UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20172022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________________________ to _______________________________
Commission file number: 001-38420
VirTra, Inc.VIRTRA, INC.
(Exact name of registrant as specified in its charter)
Nevada | 93-1207631 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
295 E. Corporate Place, Chandler, AZ | 85225 | |
(Address of principal executive offices) | (Zip Code) |
(480) 968-1488
(Registrant’s telephone number, including area code)code: (480)968-1488
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $0.0001 par value | VTSI | Nasdaq Capital Market |
Indicate by check mark whether the registrant: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 DateData 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.
Large accelerated filer | Accelerated filer | |||
Non-accelerated filer | Smaller reporting company | |||
Emerging growth company |
If an emerging growth company, indicate by checkmarkcheck 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,November 7, 2022, the registrant had 7,904,307 shares of common stock outstanding.
VIRTRA, Inc.INC.
FORM 10-Q
TABLE OF CONTENTS
2 |
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIRTRA, INC.
(Unaudited)
September 30, 2017 | December 31, 2016 | September 30, 2022 | December 31, 2021 | |||||||||||||
(Unaudited) | ||||||||||||||||
ASSETS | ||||||||||||||||
CURRENT ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 5,106,205 | $ | 3,703,579 | $ | 15,673,154 | $ | 19,708,565 | ||||||||
Accounts receivable, net | 3,011,610 | 3,244,852 | 2,318,534 | 3,896,739 | ||||||||||||
Inventory, net | 1,689,149 | 1,319,944 | 9,770,050 | 5,014,924 | ||||||||||||
Unbilled revenue | 1,724,642 | 107,297 | 4,105,351 | 3,946,446 | ||||||||||||
Prepaid expenses and other current assets | 660,288 | 250,066 | 705,063 | 940,887 | ||||||||||||
Total current assets | 12,191,894 | 8,625,738 | 32,572,152 | 33,507,561 | ||||||||||||
Long-term assets: | ||||||||||||||||
Property and equipment, net | 693,206 | 814,323 | 14,591,480 | 12,864,766 | ||||||||||||
Investment in MREC | 1,988,174 | 471,928 | ||||||||||||||
Operating lease right-of-use asset, net | 1,333,270 | 784,306 | ||||||||||||||
Intangible assets, net | 593,403 | 535,079 | ||||||||||||||
Security deposits, long-term | 35,691 | 19,712 | ||||||||||||||
Other assets, long-term | 376,461 | 189,734 | ||||||||||||||
Deferred tax asset, net | 1,561,857 | 1,674,234 | ||||||||||||||
TOTAL ASSETS | $ | 14,873,274 | $ | 9,911,989 | ||||||||||||
Total long-term assets | 18,492,162 | 16,067,831 | ||||||||||||||
Total assets | $ | 51,064,314 | $ | 49,575,392 | ||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
CURRENT LIABILITIES | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 730,302 | $ | 467,679 | $ | 697,862 | $ | 789,394 | ||||||||
Accrued compensation and related costs | 1,109,734 | 617,582 | 1,165,094 | 1,062,078 | ||||||||||||
Accrued expenses and other current liabilities | 227,688 | 194,668 | 1,127,161 | 991,744 | ||||||||||||
Notes payable, current | 11,250 | 11,250 | ||||||||||||||
Deferred revenue | 2,753,337 | 2,065,905 | ||||||||||||||
Note payable, current | 232,588 | 236,291 | ||||||||||||||
Operating lease liability, short-term | 548,376 | 347,772 | ||||||||||||||
Deferred revenue, short-term | 3,074,815 | 4,135,565 | ||||||||||||||
Total current liabilities | 4,832,311 | 3,357,084 | 6,845,896 | 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 | 2,987,138 | 1,992,625 | ||||||||||||||
Note payable, long-term | 8,108,545 | 8,280,395 | ||||||||||||||
Operating lease liability, long-term | 854,583 | 505,383 | ||||||||||||||
Other long term liabilities | - | 5,436 | ||||||||||||||
Total long-term liabilities | 99,111 | 144,626 | 11,950,266 | 10,783,839 | ||||||||||||
Total liabilities | 4,931,422 | 3,501,710 | 18,796,162 | 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 $ par value; authorized; shares issued or outstanding | - | - | ||||||||||||||
Common stock $ par value; shares authorized; shares issued and outstanding as of September 30, 2022 and shares issued and outstanding as of December 31, 2021 | 1,089 | 1,081 | ||||||||||||||
Class A common stock $ par value; shares authorized; shares issued or outstanding | - | - | ||||||||||||||
Class B common stock $ par value; shares authorized; shares issued or outstanding | - | - | ||||||||||||||
Common stock, value | 1,089 | 1,081 | ||||||||||||||
Additional paid-in capital | 14,964,939 | 14,128,837 | 31,401,259 | 30,923,391 | ||||||||||||
Accumulated deficit | (4,927,247 | ) | (7,719,351 | ) | ||||||||||||
Retained earnings (Accumulated deficit) | 865,804 | 304,237 | ||||||||||||||
Total stockholders’ equity | 9,941,852 | 6,410,279 | 32,268,152 | 31,228,709 | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 14,873,274 | $ | 9,911,989 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 51,064,314 | $ | 49,575,392 |
See accompanying notes to unaudited condensed financial statements.
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 | |||||||||||||
REVENUES | ||||||||||||||||
Net sales | $ | 4,645,593 | $ | 2,993,872 | $ | 13,902,215 | $ | 12,602,134 | ||||||||
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 | ||||||||||||
Cost of sales | 1,573,384 | 1,345,180 | 4,853,796 | 4,856,906 | ||||||||||||
Gross profit | 3,113,061 | 1,696,521 | 9,293,501 | 7,793,057 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
General and administrative | 2,050,395 | 1,401,547 | 5,515,455 | 4,632,048 | ||||||||||||
Research and development | 310,848 | 299,288 | 931,954 | 731,630 | ||||||||||||
Net operating expense | 2,361,243 | 1,700,835 | 6,447,409 | 5,363,678 | ||||||||||||
Income/(loss) from operations | 751,818 | (4,314 | ) | 2,846,092 | 2,429,379 | |||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||
Other income | 14,813 | 5,626 | 52,410 | 8,406 | ||||||||||||
Other expense | (221 | ) | (2,981 | ) | (4,113 | ) | (2,981 | ) | ||||||||
Net other income/(loss) | 14,592 | 2,645 | 48,297 | 5,425 | ||||||||||||
Income/(loss) before income taxes | 766,410 | (1,669 | ) | 2,894,389 | 2,434,804 | |||||||||||
Provision for income taxes | 24,285 | 8,414 | 102,285 | 73,618 | ||||||||||||
NET INCOME/(LOSS) | $ | 742,125 | $ | (10,083 | ) | $ | 2,792,104 | $ | 2,361,186 | |||||||
Earnings per common share | ||||||||||||||||
Basic | $ | 0.09 | $ | (0.00 | ) | $ | 0.35 | $ | 0.30 | |||||||
Diluted | $ | 0.09 | $ | (0.00 | ) | $ | 0.33 | $ | 0.28 | |||||||
Weighted average shares outstanding | ||||||||||||||||
Basic | 7,918,114 | 7,916,730 | 7,924,475 | 7,914,093 | ||||||||||||
Diluted | 8,337,377 | 7,916,730 | 8,418,275 | 8,552,275 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
Revenues: | ||||||||||||||||
Net sales | $ | 4,903,397 | $ | 6,093,263 | $ | 19,654,008 | $ | 15,790,364 | ||||||||
Total revenue | 4,903,397 | 6,093,263 | 19,654,008 | 15,790,364 | ||||||||||||
Cost of sales | 2,387,307 | 3,217,911 | 8,707,096 | 7,211,807 | ||||||||||||
Gross profit | 2,516,090 | 2,875,352 | 10,946,912 | 8,578,557 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 2,900,100 | 1,958,038 | 8,281,543 | 5,670,883 | ||||||||||||
Research and development | 687,890 | 651,734 | 1,984,343 | 1,257,271 | ||||||||||||
Net operating expense | 3,587,990 | 2,609,772 | 10,265,886 | 6,928,154 | ||||||||||||
Income (loss) from operations | (1,071,900 | ) | 265,580 | 681,026 | 1,650,403 | |||||||||||
Other income (expense): | ||||||||||||||||
Other income | 112,571 | (11,981 | ) | 223,950 | 38,777 | |||||||||||
Gain on forgiveness of note payable | - | 1,320,714 | - | 1,320,714 | ||||||||||||
Other (expense) income | (66,235 | ) | 21,948 | (195,408 | ) | (13,094 | ) | |||||||||
Net other income (expense) | 46,336 | 1,330,681 | 28,542 | 1,346,397 | ||||||||||||
Income (Loss) before provision for income taxes | (1,025,564 | ) | 1,596,261 | 709,568 | 2,996,800 | |||||||||||
Provision (Benefit) for income taxes | (222,683 | ) | 253,289 | 148,001 | 469,306 | |||||||||||
Net income (loss) | $ | (802,881 | ) | $ | 1,342,972 | $ | 561,567 | $ | 2,527,494 | |||||||
Net income (loss) per common share: | ||||||||||||||||
Basic | $ | (0.07 | ) | $ | 0.12 | $ | 0.05 | $ | 0.26 | |||||||
Diluted | $ | (0.07 | ) | $ | 0.12 | $ | 0.05 | $ | 0.25 | |||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 10,867,745 | 10,792,520 | 10,850,912 | 9,745,091 | ||||||||||||
Diluted | 10,867,745 | 11,031,922 | 10,870,842 | 10,111,458 |
See accompanying notes to unaudited condensed financial statements.
