UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~[X]~~☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2023

~~[ ]~~☐

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)	~~(IRS Employer~~	Identification No.)

295 E. Corporate Place, Chandler, AZ		85225

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

~~(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 ~~Date~~Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ~~[X]~~ ☒ No ~~[ ]~~☐

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

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

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

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

As of ~~March 30, 2018,~~August 10, 2023, the registrant had ~~7,904,307~~10,926,774 shares of common stock outstanding.

~~VIRTRA, Inc.~~

~~FORM 10-Q~~

TABLE OF CONTENTS

			PAGE NO.
PART I	FINANCIAL INFORMATION

	Item 1.	Financial ~~Statements:~~Statements (Unaudited)	F-1
		Condensed Balance Sheets as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016 (unaudited)~~2022	F-1
		Condensed Statements of Operations for the Three and ~~Nine~~Six Months ~~Ended September~~ended June 30, ~~2017~~2023 and ~~2016 (unaudited)~~2022	F-2
		Condensed Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022	F-3
		Condensed Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2023 and ~~2016 (unaudited)~~2022	F-4
		Notes to the Unaudited ~~Condensed~~ Financial Statements	F-5

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

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8

	Item 4.	Controls and Procedures	8

PART II	OTHER INFORMATION

	Item 1.	Legal Proceedings	9

	Item 1A.	Risk Factors	9

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

	Item 3.	Defaults Upon Senior Securities	9

	Item 4.	Mine Safety Disclosures	9

	Item 5.	Other Information	9

	Item 6.	Exhibits	9

	SIGNATURES		10

~~Part~~

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

~~Item 1. Financial Statements~~

VIRTRA, INC.

CONDENSED BALANCE SHEETS

~~(Unaudited)~~

	June 30, 2023		December 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	13,342,974	$	13,483,597
Accounts receivable, net		17,931,407		3,002,887
Inventory, net		9,967,539		9,592,328
Unbilled revenue		2,422,109		7,485,990
Prepaid expenses and other current assets		546,332		531,051
Total current assets		44,210,361		34,095,853

Long-term assets:
Property and equipment, net		15,149,168		15,267,133
Operating lease right-of-use asset, net		968,234		1,212,814
Intangible assets, net		571,985		587,777
Security deposits, long-term		35,691		35,691
Other assets, long-term		202,462		376,461
Deferred tax asset, net		5,361,667		2,238,762
Total long-term assets		22,289,207		19,718,638
Total assets	$	66,499,568	$	53,814,491

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,156,170	$	1,251,240
Accrued compensation and related costs		1,653,150		1,494,890
Accrued expenses and other current liabilities		5,633,901		1,917,922
Note payable, current		246,215		232,537
Operating lease liability, short-term		569,692		557,683
Deferred revenue, short-term		8,379,515		4,302,492
Total current liabilities		17,638,643		9,756,764

Long-term liabilities:
Deferred revenue, long-term		2,539,330		1,605,969
Note payable, long-term		7,932,521		8,050,116
Operating lease liability, long-term		450,337		720,023
Total long-term liabilities		10,922,188		10,376,108
Total liabilities		28,560,831		20,132,872

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; 10,926,774 shares issued and outstanding as of June 30,2023 and 10,900,759 shares issued and outstanding as of December 31,2022		1,092		1,089
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		-		-
Common stock, value		1,092		1,089
Additional paid-in capital		31,704,501		31,420,395
Retained earnings		6,233,144		2,260,135
Total stockholders’ equity		37,938,737		33,681,619
Total liabilities and stockholders’ equity	$	66,499,568	$	53,814,491

September 30, 2017 December 31, 2016

ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,106,205 $ 3,703,579
Accounts receivable, net 3,011,610 3,244,852
Inventory, net 1,689,149 1,319,944
Unbilled revenue 1,724,642 107,297
Prepaid expenses and other current assets 660,288 250,066

Total current assets 12,191,894 8,625,738

Property and equipment, net 693,206 814,323
Investment in MREC 1,988,174 471,928

TOTAL ASSETS $ 14,873,274 $ 9,911,989

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable $ 730,302 $ 467,679
Accrued compensation and related costs 1,109,734 617,582
Accrued expenses and other current liabilities 227,688 194,668
Notes payable, current 11,250 11,250
Deferred revenue 2,753,337 2,065,905

