple elements comprising of both products and services. Our revenue recognition falls under ASC 605-25,~~Multiple Element Arrangements~~~~, with the delivery of the simulator and installation being two separate deliverables. Our delivery of the simulator and the installation has been assessed to qualify as separate units of accounting:~~

	1.	~~The simulator unit upon shipment or delivery and customer acceptance, depending on the shipping terms.~~

	2.	~~The installation upon completion and customer sign-off.~~

Additionally, we recognize revenue for these products and services when it is realized or realizable and earned. Revenue is considered realized and earned when: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred and/or services have been rendered; (iii) the price is fixed and determinable; and (iv) collection of the resulting receivable is reasonably assured. Shipping fees charged to customers are recorded as a component of net revenues. All sales and sales contracts, including international sales, have been denominated in US dollars.

~~Products~~

Revenue from the sale of products is recognized when title and risk of loss passes to the customer. Delivery is considered complete when products have been shipped to the customer and title and risk of loss has transferred to the customer. For customers other than United States governmental agencies, the Company generally requires advance deposits prior to shipment. Customer deposits are recorded as a current liability under deferred revenue on the accompanying balance sheet and totaled $376,967 and $51,334 as of September 30, 2017 and December 31, 2016, respectively.

~~Services~~

Services include installation of product, separately priced extended limited warranties on parts and labor and technical support. Revenue is recognized for service contracts as earned which is generally upon completion of installation or, if extended warranties, on a straight-line basis over the term of the contract. The Company offers a standard warranty on its products from manufacturing defects on a limited basis for a period of one year after purchase and also offers separately priced extended warranties for periods of up to four years beginning after the expiration of the standard one-year warranty. After the standard warranty expires butpolicies during the term of the extended warranty, if the device fails to operate properly from defects in materials and workmanship, the Company will repair or replace the defective product at no additional charge. The Company records a gross to net revenue adjustment for the one-year standard warranty and accrues annually the estimated cost of complying with the warranty agreements for all extended warranty years. Deferred revenue for separately priced extended warranties longer than one year totaled $2,376,371 and $2,014,571 as of September 30, 2017 and Decemberthree months ended March 31, ~~2016, respectively.~~2022.

~~Income Taxes~~

Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all the benefits of deferred tax assets will not be realized. The Company currently maintains a full valuation allowance on all of its net deferred tax assets.

~~Stock Based Compensation~~

The Company calculates the cost of awards of equity instruments based on the grant date fair value of the awards using the Black-Scholes-Merton option pricing valuation model, which incorporates various assumptions including volatility, expected term and risk-free interest rates.

The expected term of the options is the estimated period of time until exercise and is based on historical experience of similar awards giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. Expected stock price volatility is based on historical volatility of the Company’s stock. The risk-free interest rate is based on the implied yield available on United States Treasury zero-coupon issues with an equivalent remaining term. The estimated fair value of stock-based compensation awards and other options is amortized on a straight-line basis over the relevant vesting period. Share-based compensation expense is recognized based on awards ultimately expected to vest. Forfeitures are recorded in subsequent periods when they occur.

Recent Accounting Pronouncements

~~In May 2014, the~~See Note 1 to our financial statements, included in Part I, Item 1., Financial Accounting Standards Board (“FASB”) issued guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue arising from contracts with customers. In August 2015, the FASB issued guidance approving a one-year deferral, making the standard effective for reporting periods beginning after December 15, 2017, with early adoption permitted only for reporting periods beginning after December 15, 2016. The Company is evaluating the impact of the standard and has not yet determined the effect on its financial position or results of operations.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires that equity investments, except for those accounted for under the equity method or those that result in consolidation of the investee, be measured at fair value, with subsequent changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. ASU 2016-01 also impacts the presentation and disclosure requirements for financial instruments. ASU 2016-01 is effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted only for certain provisions. As the Company wrote-down its Investment in Modern Round to fair value in 2017, the Company believes that the adoption of ASU 2016-01 will not have a material impact on its financial statements and will change from the cost method of accounting.Off-Balance Sheet Arrangements

~~We implemented all new accounting standards that are in effect and that may impact our financial statements~~

~~OFF-BALANCE SHEET ARRANGEMENTS~~

As of ~~September 30, 2017,~~March 31, 2022, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET ~~RISK~~RISK.