F-2 |
VIRTRA, INC.
CONDENSED STATEMENTSTATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
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 |
Shares | Amount | Shares | Amount | Capital | Stock | Earnings | Total | |||||||||||||||||||||||||
For the Three Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional Paid-In | Treasury | Accumulated | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Stock | Earnings | Total | |||||||||||||||||||||||||
Balance at June 30, 2022 | - | $ | - | 10,876,945 | $ | 1,087 | $ | 31,356,608 | $ | - | $ | 1,668,685 | $ | 33,026,380 | ||||||||||||||||||
Stock options exercised | - | - | 10,000 | 1 | 21,125 | - | - | 21,126 | ||||||||||||||||||||||||
Stock issued for cash in offering, net | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Stock options repurchased | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Stock issued for services | - | - | 11,314 | 1 | 756 | - | - | 757 | ||||||||||||||||||||||||
Stock reserved for future services | - | - | - | - | 22,770 | - | - | 22,770 | ||||||||||||||||||||||||
Treasury stock | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Treasury stock cancelled | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Net income | - | - | - | - | - | - | (802,881 | ) | (802,881 | ) | ||||||||||||||||||||||
Balance at September 30, 2022 | - | $ | - | 10,898,259 | $ | 1,089 | $ | 31,401,259 | $ | - | $ | 865,804 | $ | 32,268,152 |
For the Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional Paid-In | Treasury | Accumulated | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Stock | Earnings | Total | |||||||||||||||||||||||||
Balance at December 31, 2021 | - | $ | - | 10,807,130 | $ | 1,081 | $ | 30,923,391 | $ | - | $ | 304,237 | $ | 31,228,709 | ||||||||||||||||||
Stock options exercised | - | - | 15,000 | 1 | 33,850 | - | - | 33,851 | ||||||||||||||||||||||||
Stock issued for cash in offering, net | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Stock options repurchased | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Stock issued for services | - | - | 76,129 | 7 | 350,751 | - | - | 350,758 | ||||||||||||||||||||||||
Stock reserved for future services | - | - | - | - | 93,267 | - | - | 93,267 | ||||||||||||||||||||||||
Treasury stock | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Treasury stock cancelled | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Net income | - | - | - | - | - | - | 561,567 | 561,567 | ||||||||||||||||||||||||
Balance at September 30, 2022 | - | $ | - | 10,898,259 | $ | 1,089 | $ | 31,401,259 | $ | - | $ | 865,804 | $ | 32,268,152 |
For the Three Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional Paid-In | Treasury | Accumulated | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Stock | Deficit | Total | |||||||||||||||||||||||||
Balance at June 30, 2021 | - | $ | - | 10,780,030 | $ | 1,078 | $ | 30,694,430 | $ | - | $ | (1,051,330 | ) | $ | 29,644,178 | |||||||||||||||||
Stock options exercised | - | - | 2,500 | - | 5,250 | - | - | 5,250 | ||||||||||||||||||||||||
Stock issued for services | - | - | 24,600 | 3 | 171,213 | - | - | 171,216 | ||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | 1,342,972 | 1,342,972 | ||||||||||||||||||||||||
Balance at September 30, 2021 | - | $ | - | 10,807,130 | $ | 1,081 | $ | 30,870,893 | $ | - | $ | 291,642 | $ | 31,163,616 |
For the Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional Paid-In | Treasury | Accumulated | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Stock | Deficit | Total | |||||||||||||||||||||||||
Balance at December 31, 2020 | - | $ | - | 7,775,030 | $ | 778 | $ | 13,893,660 | $ | - | $ | (2,235,852 | ) | $ | 11,658,586 | |||||||||||||||||
Stock options exercised | - | - | 7,500 | - | 11,320 | - | - | 11,320 | ||||||||||||||||||||||||
Stock issued for cash in offering, net | - | - | 3,000,000 | 300 | 16,794,700 | - | - | 16,795,000 | ||||||||||||||||||||||||
Stock issued for services | - | - | 24,600 | 3 | 171,213 | 171,216 | ||||||||||||||||||||||||||
Net income | - | - | - | - | - | - | 2,527,494 | 2,527,494 | ||||||||||||||||||||||||
Net income (loss) | - | - | - | - | - | - | 2,527,494 | 2,527,494 | ||||||||||||||||||||||||
Balance at September 30, 2021 | - | $ | - | 10,807,130 | $ | 1,081 | $ | 30,870,893 | $ | - | $ | 291,642 | $ | 31,163,616 |
See accompanying notes to unaudited condensed financial statements.