Total current liabilities 4,832,311 3,357,084

Long-term liabilities:
Deferred rent liability 87,861 122,126
Notes payable, long-term 11,250 22,500

Total long-term liabilities 99,111 144,626

Total liabilities 4,931,422 3,501,710

Commitments and contingencies

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 ) -
Additional paid-in capital 14,964,939
14,128,837

Accumulated deficit (4,927,247 ) (7,719,351 )

Total stockholders’ equity 9,941,852 6,410,279

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 14,873,274 $ 9,911,989

See accompanying notes to unaudited condensed financial statements.

F-1

VIRTRA, INC.

CONDENSED STATEMENTS OF OPERATIONS

~~(Unaudited)~~(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

	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
	Three Months Ended						Six Months Ended
	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Revenue:
Net Sales	$	10,336,903		$	7,997,383		$	20,363,838		$	14,750,611
Total Revenue		10,336,903			7,997,383			20,363,838			14,750,611

Cost of sales		4,416,202			3,253,651			7,494,199			6,319,789

Gross Profit		5,920,701			4,743,732			12,869,639			8,430,822

Operating Expenses:
General and administrative		3,280,344			3,085,051			5,991,681			5,381,443
Research and Development		711,754			617,058			1,478,050			1,296,453

Net Operating expense		3,992,098			3,702,109			7,469,731			6,677,896

Income from operations		1,928,603			1,041,623			5,399,908			1,752,926

Other Income (expense):
Other Income		208,599			57,056			392,240			111,379
Other Expense		(133,078	)		(64,621	)		(200,305	)		(129,173	)

Net other income (expense)		75,521			(7,565	)		191,935			(17,794	)

Income before provision for income taxes		2,004,124			1,034,058			5,591,843			1,735,132

Provision for income taxes		977,489			246,684			1,618,834			370,684

Net Income	$	1,026,635		$	787,374		$	3,973,009		$	1,364,448

Net income per common share:
Basic	$	0.09		$	0.07		$	0.36		$	0.13
Diluted	$	0.09		$	0.07		$	0.36		$	0.13

Weighted average shares outstanding:
Basic		10,924,714			10,866,775			10,921,033			10,837,186
Diluted		10,933,130			10,892,302			10,925,702			10,867,667

See accompanying notes to unaudited condensed financial statements.

F-2

VIRTRA, INC.

CONDENSED ~~STATEMENT~~STATEMENTS 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 June 30, 2023
	Preferred Stock				Common Stock				Additional Paid-In			Treasury		Accumulated
	Shares		Amount		Shares		Amount		Capital			Stock		Earnings		Total

Balance at March 31, 2023		-	$	-		10,924,274	$	1,091	$	31,536,182			-	$	5,206,508	$	36,743,781
Stock options exercised		-		-		2,500		1		10,475			-		-		10,476
Stock options repurchased		-		-		-		-		(17,568	)		-		-		(17,568	)
Stock reserved for future services		-		-		-		-		175,412			-		-		175,412
Net income		-		-		-		-		-			-		1,026,635		1,026,635
Balance at June 30, 2023		-	$	-		10,926,774	$	1,092	$	31,704,501		$	-	$	6,233,144	$	37,938,737

	For the Three Months Ended June 30, 2022
	Preferred Stock				Common Stock				Additional Paid-In		Treasury		Accumulated
	Shares		Amount		Shares		Amount		Capital		Stock		Earnings		Total

Balance at March 31, 2022		-	$	-		10,809,630		1,081		30,957,616	$	-	$	881,311	$	31,840,008
Stock options exercised		-		-		5,000		-		4,750		-		-		4,750
Stock issued for services		-		-		64,815		6		349,995		-		-		350,001
Stock reserved for future services		-		-		-		-		44,247		-		-		44,247
Net income		-		-		-		-		-		-		787,374		787,374
Balance at June 30, 2022		-	$	-		10,876,945		1,087		31,356,608	$	-	$	1,668,685	$	33,026,380

	For the Six Months Ended June 30, 2023
	Preferred Stock				Common Stock				Additional Paid-In			Treasury		Accumulated
	Shares		Amount		Shares		Amount		Capital			Stock		Earnings		Total