Not required for smaller reporting companies.

ITEM 4. CONTROLS AND ~~PROCEDURES~~PROCEDURES.

Evaluation of disclosure controls and procedures

We maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Exchange Act. Disclosure ~~Controls~~controls and ~~Procedures~~

~~We have not yet~~procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of March 31, 2022, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to ~~a transition period established by~~material weaknesses, which we identified in our report on internal control over financial reporting contained in our Annual Report on Form 10-K for the ~~rules of~~year ended December 31, 2021, filed with the SEC ~~for newly public companies.~~on August 2, 2022.

~~Internal Control over Financial Reporting~~

~~We have not yet evaluated our disclosure controls and procedures due to the transition period established by the rules of the SEC for newly public companies.~~

Change in ~~Internal Control~~internal control over ~~Financial Reporting~~financial reporting

There ~~was~~has been no change in our internal control over financial reporting that occurred during the quarterly period ended ~~September 30, 2017~~March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Subsequent to March 31, 2022, we have implemented more formal review and documentation of workflow processes, and increased our ERP training for our staff. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.

PART IIII: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~We are not a party~~See Note 9 to ~~any other material litigation, nor, to the knowledge of management, is any litigation threatened against us that may materially affect us. From time to time we are involved~~our unaudited financial statements, included in ~~legal proceedings occurring in the ordinary course of business.~~

On September 18, 2017, VirTra entered into a Settlement Agreement and Release of Claims with two parties and on November 30, 2017, VirTra entered into a Settlement Agreement and Release of Claims with the remaining two parties in the outstanding lawsuit agreeing to payments totaling $100,300 in full dismissal of all outstanding complaints against VirTra. The agreement does not constitute an admission that VirTra violated any local, state or federal regulations or engaged in any improper or unlawful conduct or wrongdoing. The US District Court of Arizona, District of Arizona approved Joint Motion Requesting Approval of Settlements on September 25, 2017 and December 7, 2017, respectively, for each settlement agreement. All required settlement payments were completed in accordance with the Settlement Agreements on September 29, 2017 and December 13, 2017. Management believes that the ultimate outcomePart I, Item 1., Financial Information of this ~~matter did not have a material effect~~Quarterly Report on ~~its earnings, cash flows, or financial position.~~Form 10-Q, which information is incorporated herein by reference.

ITEM 1A. RISK FACTORS

Not required for smaller reporting companies.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~None.~~ None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

	(a)	None

	(b)	There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors since the filing with the SEC of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

~~(a) None.~~

~~(b) There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors during the quarter ended September 30, 2017.~~

ITEM 6. EXHIBITS

Exhibit No.	Exhibit ~~No.~~	Description

31.1	Certification of ~~the~~ Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31.2~~31.3	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

~~101.INS~~ 104	Cover Page Interactive Data File (embedded within the Inline XBRL ~~Instance Document~~document)

	10
~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VIRTRA, INC.

Date: August 11, 2022	By:	/s/ Robert D. Ferris
		Robert D. Ferris
		Co-Chief Executive Officer and President
		(principal executive officer)

~~Dated: March 30, 2018~~	By:	/s/ ~~Robert D. Ferris~~John F. Givens II
		~~Robert D. Ferris,~~John F. Givens II
		~~Chief~~Co-Chief Executive Officer ~~and President~~
		(principal executive officer)

	By:	/s/ ~~Judy Henry~~Marsha J. Foxx
		~~Judy Henry,~~Marsha J. Foxx,
		Chief ~~Financial~~Accounting Officer
		(principal financial and principal accounting officer)

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

295 E. Corporate Place, Chandler, AZ		85225

~~7970 S. Kyrene Rd., Tempe, Arizona~~	~~85284~~
(Address of principal executive offices)		(Zip Code)