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 | $ | - |
2022 | 2021 | |||||||
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 561,567 | $ | 2,527,494 | ||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | 659,775 | 367,253 | ||||||
Right of use amortization | 291,879 | 231,300 | ||||||
Gain on forgiveness of note payable | - | (1,329,280 | ) | |||||
Employee stock compensation | - | 171,216 | ||||||
Stock issued for service | 444,025 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | 1,578,205 | (3,512,154 | ) | |||||
Inventory, net | (4,755,126 | ) | (2,417,589 | ) | ||||
Deferred taxes | 112,377 | 409,893 | ||||||
Unbilled revenue | (158,905 | ) | 1,062,316 | |||||
Prepaid expenses and other current assets | 235,824 | (242,322 | ) | |||||
Other assets | (186,727 | ) | (33,150 | ) | ||||
Security deposits, long-term | (15,979 | ) | 66,788 | |||||
Accounts payable and other accrued expenses | 137,762 | 912,318 | ||||||
Payments on operating lease liability | (291,039 | ) | (239,259 | ) | ||||
Deferred revenue | (66,237 | ) | 3,387,802 | |||||
Net cash provided by (used in) operating activities | $ | (1,452,599 | ) | 1,362,626 | ||||
Cash flows from investing activities: | ||||||||
Purchase of certificates of deposit | - | - | ||||||
Redemption of certificates of deposit | - | - | ||||||
Purchase of intangible assets | (120,016 | ) | (627,765 | ) | ||||
Purchase of property and equipment | (2,324,058 | ) | (11,407,278 | ) | ||||
Net cash (used in) investing activities | (2,444,074 | ) | (12,035,043 | ) | ||||
Cash flows from financing activities: | ||||||||
Repurchase of stock options | - | - | ||||||
Principal payments of debt | (172,589 | ) | (20,195 | ) | ||||
Net proceeds from long term debt | - | 8,590,151 | ||||||
Stock issued for cash in offering, net | - | 16,795,000 | ||||||
Stock options exercised | 33,851 | 11,320 | ||||||
Purchase of treasury stock | - | - | ||||||
Note payable-PPP Loan | - | - | ||||||
Net cash provided by (used in) financing activities | (138,738 | ) | 25,376,276 | |||||
Net increase (decrease) in cash and restricted cash | (4,035,411 | ) | 14,703,859 | |||||
Cash and restricted cash, beginning of period | 19,708,565 | 6,841,984 | ||||||
Cash and restricted cash, end of period | $ | 15,673,154 | $ | 21,545,843 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash (refunded) paid: | ||||||||
Income taxes paid (refunded) | $ | 99,035 | $ | 78,096 | ||||
Interest paid | 128,507 | 20,783 | ||||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Addition of new lease and corresponding ROU asset and lease liability | $ | 840,843 | - | |||||
Conversion of inventory to property and equipment | 322,968 | - |
See accompanying notes to unaudited condensed financial statements.
F-4 |
VIRTRA, INC.
Notes To CONDENSED Financial StatementsNOTES TO FINANCIAL STATEMENTS
(Unaudited)(Unaudited)
NOTENote 1.ORGANIZATION AND BUSINESS OPERATIONSOrganization 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 developmenta 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 relatedits 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 outbreak of a novel strain of coronavirus (COVID-19). The pandemic has significantly impacted the economic conditions in the U.S. The ultimate impact of the pandemic on the Company’s results of operations, financial position, liquidity or dissenters’ rightscapital resources cannot be reasonably estimated at this time. To date, the COVID-19 restrictions resulted in reduced customer shipments and customer system installations. These developments have resulted in lower recognized revenue and possibly lower gross margin. To date, there have been minimal order cancellations; rather, due to disruption in the supply chain 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 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 such sharesthe year ended December 31, 2021 included in accordancethe 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 IncorporationSEC 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 thatSEC, although we believe the disclosures included in these unaudited condensed financial statementsthat 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 for a fair presentationto present fairly our financial position at September 30, 2022 and the results of such interim results. The resultsour operations and cash flows for the threeperiods presented. We derived the December 31, 2021 balance sheet data from audited financial statements; however, we did not include all disclosures required by GAAP.
Interim results are subject to seasonal variations, and the results of operations for the nine months ended September 30, 20172022 are not necessarily indicative of the results for any subsequent period. These unaudited condensed financial statements shouldto be read in conjunction with the audited financial statements and notesexpected 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, 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.
F-5 |
Recent Accounting PronouncementsRevenue Recognition
Between May 2014 and December 2016,The Company adopted the Financial Accounting Standards BoardBoard’s (the “FASB”) issued several Accounting Standard UpdatesStandards Codification (“ASUs”ASC”) on606, Revenue from Contracts with CustomersCustomer (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 reflectsuse the consideration tomodified 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 optionASC 606 to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting the standards recognizeduncompleted 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 currentlya customer, identify the performance obligations in the process of assessingcontract, 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 oftransaction price to the FASB Emerging Issues Task Force), to provide guidance on the presentation of restricted cash or restricted cash equivalentsperformance obligations in the statementcontract, 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, andCompany’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 sale and extended warranties purchased are recorded as current and long-term liabilities (deferred revenue) until earned. The following briefly summarizes the nature of our performance obligations and method of revenue recognition:
Performance Obligation | Method of Recognition | |
Simulator and accessories | Upon transfer of control | |
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. |
The Company recognizes revenue upon transfer of control or upon completion of the services for the simulator and accessories; for the installation and training and customized software performance obligations as the customer has the right and ability to direct the use of these products and services and the customer obtains substantially all of the remaining benefit from these products and services at that time. Revenue from certain customized content contracts may be recognized over the period the services are performed based on the terms of the contract. For the sales-based royalty exchanged for license of intellectual property, the Company recognized revenue as the sales occur over time.
The Company recognizes revenue on a registrant whenstraight-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, standards are adopted in a futurethe warranty service is performed continuously over the warranty period. Specially, these disclosure requirements apply
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 adoptionperformance 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 ASU No. 2014- 09, Revenue from Contracts with Customers (Topic 606); ASU No. 2016-02, Leases (Topic 842); and ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement 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
Under ASC 606, disaggregated revenue recognition as it pertains to current revenue streams.
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 iscustomers depicts the same time as the amendments in ASU No. 2014-09,nature, amount, timing, and early adoption is permitted.uncertainty of revenue and cash flows affected by economic factors. The Company does not expect this amendment to have a material impact on its financial statements.has evaluated revenues recognized and the following table illustrates the disaggregation disclosure by customer’s location and performance obligation.
In May 2017,Schedule of Disaggregation of Revenues
Three Months ended September 30, | ||||||||||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||||||||||
Commercial | Government | International | Total | Commercial | Government | International | Total | |||||||||||||||||||||||||
Simulators and accessories | $ | 198,886 | $ | 2,641,214 | $ | 369,906 | $ | 3,210,006 | $ | 1,370,466 | $ | 2,645,312 | $ | 723,471 | $ | 4,739,249 | ||||||||||||||||
Extended service-type warranties | 29,798 | 650,839 | 14,368 | 695,005 | 31,910 | 656,870 | 25,180 | 713,960 | ||||||||||||||||||||||||
Customized software and content | - | 794,857 | 3,437 | 798,294 | - | 290,829 | 52,273 | 343,102 | ||||||||||||||||||||||||
Installation and training | 8,992 | 192,380 | (5,860 | ) | 195,512 | 42,952 | 190,098 | 59,500 | 292,550 | |||||||||||||||||||||||
Licensing and royalties | 4,580 | - | - | 4,580 | 4,402 | - | - | 4,402 | ||||||||||||||||||||||||
Total Sales Revenue | $ | 242,256 | $ | 4,279,290 | $ | 381,851 | $ | 4,903,397 | $ | 1,449,730 | $ | 3,783,109 | $ | 860,424 | $ | 6,093,263 |
For the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scopethree months ended September 30, 2022, governmental customers comprised $4,279,290, or 87% of Modification Accounting, to provide claritytotal net sales, commercial customers comprised $242,256, or 5% of total net sales, and reduce both (1) diversity in practiceinternational customers comprised $381,851, or 8% of total net sales. By comparison, for the three months ended September 30, 2021, governmental customers comprised $3,783,109, or 62%, of total net sales, commercial customers comprised $1,449,730, or 24%, of total net sales, and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the termsinternational customers comprised $860,424, or conditions14%, 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.total net sales.