Balance at December 31, 2022		-	$	-		10,900,759	$	1,089	$	31,420,395			-	$	2,260,135	$	33,681,619
Stock options exercised		-		-		10,000		2		27,200			-		-		27,202
Stock options repurchased		-		-		-		-		(17,568	)		-		-		(17,568	)
Stock issued for services		-		-		16,015		1		74,999			-		-		75,000
Stock reserved for future services		-		-		-		-		199,475			-		-		199,475
Net income		-		-		-		-		-			-		3,973,009		3,973,009
Balance at June 30, 2023		-	$	-		10,926,774	$	1,092	$	31,704,501		$	-	$	6,233,144	$	37,938,737

	For the Six Months Ended June 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
Balance		-	$	-		10,807,130		1,081		30,923,391	$	-	$	304,237	$	31,228,709
Stock options exercised		-		-		5,000		-		12,725		-		-		12,725
Stock issued for services		-		-		64,815		6		349,995		-		-		350,001
Stock reserved for future services		-		-		-		-		70,497		-		-		70,497
Net income		-		-		-		-		-		-		1,364,448		1,364,448
Balance at June 30, 2022		-	$	-		10,876,945		1,087		31,356,608	$	-	$	1,668,685	$	33,026,380
Balance		-	$	-		10,876,945		1,087		31,356,608	$	-	$	1,668,685	$	33,026,380

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 $ -

	2023			2022
	Six Months Ended June 30
	2023			2022

Cash flows from operating activities:
Net income	$	3,973,009		$	1,364,448
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		479,889			446,688
Right of use amortization		244,580			160,658
Employee stock compensation		199,475			70,497
Stock issued for service		75,000			350,001
Changes in operating assets and liabilities:
Accounts receivable, net		(14,928,520	)		(2,491,348	)
Inventory, net		(375,211	)		(3,816,862	)
Deferred taxes		(3,122,905	)		255,511
Unbilled revenue		5,063,881			(873,605	)
Prepaid expenses and other current assets		(15,281	)		92,128
Other assets		173,999			(186,727	)
Security deposits, long-term		-			(15,979	)
Accounts payable and other accrued expenses		3,792,847			1,115,242
Payments on operating lease liability		(257,677	)		(170,535	)
Deferred revenue		5,010,384			921,613
Net cash provided by (used in) operating activities		313,470			(2,778,270	)

Cash flows from investing activities:
Purchase of intangible assets		-			(86,012	)
Purchase of property and equipment		(345,640	)		(1,725,726	)
Net cash (used in) investing activities		(345,640	)		(1,811,738	)

Cash flows from financing activities:
Principal payments of debt		(118,087	)		(115,049	)
Stock options exercised		9,634			12,725
Net cash (used in) financing activities		(108,453	)		(102,324	)

Net increase (decrease) in cash and restricted cash		(140,623	)		(4,692,332	)
Cash and restricted cash, beginning of period		13,483,597			19,708,565
Cash and restricted cash, end of period	$	13,342,974		$	15,016,233

Supplemental disclosure of cash flow information:
Cash (refunded) paid:	$	134,514		$	99,035
Income taxes paid (refunded)	$	-		$	128,507

Supplemental disclosure of non-cash investing and financing activities:
Conversion of inventory to property and equipment	$	-		$	294,016

See accompanying notes to unaudited condensed financial statements.

F-4

VIRTRA, INC.

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

(~~Unaudited~~)(Unaudited)

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

Organization and Business Operations

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

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

The Russian-Ukraine conflict is a global concern. The Company does not have any significant direct exposure to Russia or ~~dissenters’ rights~~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 shares~~the year ended December 31, 2022 included in ~~accordance~~the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the ~~Texas Business Organization Code.~~

~~As part of the Plan of Conversion, the Company filed Articles of Incorporation~~SEC on March 31, 2023. Certain information and footnote disclosures normally included in Nevada whereby it changed its name from VirTra Systems, Inc. to VirTra, Inc. and revised its capitalization. The Company’s Articles of Incorporation filed in Nevada authorized the Company to issue 62,500,000 shares, of which (1) 60,000,000 shares shall be common stock, par value $0.0001 per share (the “common stock”), of which (a) 50,000,000 shares shall be common stock, par value $0.0001, (b) 2,500,000 shares shall be Class A common stock, par value $0.0001 per share (the “Class A common stock”), and (c) 7,500,000 shares shall be Class B common stock, par value $0.0001 per share (the “Class B common stock”) and (2) 2,500,000 shares shall be Preferred Stock, par value $0.0001 per share, which may, at the sole discretion of the Board of Directors be issued in one or more series (the “Preferred Stock”). The Company also adopted new bylaws as part of the Plan of Conversion.