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

Large accelerated filer	~~[ ]~~☐	Accelerated filer	~~[ ]~~☐
Non-accelerated filer	~~[ ]~~☒	Smaller reporting company	~~[X]~~☒
~~(Do not check if a smaller reporting company)~~		Emerging growth company	~~[X]~~☒

			PAGE NO.
PART I			FINANCIAL INFORMATION

	Item 1.	Financial ~~Statements:~~Statements (Unaudited)	F-1
		~~Condensed~~ Balance Sheets as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016 (unaudited)~~2021	F-1
		~~Condensed~~ Statements of Operations for the Three Months ended March 31, 2022 and ~~Nine~~2021	F-2
		Statements of Changes in Stockholders’ Equity for the Three Months Ended ~~September 30, 2017~~March 31, 2022 and ~~2016 (unaudited)~~2021	~~F-2~~F-3
		~~Condensed Statements of Stockholders’ Equity~~	~~F-3~~
		~~Condensed~~ Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2022 and ~~2016 (unaudited)~~2021	F-4
		Notes to the Unaudited ~~Condensed~~ Financial Statements	F-5

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

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8

	Item 4.	Controls and Procedures	8

PART II			OTHER INFORMATION

	Item 1.	Legal Proceedings	9

	Item 1A.	Risk Factors	9

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

	Item 3.	Defaults Upon Senior Securities	9

	Item 4.	Mine Safety Disclosures	9

	Item 5.	Other Information	9

	Item 6.	Exhibits	10

	SIGNATURES		11

	Preferred stock				Common stock				Additional paid-in			Treasury			Accumulated
	Shares		Amount		Shares		Amount		capital			Stock			Deficit			Total

Balance at December 31, 2016		-	$	-		7,927,774	$	793	$	14,128,837		$	-		$	(7,719,351	)	$	6,410,279

Stock based compensation		-		-		-		-		160,351			-			-			160,351

Stock options repurchased		-		-		-		-		(67,000	)		-			-			(67,000	)

Stock warrants vested-MREC Investment		-		-		-		-		1,516,246			-			-			1,516,246

Stock warrants repurchased-MREC Inv.		-		-		-		-		(773,495	)		-			-			(773,495	)

Treasury stock		-		-		-		-		-			(96,633	)		-			(96,633	)

Net income		-		-		-		-		-			-			2,792,104			2,792,104

Balance at September 30, 2017		-	$	-		7,927,774	$	793	$	14,964,939		$	(96,633	)	$	(4,927,247	)	$	9,941,852

	Three Months Ending September 30,						Nine Months Ending September 30,
	2017			2016			2017			2016
Number of stock options redeemed		30,000			12,500			55,000			237,500
Redemption value	$	97,300		$	37,500		$	182,550		$	505,224
Amount previously expensed (2010 and 2009)		(32,000	)		(12,500	)		(67,000	)		(190,000	)

Additional compensation expense	$	65,300		$	25,000		$	115,550		$	315,224

Building Lease Schedule

2017	$	87,651
2018		324,353
2019		105,542

Total	$	517,546

	Three Months Ended										Nine Months Ended
	September 30,		September 30,			Increase		%			September 30,		September 30,		Increase		%
	2017		2016			(Decrease)		Change			2017		2016		(Decrease)		Change

Net Income/(Loss)	$	742,125	$	(10,083	)	$	752,208		-7460.2	%	$	2,792,104	$	2,361,186	$	430,918		18.3	%
Adjustments:
Depreciation and amortization		65,570		64,591			979		1.5	%		204,527		160,768		43,759		27.2	%
Non-cash stock option expense		42,376		30,000			12,376		41.3	%		160,351		93,990		66,361		70.6	%
Provision for income taxes		24,285		8,414			15,871		188.6	%		102,285		73,618		28,667		38.9	%

Adjusted EBITDA	$	874,356	$	92,922		$	781,434		841.0	%	$	3,259,267	$	2,689,562	$	569,705		21.2	%