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 of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down round features. Part II simply replaces 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 and does not impact the accounting for these mandatorily redeemable instruments. This ASU is effective for public companies for the annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. The Company does not expect this amendment to have a material impact on its financial statements.
NOTEDisaggregation of Revenue
Nine Months ended September 30, | ||||||||||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||||||||||
Commercial | Government | International | Total | Commercial | Government | International | Total | |||||||||||||||||||||||||
Simulators and accessories | $ | 1,412,539 | $ | 11,175,641 | $ | 3,013,844 | $ | 15,602,024 | $ | 2,183,796 | $ | 7,828,503 | $ | 1,907,588 | $ | 11,919,887 | ||||||||||||||||
Extended service-type warranties | 91,836 | 2,129,077 | 59,675 | 2,280,588 | 79,531 | 2,001,423 | 74,196 | 2,155,150 | ||||||||||||||||||||||||
Customized software and content | - | 796,962 | 212,437 | 1,009,399 | - | 905,204 | 125,716 | 1,030,920 | ||||||||||||||||||||||||
Installation and training | 56,200 | 599,780 | 101,437 | 757,417 | 93,501 | 496,251 | 85,850 | 675,602 | ||||||||||||||||||||||||
Licensing and royalties | 4,580 | - | - | 4,580 | 8,805 | - | - | 8,805 | ||||||||||||||||||||||||
Total Revenue | $ | 1,565,155 | $ | 14,701,460 | $ | 3,387,393 | $ | 19,654,008 | $ | 2,365,633 | $ | 11,231,381 | $ | 2,193,350 | $ | 15,790,364 |
For the nine months ended September 30, 2022, governmental customers comprised $14,701,460, or 75% of total net sales, commercial customers comprised $1,565,155, or 8% of total net sales, and international customers comprised $3,387,393, or 17% of total net sales. By comparison, for the nine months ended September 30, 2021, governmental customers comprised $11,231,381, or 71% of total net sales, commercial customers comprised $2,365,633, or 15% of total net sales, and international customers comprised $2,193,350, or 14% of total net sales. For the nine months ended September 30, 2022 and 2021, the Company recorded $2,076,357 and $1,349,677, respectively, in STEP revenue, or 10.6% and 8.5%, respectively, 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 $2,657,876 and $2,371,531 at September 30, 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 $416,939 and $1,764,034 as of September 30, 2022 and December 31, 2021, respectively. Deferred revenue for separately priced extended warranties longer than one year totaled $2,987,138 and $1,815,871 as of September 30, 2022 and December 31, 2021, respectively. The accrual for the one-year manufacturer’s warranty liability totaled $381,000 and $384,000 as of September 30, 2022 and December 31, 2021, respectively. During the three months ended September 30, 2022 and 2021, the Company recognized revenue of $1,364,519 and $713,960, respectively, related to the extended service-type warranties that was amortized from the deferred revenue balance at the beginning of each period. During the nine months ended September 30, 2022 and 2021, the Company recognized revenue of $2,280,588 and $2,155,150, respectively. 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.
Concentration of Credit Risk and Major Customers and Suppliers
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, certificates of deposit, and accounts receivable.
The Company’s cash, cash equivalents and certificates of deposit are maintained with financial institutions with high credit standings and are FDIC insured deposits. The FDIC insures deposits according to the ownership category in which the funds are insured and how the accounts are titled. The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. The Company had uninsured cash and cash equivalents of $15,171,851 and $19,207,786 as of September 30, 2022 and December 31, 2021, respectively.
F-7 |
Most sales are to governments that are typically made on credit and the Company generally does not require collateral. Management performs ongoing credit evaluations of its customers’ financial condition and maintains an allowance for estimated losses. Historically, the Company has experienced minimal charges relative to doubtful accounts.
Historically, the Company primarily sells its products to United States federal and state agencies. For the nine months ended September 30, 2022, one federal agency comprised 11.3% of total net sales. By comparison, for the nine months ended September 30, 2021, no single customer had a significant percentage of total revenue. For the three months ended September 30, 2022, one federal agency comprised 29.2% of total net sales. By comparison, for the three months ended September 30, 2021, one commercial customer comprised 20% of total net sales.
As of September 30, 2022, one federal agency comprised 36.3% of total accounts receivable. By comparison, as of December 31, 2021, the Company did not have any customer that accounted for more than 10% of total accounts receivable.
Schedule of Earnings Per Share
2022 | 2021 | 2022 | 2021 | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net Income (loss) | $ | (802,881 | ) | $ | 1,342,972 | $ | 561,567 | $ | 2,527,494 | |||||||
Weighted average common stock outstanding | 10,867,745 | 10,792,520 | 10,850,912 | 9,745,091 | ||||||||||||
Incremental shares from stock options | - | 239,402 | 19,930 | 366,367 | ||||||||||||
Weighted average common stock outstanding, diluted | 10,867,745 | 11,031,922 | 10,870,842 | 10,111,458 | ||||||||||||
Net income (loss) per common share and common equivalent share | ||||||||||||||||
Basic | $ | (0.07 | ) | $ | 0.12 | $ | 0.05 | $ | 0.26 | |||||||
Diluted | $ | (0.07 | ) | $ | 0.12 | $ | 0.05 | $ | 0.25 |
F-8 |
Note 2. INVENTORYInventory
Inventory consisted of the following as of:
September 30, 2017 | December 31, 2016 | |||||||
Raw materials | $ | 1,718,367 | $ | 1,085,519 | ||||
Finished goods | - | 251,707 | ||||||
Reserve | (29,218 | ) | (17,282 | ) | ||||
Total inventory | $ | 1,689,149 | $ | 1,319,944 |
Schedule of Inventory
September 30, 2022 | December 31, 2021 | |||||||
Raw materials and work in process | $ | 10,072,481 | $ | 5,229,636 | ||||
Reserve | (302,431 | ) | (214,712 | ) | ||||
Total inventory | $ | 9,770,050 | $ | 5,014,924 |
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 September 30, 2022 and December 31, 2021, respectively.
NOTENote 3.Property and Equipment
Property and equipment consisted of the following as of:
Schedule of Property and Equipment
September 30, 2022 | December 31, 2021 | |||||||
Land | $ | 1,778,987 | $ | 1,778,987 | ||||
Building & Building Improvements | 9,129,364 | 9,005,205 | ||||||
Computer equipment | 1,207,530 | 1,171,319 | ||||||
Furniture and office equipment | 279,423 | 262,814 | ||||||
Machinery and equipment | 2,758,608 | 1,970,007 | ||||||
STEP equipment | 1,769,825 | 1,496,252 | ||||||
Leasehold improvements | 334,934 | 334,934 | ||||||
Construction in Progress | 1,091,905 | 7,000 | ||||||
Total property and equipment | 18,350,576 | 16,026,518 | ||||||
Less: Accumulated depreciation and amortization | (3,759,096 | ) | (3,161,752 | ) | ||||
Property and equipment, net | $ | 14,591,480 | $ | 12,864,766 |
Depreciation expense, including STEP depreciation, was $597,775 and $350,963 for the nine months ended September 30, 2022 and 2021, respectively.
F-9 |
Note 4. Intangible Assets
Intangible assets consisted of the following as of:
Schedule of Intangible Asset
September 30, 2022 | December 31, 2021 | |||||||
Patents | $ | 160,000 | $ | 160,000 | ||||
Capitalized media content | 451,244 | 331,228 | ||||||
Acquired lease intangible assets | 83,963 | 83,963 | ||||||
Total intangible assets | 695,207 | 575,191 | ||||||
Less accumulated amortization | (101,804 | ) | (40,112 | ) | ||||
Intangible assets, net | $ | 593,403 | $ | 535,079 |
Amortization expense was $61,692 and $16,209 for the nine months ended September 30, 2022 and 2021, respectively.