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

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

~~Basis of Presentation~~

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

The accompanying unaudited ~~condensed~~ financial statements reflect, in our opinion, all ~~adjustments, which include~~ normal recurring adjustments ~~considered~~ necessary ~~for a fair presentation~~to present fairly our financial position on June 30, 2023, and the results of ~~such interim results. The results~~our operations and cash flows for the ~~three~~periods presented. We derived the December 31, 2022, 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 ~~nine~~the results of operations for the six months ended ~~September~~June 30, ~~2017~~2023, are not necessarily indicative of the results ~~for any subsequent period. These unaudited condensed financial statements should~~to be ~~read in conjunction with the audited financial statements and notes~~expected for the year ended December 31, 2016 included in the Company’s Post-Qualification Offering Circular Amendment No. 1 to Form 1-A filed with the Securities and Exchange Commission (the “SEC”) on February 21, 2018.full year.

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

Use of Estimates

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

Revenue Recognition

~~F-5~~

~~Recent Accounting Pronouncements~~

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

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

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

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

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

F-5

Under ASC 606, the Company ~~on January 1, 2019,~~must identify the contract with ~~early adoption permitted. The Company is currently~~a customer, identify the performance obligations in the ~~process of assessing~~contract, determine the ~~impact of this ASU on its financial statements.~~

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

The Company’s primary sources of ~~cash flow.~~revenue are derived from simulator and accessories sales, training and installation, the sale of customizable software and the sale of extended service-type warranties. The ~~amendments should be applied using~~Company’s policy is to typically invoice upon completion of installation and/or training until such a ~~retrospective transition method, and~~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 when~~straight-line basis over the period of services being rendered for the extended service-type warranties as these warranties represent a performance obligation to “stand ready to perform” over the duration of the warranties. As such, ~~standards are adopted in a future~~the 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 ~~adoption~~performance obligations based upon their stand-alone selling prices. Discounts on 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 is~~customers 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, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Accounting Standards Codification (“ASC”) 718. The amendments are effective for fiscal years beginning after December 15, 2017, and should be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in an interim period. The Company does not expect this amendment to have a material impact on its financial statements.

F-6

Schedule of Disaggregation of Revenue

	Commercial		Government		International		Total		Commercial		Government		International		Total
	Three Months Ended June 30,
	2023								2022
	Commercial		Government		International		Total		Commercial		Government		International		Total
Simulators and accessories	$	73,099	$	8,506,291	$	373,166	$	8,952,556	$	3,521,100	$	1,422,233	$	1,737,301	$	6,680,634
Extended Service-type warranties		21,367		599,390		16,257		637,014		30,546		747,878		27,646		806,070
Customized software and content		4,800		277,555		82,855		365,210		-		60,392		126,000		186,392
Installation and training		19,702		154,280		208,141		382,123		35,343		249,847		39,097		324,287
Total Revenue	$	118,968	$	9,537,516	$	680,419	$	10,336,903	$	3,586,989	$	2,480,350	$	1,930,044	$	7,997,383

	Commercial		Government		International		Total		Commercial		Government		International		Total
	Six Months Ended June 30,
	2023								2022
	Commercial		Government		International		Total		Commercial		Government		International		Total
Simulators and accessories	$	562,908	$	13,985,932	$	3,515,037	$	18,063,877	$	5,101,292	$	4,646,791	$	2,643,938	$	12,392,021
Extended Service-type warranties		44,711		1,138,598		35,680		1,218,989		62,033		1,478,238		45,308		1,585,579
Customized software and content		24,300		284,751		65,994		375,045		-		2,106		209,000		211,106
Installation and training		40,264		403,834		261,829		705,927		47,208		407,400		107,297		561,905
Total Revenue	$	672,183	$	15,813,115	$	3,878,540	$	20,363,838	$	5,210,533	$	6,534,535	$	3,005,543	$	14,750,611