Note 5. Leases
September 30, 2017 | December 31, 2016 | |||||||
Computer equipment | $ | 818,155 | $ | 753,987 | ||||
Furniture and office equipment | 196,216 | 182,969 | ||||||
Machinery and equipment | 925,495 | 925,495 | ||||||
Leasehold improvements | 324,313 | 318,318 | ||||||
Total property and equipment | 2,264,178 | 2,180,768 | ||||||
Less: Accumulated depreciation | (1,570,972 | ) | (1,366,445 | ) | ||||
Property and equipment, net | $ | 693,206 | $ | 814,323 |
On May 12, 2022, the Company entered into a lease agreement for office and manufacturing space in Orlando, FL. The new lease is classified as an operating lease, with a term of 61 months beginning June 1, 2022 and ending June, 30, 2027, with the first month rent free.
Depreciation
The balance sheet classification of lease assets and liabilities as of September 30, 2022 was as follows:
Schedule of Balance Sheet Classification of Lease Assets and Liabilities
Balance Sheet Classification | September 30, 2022 | |||
Assets | ||||
Operating lease right-of-use assets, December 31, 2021 | $ | 784,306 | ||
Addition of lease right-of-use asset in 2022 | 840,843 | |||
Amortization for the Nine months ended September 30, 2022 | (291,879 | ) | ||
Total operating lease right-of-use asset, September 30, 2022 | $ | 1,333,270 | ||
Liabilities | ||||
Current | ||||
Operating lease liability, short-term | $ | 548,376 | ||
Non-current | ||||
Operating lease liability, long-term | 854,583 | |||
Total lease liabilities | $ | 1,402,959 |
Future minimum lease payments as of September 30, 2022 under non-cancelable operating leases are as follows:
Schedule of Future Minimum Lease Payments
Future Minimum Lease Payments | ||||
2022 | $ | 286,412 | ||
2023 | 572,794 | |||
2024 | 317,939 | |||
2025 | 191,479 | |||
2026 | 196,311 | |||
2027 | 99,381 | |||
Total lease payments | 1,664,316 | |||
Less: imputed interest | (261,357 | ) | ||
Operating lease liability | $ | 1,402,959 |
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 | ) | ||
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 was $65,570 and $64,591 for the three months ended September 30, 20172022 and 2016,2021 was $243,440 and $146,497, respectively. DepreciationRent expense was $204,527 and $160,768 for the nine months ended September 30, 20172022 and 2016,2021 was $647,893 and $436,750, 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
September 30, 2017 | December 31, 2016 | September 30, 2022 | December 31, 2021 | |||||||||||||
Salaries and wages payable | $ | 431,741 | $ | 93,832 | $ | 269,530 | $ | 422,562 | ||||||||
401(k) contributions payable | 16,971 | 25,729 | ||||||||||||||
Accrued paid time off | 254,211 | 190,518 | ||||||||||||||
Employee benefits payable | 12,821 | 16,523 | ||||||||||||||
Accrued paid time off (PTO) | 587,902 | 483,311 | ||||||||||||||
Profit sharing payable | 406,811 | 307,503 | 294,841 | 139,682 | ||||||||||||
Total accrued compensation and related costs | $ | 1,109,734 | $ | 617,582 | $ | 1,165,094 | $ | 1,062,078 |
Accrued expenses and other current liabilities consisted of the following as of:
Schedule of Accrued Expenses and Other Current Liabilities
September 30, 2022 | December 31, 2021 | |||||||
Manufacturer’s warranties | $ | 381,000 | $ | 384,000 | ||||
Warranties-other | - | |||||||
Loss contingencies | - | |||||||
Taxes payable | 188,816 | 113,921 | ||||||
Miscellaneous payable | 557,345 | 493,823 | ||||||
Total accrued expenses and other current liabilities | $ | 1,127,161 | $ | 991,744 |
F-11 |
Note 7. Note Payable
On August 25, 2021, the Company completed the purchase of real property located in Chandler, Arizona (the “Property”) for $10,800,000, paid with cash and proceeds from a mortgage loan from Arizona Bank & Trust in the amount of $8,600,000. The loan terms include interest to be accrued at a fixed rate of 3% per year, 119 regular monthly payments of $40,978, and one irregular payment of $5,956,538 due on the maturity date of August 23, 2031. The Company began making monthly payments on September 23, 2021. The payment and performance of the loan is secured by a security interest in the property acquired.
The note payable amounts consist of the following:
Schedule of Notes Payable
September 30, 2022 | December 31, 2021 | |||||||
Short-term liabilities: | ||||||||
Note payable, principal | $ | 228,445 | $ | 231,871 | ||||
Accrued interest on note | 4,143 | 4,420 | ||||||
Note payable, short-term | $ | 232,588 | $ | 236,291 | ||||
Long-term liabilities: | ||||||||
Note payable, principal | $ | 8,108,545 | $ | 8,280,395 | ||||
Note payable, long term | $ | 8,108,545 | $ | 8,280,395 |
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 8. Related Party Transactions
During the nine months ended September 30, 2022, the Company redeemed 33,851. previously awarded stock options nearing expiration from related parties consisting of the Company’s Co-CEO and former COO. The redemptions eliminated the stock options and resulted in a total of $ in additional compensation expense. During the nine months ended September 30, 2022, one Board member and the Company’s former COO purchased shares of common stock, $ par value per share (the “Common Stock”), pursuant to the exercise of previously awarded stock options at their respective exercise prices, for a total of $
During the nine months ended September 30, 2021, the Company redeemed 11,320. previously awarded stock options nearing expiration from related parties consisting of the Company’s Co-CEO and former COO. The redemption eliminated the stock options and resulted in a total of $ in additional compensation expense. During the nine months ended September 30, 2021, one Board member purchased shares of Common Stock, pursuant to the exercise of previously awarded stock options at their respective exercise prices, for a total of $
F-12 |
Note 9. Commitments and Contingencies
Litigation
From time to time, the Company is notified of litigation or that a claim is being made against it. The Company evaluates contingencies on an on-going basis and has established loss provisions for matters in which losses are probable and the amount of loss can be reasonably estimated. There is no pending litigation at this time.
Restricted Stock Unit Grants
On August 26, 2021 and April 11, 2022, the Compensation Committee of the Board of Directors issued a total of , and Restricted Stock Units respectively, pursuant to Section 9 of the 2017 Equity Incentive Plan to the co-Chief Executive Officers and the Chief Operating Officer, to be awarded based on achievement of certain performance goals over the next three years. During August 2022, Restricted Stock Units were forfeited upon the departure of the Chief Operating Officer.
It is the Company’s policy to estimate the fair value of the RSU’s on the 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 straight-line basis over the remaining time period. The Company determined based on the vesting terms described above that the net profit (net income under GAAP) for the twelve months ending June 30, 2022, was $2,720,015 and therefore awarded 5,747 (prior to deduction of shares to pay the tax withholding liability) and shares of common stock to its Co-Chief Executive Officers. The Company determined based on the vesting terms described above that the net profit (net income under GAAP) for the twelve months ending June 30, 2023, of $3,000,000 is probable and recorded expenses of $ and $93,267 related to the RSUs for the three months and nine months ending September 30, 2022, respectively.
Profit Sharing
As part of the benefit package maintained by the Company, the Profit SharingVirTra provides a discretionary profit-sharing program that pays out a percentage of Company annual profits each year 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 in April and October of the following year.year to only active employees. 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, 20172022 and 2016, respectively.2021, $ and $ was expensed to operations for profit sharing.