For the six months ended June 30, 2023, governmental customers comprised $15,813,114, or 78% of total net sales, commercial customers comprised $672,185, or 3% of total net sales, and international customers comprised $3,878,540, or 19% of total net sales. By comparison, for the six months ended June 30, 2022, governmental customers comprised $6,534,535, or 44%, of total net sales, commercial customers comprised $5,210,533, or 36%, of total net sales, and international customers comprised $3,005,543, or 20%, of total net sales. Previously, VirTra considered a sale to a prime contractor for a government end-user as “commercial”. However, beginning in 2022, VirTra now classifies such sales as “government”.

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 the customer’s receivable balance. Customer deposits are recorded as a current liability under deferred revenue on the accompanying balance sheet and totaled $8,379,514 and $2,719,108 on June 30, 2023, and December 31, 2022, respectively. Changes in deferred revenue amounts related to customer deposits will fluctuate from year to year based upon the mix of customers required to prepay deposits under the Company’s credit policy.

Warranty

The Company warranties its products from manufacturing defects on a limited basis for a period of one year after purchase, but also sells separately priced extended service-type warranties for periods of up to four years after the expiration of the standard one-year warranty. During the term of the initial one-year warranty, if the device fails to operate properly from defects in materials and workmanship, the Company will fix or replace the defective product. Deferred revenue for separately priced extended warranties one year or less totaled $1,044,472 and $1,583,384 as of June 30, 2023, and December 31, 2022, respectively. Deferred revenue for separately priced extended warranties longer than one year totaled $2,444,652 and $1,601,472 as of June 30, 2023, and December 31, 2022, respectively. The accrual for the one-year manufacturer’s warranty liability totaled $308,000 and $358,000 as of June 30, 2023, and December 31, 2022, respectively, as there was a significantly lower amount of warranty expenses that justified a decrease in accrual. During the six months ended June 30, 2023, and 2022, the Company recognized revenue of $1,218,990 and $916,069, respectively, related to the extended service-type warranties that was amortized from the deferred revenue balance at the beginning of each period. Changes in deferred revenue amounts related to extended service-type warranties will fluctuate from year to year based upon the average remaining life of the warranties at the beginning of the period and new extended service-type warranties sold during the period.

F-7

~~In July 2017,~~

Concentration of Credit Risk and Major Customers and Suppliers

Financial instruments that potentially subject the ~~FASB issued ASU No. 2017-11 – “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives~~Company to concentrations of credit risk consist of cash and ~~Hedging (Topic 815)” I. Accounting~~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 $12,842,974 and $12,983,597 as of June 30, 2023, and December 31, 2022, respectively.

Sales 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 ~~Certain Financial Instruments with Down Round Features~~estimated losses. Historically, the Company has experienced minimal charges relative to doubtful accounts.

Historically, the Company primarily sells its products to U.S. federal and ~~II. Replacement~~state agencies.

As of June 30, 2023, the Company had one customer that accounted for 17% of the ~~Indefinite Deferral for Mandatorily Redeemable Financial Instruments~~total accounts receivable.

Net Income per Common Share

The net income per common share is computed by dividing net income by the weighted average of ~~Certain Nonpublic Entities~~common shares outstanding. Diluted net income per share reflects the potential dilution, using the treasury stock method, that would occur if outstanding stock options and ~~Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I applies to entities that issue financial instruments such~~warrants were exercised. Earnings per share computations are 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 instrumentsfollows:

Schedule 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.Earnings Per Share

	2023		2022
	Three Months Ended June 30,
	2023		2022

Net Income	$	1,026,635	$	787,374
Weighted average common stock outstanding		10,924,714		10,866,775
Incremental shares from stock options		8,416		25,527
Weighted average common stock outstanding, diluted		10,933,130		10,892,302

Net income per common share and common equivalent share
Basic	$	0.09	$	0.07
Diluted	$	0.09	$	0.07

	2023		2022
	Six Months Ended June 30,
	2023		2022

Net Income	$	3,973,009	$	1,364,448
Weighted average common stock outstanding		10,921,033		10,837,186
Incremental shares from stock options		4,669		30,481
Weighted average common stock outstanding, diluted		10,925,702		10,867,667