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”) andeach 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.
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 to3,353,495 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 amount specified in the agreement, MREC may pay to VirTra the difference between the amount of total royalty payments and the minimum specified in the agreement to maintain exclusivity. The Company recognized $245,082 and $47,829 for license fees (royalties) for the nine months ended September 30, 2017 and 2016, respectively.
Note 6. Related Party Transactions
During the three months ended September 30, 2017 and 2016, the Company issued 13,750 and 11,250 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 $3.76 and $4.20, 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.
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. 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’s policy is to not disclose the specifics of any claim or threatened lawsuit until such complaint is actually served on the Company.On October 20, 2016, 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 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 outcome of this matter did not have a material effect on its earnings, cash flows, or financial position.
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 towill 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 towill be determined by the Company atin its discretion and were towill be subject to economic and market conditions, stock price, applicable legal requirements and other factors. During the nine months ended September 30, 2017, the Company repurchased 20,939 shares at a costOn January 9, 2019, VirTra’s Board of $96,633.
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, andDirectors authorized an additional $1 million be allocated for the nine month period ending September 30, 2017 VirTra repurchased 20,939 sharesrepurchase of VirTra’s stock to hold in treasury atunder the existing 10b-18 plan. The stock repurchase program was suspended as a total cost basisresult of $96,634 pursuantinterim rulings for public-company recipients of a PPP loan under the CARES Act. Although the Company’s PPP loan was forgiven on July 20, 2021, the suspension of the stock repurchase program continues 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.effect.
Non-qualified Stock Options
The Company has periodically issuesissued non-qualified incentive stock options to key employees, officers and directors under a Stock Option Compensationstock 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 beenand are generally seven years. DuringUpon 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:
September 30, 2022 | September 30, 2021 | |||||||||||||||
Number of Stock | Weighted Exercise | Number of Stock | Weighted Exercise | |||||||||||||
Options | Price | Options | Price | |||||||||||||
Options outstanding, beginning of year | 112,500 | $ | 3.51 | 164,167 | $ | 3.13 | ||||||||||
Granted | - | - | - | - | ||||||||||||
Redeemed | (22,500 | ) | 2.55 | (26,250 | ) | 1.51 | ||||||||||
Exercised | (15,000 | ) | 1.55 | (7,500 | ) | 1.51 | ||||||||||
Expired / terminated | - | - | - | - | ||||||||||||
Options outstanding, end of period | 75,000 | $ | 4.45 | 130,417 | $ | 3.55 | ||||||||||
Options exercisable, end of period | 75,000 | $ | 4.45 | 130,417 | $ | 3.55 |
F-13 |
The Company did not have any non-vested stock options outstanding as of September 30, 2022 and December 31, 2021. The weighted average contractual term for options outstanding and exercisable at September 30, 2022 and 2021 was 20172022 and 2016,2021, the Company issued 13,750received payments related to the exercise of options in the amount of $16,875 and 11,250 stock options, with a weighted average$5,250, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price of $3.76the 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. years. The aggregate intrinsic value of the options outstanding and exercisable at September 30, 2022 and 2021 was $ and $ , respectively. For the three months ended September 30,
On July 1, 2017, the Company granted to members of its Board of Directors options to purchase 13,750 sharesfair 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 termthe 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 September 30, 2022, motivate employees, including officers, consultants and directors. We may provide these incentives through the grant of stock options, stock appreciation rights, restricted stock awards and , and restricted stock units, performance shares and units and other cash-based or stock-based awards. and
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 behave 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 usthe Company’s Co-CEO’s and former COO, respectively.
Common stock activity
On September 1, 2022, the holder of the award and may include any of the following: stock options, stock appreciation rights, restricted stock,Company settled performance-based restricted stock units performancethat had been granted to its co-CEOs by issuing them an aggregate of shares and performance units and cash-based awards and other stock-based awards.
(60,190.48. The assumptions usedCompany had achieved net profit for the periodstwelve months ended SeptemberJune 30, 2022 of at least $ .
On April 11, 2022, the Company issued Mr. Givens a signing bonus of shares of common stock, valued at $350,001, which are restricted from transfer until the earlier of: i) 12 months of employment having lapsed or ii) the Company terminating employment with Mr. Givens without cause.
Mr. Givens was also granted pursuant to VirTra’s 2017 and 2016,Equity Incentive Plan. . performance-based restricted stock units
The vesting schedule notwithstanding, the Compensation Committee shall have the discretion to declare the vesting of weighted-average fair valueany 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 awarded. Additionally, while a maximum net profit 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 |
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 $30,000year has been set 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 partallocation of the Co-Venture Agreement,available shares at this time, it is very possible that 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 technology and the payment of all required minimum royalty/licensing fee paymentswill exceed these levels 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 fivenext 3 years and an exercise price of $2.72. On June 1, 2017,if such performance occurs, the one-year anniversary of MREC opening its first range facility occurred, and the associated warrants were vested. See Note 5.
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 electingCompensation Committee will meet to purchase warrants pursuant to the terms of the net exercise provision set forthdetermine if additional compensation is in the Warrant Agreement. Mr. Saltz, a directorbest interests of the Company andat that time.
On March 31, 2021, the Company entered into a substantial shareholder of MREC, held 778,243 ofSecurities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Purchasers”), pursuant to which the Tranche 1 Warrants priorCompany agreed to sell to the assignmentPurchasers an aggregate 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 $2.72 warrant exercise price, upon conversion the 459,691 warrants entitle the holders to receive 172,912 shares(the “RDO Shares”) of the Company’s common stock, without payment of any additional consideration pursuant to the net exercise terms of the Tranche 1 Warrants that are currently exercisable.
Effective August 16, 2017, the Company and the MREC affiliate holders entered into an agreement (the “Warrant Buyout Agreement”) whereby the Company acknowledged the assignment of the Tranche 1 Warrants to MREC and agreed to repurchase them$ par value per share, at a price of $3.924$ per share of common stock issuablein a registered director offering (the “Offering”). The RDO Shares were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3 (File No. 333-238624), which was filed by the net exerciseCompany with the SEC on May 22, 2020 and subsequently declared effective on September 2, 2020, and a related prospectus.
The Company also entered into a placement agent agreement (the “Placement Agency Agreement”) on March 31, 2021 with Roth Capital Partners, LLC (“Roth”), pursuant to which Roth agreed to serve as placement agent for the issuance and sale of the RDO Shares. The Company agreed to pay Roth an aggregate fee equal to 6.5% of the gross proceeds received by the Company from the sale of the securities in the transaction. The Company also agreed to pay Roth a reimbursement for legal fees and expenses in an amount not to exceed $35,000.
Roth acted as the lead placement agent in the Offering. Lake Street Capital Markets acted as co-placement agent for the Offering. Maxim Group LLC acted as a financial advisor to the Company in connection with the Offering.
A prospectus supplement and the accompanying prospectus relating to and describing the 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 WarrantsOffering, dated March 31, 2021, was $773,495.
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. Subsequent Events
Other
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 $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 VirTra 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 on the Nasdaq Capital Market upon qualification by the SEC of its planned Regulation A+ offering of common stock with a minimum of $5,000,000 and a maximum of $10,000,000 pursuant to an Offering Statement filed with the SEC on September 11, 2017, as amended.April 2, 2021.
On December 1, 2017,April 5, 2021, the Company redeemed fromclosed the CEO and COO 12,500 previously awarded expiring stock options for cash totaling $62,000, of which $17,500 had been previously expensed in 2011 with the balance of $44,500 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 splitOffering. The total gross proceeds of the Company’s common stock, par value $0.0001 per share with resulting fractional shares to be rounded up toOffering were $18.0 million, before deducting 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,placement agents’ fees and other estimated Offering expenses 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.totaled $1,205,000.
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 and the maximum offering amount (“Maximum Offering Amount”) was $10,000,000. We terminated the offering on March 29, 2018. No shares were sold pursuant to the offering.Note 11. Subsequent Events
On March 29, 2018, our shares of Common Stock began trading on the Nasdaq Capital Market under the symbol, “VTSI.”None.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSOPERATIONS.
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, 20162021 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 toAnnual Report on Form 1-A10-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.
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OVERVIEW
We develop, sell
Business Overview
VirTra, Inc. (the “Company,” “VirTra,” “we,” “us” and support“our”) is a global provider of judgmental use of force training and marksmanshipsimulators, firearms training systemssimulators and accessoriesdriving simulators for the law enforcement, military, or civilian use. Our simulators useeducational and commercial markets. The Company’s patented technologies, software, hardware and contentscenarios 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 effectivesave 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 ammunitionto 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 certaina 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 basedvideo-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 have two main customer groups, namely, law enforcement and military. These are 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 training simulators sales to these identified customer groups by pursuing the following key growth strategies:
● | Build Our Core Business. Our goal is to profitably grow our market share by continuing to develop, produce and market the most effective simulators possible. Through disciplined growth in our business, we have achieved a solid balance sheet by increasing our working capital and limiting our bank debt. We plan to add staff to our experienced management team as needed to meet the expected increase in demand for our products and services as we increase our marketing and sales activities. | |
● | Increase Total Addressable Market. We plan to increase the size of our total addressable market. This effort will focus on new marketing and new product and/or service offerings for the purpose of widening the number of types of customers who might consider our products or services uniquely compelling. | |
● | Broaden Product Offerings. Since 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. |
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We also are engaged in licensing our technology to Modern Round Entertainment Corporation (“MREC”), a developer and operator of a combined dining and entertainment concept centered on an indoor shooting experience.
Simulator Product Offerings
Our simulator products include the following:
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○ | 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®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. |
● |
○ | 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 the industry’s only 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 | ||
● | 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. | |
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● | Simulated Recoil | |
● | Return Fire Device – the patented | |
● | TASER©, OC spray and low-light training devices that interact with VirTra’s simulators for training. |
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
Results of operations for the three and nine months ended September 30, 20172022 and September 30, 2021
Revenues.RevenuesNet sales were $4,686,445$4,903,397 for the three months ended September 30, 20172022 compared to $3,041,701$6,093,263 for the same period in 2016 and $14,147,2972021, a decrease of $1,189,866, or 19.5%. Net sales were $19,654,008 for the nine months ended September 30, 20172022 compared to $12,649,963$15,790,364 for the same period in 2016.2021, an increase of $3,863,644, or 24.5%. The 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 $1,573,384decrease in revenues for the three months ended September 30, 20172022 as compared to $1,345,181 for the same period in 2016 and $4,853,796the prior year is due to unbilled sales not yet being recognized. The increase in sales for the nine months ended September 30, 2017 compared to $4,856,906 for the same period in 2016. 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,2022 resulted from an increase in salesthe number of mix of higher margin products including training, servicesimulators and warranty sales,accessories completed, delivered and a reduction in material costs due to higher volume purchases and more favorable pricing of raw materials and systems components in 2017revenue recognized compared to the same periodperiods in 2016.2021. It should be noted that there were unbilled revenue of $4,105,351 on the balance sheets as of September 30, 2022 that the Company expects to recognize as revenue in the coming quarters.
Cost of Sales.
Gross Profit.Gross profit was $3,113,061Cost of sales were $2,387,307 for the three months ended September 30, 20172022 compared to $1,696,521$3,217,911 for the same period in 2016 with2021, a grossdecrease of $830,604, or 25.8%. Cost of sales were $8,707,096 for the nine months ended September 30, 2022 compared to $7,211,807 for the same period in 2021, an increase of $1,495,289, or 20.7%. The increase was due to additional 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 and product mix.
Gross Profit. Gross profit margin of 66%was $2,516,090 for the three months ended September 30, 20172022 compared to 56%$2,875,352 for the same period in 2016.2021, a decrease of $359,262, or 12.5%. Gross profit was $9,293,503$10,946,912 for the nine months ended September 30, 20172022 compared to $7,793,057$8,578,557 for the same period in 2016, with a2021, an increase of $2,368,355, or 27.6%. The gross profit margin of 66%for the three months ended September 30, 2022 and 2021 was 51% and 47%, respectively. The gross profit margin was 56% for the nine months ended September 30, 2017 compared to 62%2022 and 54% for the same period in 2016.2021. The increase in gross profit improvement was a result of a reduction indue to 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, servicesystems, accessories 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.services sold.
Operating Expenses.Net operating expense was $2,361,243$3,587,990 for the three months ended September 30, 20172022 compared to $1,700,835$2,609,772 for the same period in 2016.2021, an increase of $978,218, or 37.5%. Net operating expense was $6,447,409$10,265,886 for the nine months ended September 30, 20172022 compared to $5,363,678$6,928,154 for the same period in 2016.2021, an increase of $3,337,732, or 48.2%. The three month and nine month year over year increases wereincrease was primarily due to expanding staffing levels, annual increases inexpenses related to the move into the new building, Orlando location, and increased payroll and benefits for current staff, sales and marketing expansion, new research and development work, and IT infrastructure upgrades.costs.
Net Income.Operating Income (Loss). Net incomeLoss from operations was $742,125$1,071,900 for the three months ended September 30, 20172022 compared to a net lossincome of $10,083$265,580 for the same period in 2016. Net2021, a decrease of $1,337,480 or 503.6%. Operating income was $2,792,104$681,026 for the nine months ended September 30, 20172022 compared to $2,361,186$1,650,403 for the same period in 2016.2021, a decrease of $969,377, or 58.7%.
Other Income (Expense). Other income net of other expense was $46,336 for the three months ended September 30, 2022 compared to other income net of other expense of $1,330,681 for the same period in 2021, a decrease of $1,284,345, or 96.5%, primarily from the forgiveness of the PPP Loan of $1,320,714. Other income net of other expense was $28,542 for the nine months ended September 30, 2022 compared to other income net of other expense of $1,346,397 for the same period in 2021, a decrease of $1,317,855, or 97.9%.
Provision (Benefit) for Income Tax. Income tax benefit was $222,683 for the three months ended September 30, 2022 compared to an income tax expense of $253,289 for the same period in 2021, a decrease of $475,972, or 187.9%. Income tax expense was $148,001 for the nine months ended September 30, 2022 compared to an income tax expense of $469,306 for the same period in 2021, a decrease of $321,305, or 68.5%. Provision (benefit) for income tax is estimated quarterly applying both federal and state tax rates.
Net Income (Loss). Net loss was $802,881 for the three months ended September 30, 2022, compared to net income of $1,342,972 for the same period in 2021, a decrease of $2,145,852, or 159.8%. Net income was $561,567 for the nine months ended September 30, 2022 compared to $2,527,494 for the same period in 2021, a decrease of $1,965,927, or 77.8%. The increasefluctuations in net income resulted from increases in revenue and gross profit partially offset by an increase in operating expenses as noted(loss) relate to each respective section discussed above.
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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 flowsflow statement data prepared in accordance with GAAP or as a measure of profitability or liquidity. A reconciliation of net incomeloss to adjusted EBITDA is provided in the following table:
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||||||||||
September 30, | September 30, | Increase | % | September 30, | September 30, | Increase | % | |||||||||||||||||||||||||
2022 | 2021 | (Decrease) | Change | 2022 | 2021 | (Decrease) | Change | |||||||||||||||||||||||||
Net Income (Loss) | $ | (802,881 | ) | $ | 1,342,972 | $ | (2,145,853 | ) | -160 | % | $ | 561,567 | $ | 2,527,494 | $ | (1,965,927 | ) | 78 | % | |||||||||||||
Adjustments: | ||||||||||||||||||||||||||||||||
Provision for income taxes | (222,683 | ) | 253,289 | (475,972 | ) | -188 | % | 148,001 | 469,306 | (321,305 | ) | -68 | % | |||||||||||||||||||
Depreciation and amortization | 423,069 | 166,098 | 256,971 | 155 | % | 659,775 | 367,253 | 292,522 | 80 | % | ||||||||||||||||||||||
EBITDA | $ | (602,495 | ) | $ | 1,762,359 | $ | (2,364,854 | ) | -134 | % | $ | 1,369,343 | $ | 3,364,053 | $ | (1,994,710 | ) | -59 | % | |||||||||||||
Right of use amortization | 131,221 | 78,001 | 53,220 | 68 | % | 291,879 | 231,300 | 60,579 | 26 | % | ||||||||||||||||||||||
Gain on forgiveness of note | - | (1,320,714 | ) | 1,320,714 | -100 | % | - | (1,320,714 | ) | 1,320,714 | -100 | % | ||||||||||||||||||||
Adjusted EBITDA | $ | (471,274 | ) | $ | 519,646 | $ | (990,920 | ) | -191 | % | $ | 1,661,222 | $ | 2,274,639 | $ | (613,147 | ) | -27 | % |
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$15,673,154 and $3,703,579 in$19,708,565 of cash and cash equivalents as of September 30, 20172022 and December 31, 2016,2021, respectively. The workingWorking capital was $7,359,583$25,726,256 and $5,268,654 for the periods ended$25,944,717 as of September 30, 20172022 and December 31, 2016,2021, respectively.
Net cash provided byused in operating activities was $2,549,964 and $2,569,636$1,452,599 for the nine months ended September 30, 20172022 and 2016, respectively, resultingnet cash provided by operating activities was $1,362,626 for the nine months ended September 30, 2021. Net cash used in operating activities resulted primarily from an increase in net income and significantinventory, offset by a decrease in accounts receivable, as well as other changes in accounts receivables, unbilled revenue, inventory, prepaid expenseoperating assets and other current assets, accounts payable and other accrued expenses.liabilities.
Net cash used in investing activities was $83,410 and $468,115$2,444,074 for the nine months ended September 30, 20172022, compared to net cash used in investing activities of $12,035,043 for the nine months ended September 30, 2021. Investing activities in 2022 and 2016, respectively, resulting from a reduction in2021 consisted of purchases of intangible assets, manufacturing equipment, and purchases of property and equipment.equipment (see Note 3).
Net cash used in financing activities was $1,063,928 and $497,143$138,738 for the nine months ended September 30, 2017 and 2016, respectively, resulting2022, compared to net cash provided by financing activities of $25,376,276 for the nine months ended September 30, 2021. In 2022, cash was used primarily for principal payments of debt, offset by proceeds from the purchase of treasury stock, repurchaseexercise of stock warrantsoptions, compared to financing activities in 2021 which wasconsisted of stock options exercised, stock issued for service, and proceeds from long-term debt, offset by the forgiveness of the PPP loan, and principal payments on note payable.
Bookings and Backlog
The Company defines bookings as the total of newly signed contracts and purchase orders received in a reductiondefined time period. The Company received bookings totaling $26,631,879 for the nine months ended September 30, 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 repurchasea 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 stock options.each respective agreement. As of September 30, 2022, the Company’s backlog was $28,300,000. Management estimates the majority of the new bookings received in the first nine months of 2022 will be converted to revenue in 2022 and early 2023. 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 and/or supply chain/staffing challenges have resulted in reduced customer shipments and customer system installations. These developments are expected to result in lower recognized revenue, possible order cancellations and possibly lower gross margin when they occur. To date, there have been minimal order cancellations and some delays. Delayed orders remain in backlog.
Cash Requirements
Our management believes that our current capital resources will be adequate to continue operating ourthe company and maintaining our current business strategy for more than 12 months.months from the filing of this Quarterly Report. We are, however, seekingopen to raiseraising 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
We have identified the following policies below as critical to our business and results of operations. Our reported results 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 PresentationCritical Accounting Policies and Use of Estimates
Our discussion and analysis of our financial condition and results of operations are based on our unaudited financial statements, which have been prepared in accordance with GAAP, unless otherwise noted.GAAP. The preparation of our unaudited financial statements in conformity with GAAP requires managementus to make estimates and assumptionsjudgments that affect the reported amounts of assets, liabilities, revenue, expenses, and liabilities andrelated disclosure of contingent assets and liabilities asliabilities. On an ongoing basis, we evaluate our estimates, including those related to areas that require a significant level of the datejudgment 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 resultsamounts could differ significantly from those estimates.
Fair Valueamounts 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 valueCondition and Results of financial instruments approximates their carrying values at September 30, 2017 andOperations” 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 atno changes in our critical accounting policies during the lower of cost or market with cost being determined on the average cost method. Work 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 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 periodsnine months 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.2022.
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:
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:
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 but 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 December 31, 2016, respectively.
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, theSee 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 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 impactInformation of this ASUQuarterly Report on its financial statements.Form 10-Q.
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, 2017,2022, 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 RISKRISK.
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURESPROCEDURES.
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 Controlscontrols and Procedures
We have not yetprocedures 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 September 30, 2022, our disclosure controls and procedures due to a transition period established by the ruleswere not effective. The ineffectiveness of the SEC for newly public companies.
Internal Control over Financial Reporting
We have not yet evaluated our disclosure controls and procedures was due to material weaknesses, which we identified in our report on internal control over financial reporting contained in our Annual Report on Form 10-K for the transition period established by the rules ofyear ended December 31, 2021, filed with the SEC for newly public companies.on August 2, 2022.
Change in Internal Controlinternal control over Financial Reportingfinancial reporting
There washas been no change in our internal control over financial reporting that occurred during the quarterly period ended September 30, 20172022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Subsequent to September 30, 2022, we are implementing more formal review and documentation of workflow processes, and increased our ERP training for our staff. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.
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PART IIII: OTHER INFORMATION
We are not a partySee 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 involvedour 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 effectQuarterly Report on its earnings, cash flows, or financial position.Form 10-Q, which information is incorporated herein by reference.
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.
(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. |
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(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.
Exhibit No. | Exhibit | Description | ||
Restricted Stock Unit Agreement - John F. Givens II (incorporated by reference to Exhibit 10.14 to the registrant’s annual report on Form 10-K (File No. 001-38420) filed August 2, 2022) | ||||
31.1 | Certification of | |||
31.2 | ||||
32.1 | Certification of the Principal Executive | |||
101.INS | Inline XBRL Instance Document | |||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||
101.CAL | Inline XBRL Taxonomy Extension Calculation Document | |||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||
Cover Page Interactive Data File (embedded within the Inline XBRL | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
VIRTRA, INC. | ||
By: | /s/ Robert D. Ferris | |
Robert D. Ferris | ||
(principal executive officer) | ||
By: | /s/ | |
(principal |