Net income per common share and common equivalent share
Basic	$	0.36	$	0.13
Diluted	$	0.36	$	0.13

~~NOTE~~

F-8

Note 2. ~~INVENTORY~~Inventory

Inventory consisted of the following as of:

Schedule of Inventory

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

	June 30, 2023			December 31, 2022

Raw materials and work in process	$	10,349,715		$	9,894,759
Reserve		(382,176	)		(302,431	)

Total Inventory	$	9,967,539		$	9,592,328

~~F-7~~

The Company regularly evaluates the useful life of its spare parts inventory and as a result, the Company classified $0 and $294,016 of spare parts as Other Assets, long-term on the Balance Sheet at June 30, 2023 and December 31, 2022, respectively.

~~NOTE~~Note 3.Property and Equipment

Property and equipment consisted of the following as of:

Schedule of Property and Equipment

	September 30, 2017			December 31, 2016			June 30, 2023			December 31, 2022

Land							$	1,778,987		$	1,778,987
Building & Building Improvements								9,129,364			9,129,364
Computer equipment	$	818,155		$	753,987			1,209,371			1,210,021
Furniture and office equipment		196,216			182,969			307,708			289,379
Machinery and equipment		925,495			925,495			2,820,194			2,788,803
STEP equipment								2,002,084			1,954,430
Leasehold improvements		324,313			318,318			347,384			347,384
Construction in Progress								1,998,248			1,749,332

Total property and equipment		2,264,178			2,180,768			19,593,340			19,247,700
Less: Accumulated depreciation		(1,570,972	)		(1,366,445	)
Less: Accumulated depreciation and amortization								(4,444,172	)		(3,980,567	)

Property and equipment, net	$	693,206		$	814,323		$	15,149,168		$	15,267,133

Depreciation ~~expense was $65,570~~expenses, including STEP depreciation, were $463,605 and ~~$64,591~~$196,711 for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023, and ~~2016,~~2022, respectively. ~~Depreciation expense was $204,527 and $160,768 for the nine months ended September 30, 2017 and 2016, respectively.~~

~~F-8~~F-9

~~NOTE 4.Accrued Expenses~~

Note 4. Intangible Assets

~~Accrued compensation and related costs~~

Intangible assets consisted of the following as of:

Schedule of Intangible Asset

	June 30, 2023			December 31, 2022
Patents	$	160,000		$	160,000
Capitalized media content		451,244			451,244
Acquired lease intangible assets		83,963			83,963

Total intangible assets		695,207			695,207
Less accumulated amortization		(123,222	)		(107,430	)

Intangible assets, net	$	571,985		$	587,777

Amortization expense was $15,792 and $41,128 for the six months ended June 30, 2023, and 2022, respectively.

Note 5. Leases

The Company leases approximately 37,729 rentable square feet of office and warehouse space from an unaffiliated third party for our former corporate office, manufacturing, assembly, warehouse and shipping facility located at 7970 South Kyrene Road, Tempe, Arizona 85284. From 2016 through March 2019, the Company leased approximately 4,529 rentable square feet of office and industrial space from an unaffiliated third party for our machine shop at 2169 East 5th Street, Tempe, Arizona 85284. In April 2019, the Company relocated the machine shop from the 5th Street location to 7910 South Kyrene Road, located within the same business complex as our main office. The Company executed a lease amendment to add an additional 5,131 rentable square feet for the machine shop and extended its existing office lease through April 2024. On June 1, 2022, we entered into a new lease of approximately 9,350 square feet located at 12301 Challenger Parkway, Orlando, Florida, from an unaffiliate third party through May 2027.

On March 1,2023 the company entered into a sublease for its 7970 South Kyrene location for the last 13 months of the lease agreement.

The Company’s lease agreements do not contain any residual value guarantees, restrictive covenants or variable lease payments. The Company has not entered into any financing leases.

In addition to base rent, the Company’s lease generally provides for additional payments for other charges, such as rental tax. The lease includes fixed rent escalations. The Company’s lease does not include an option to renew.

The Company determines if an arrangement is a lease at inception. Operating leases are recorded in operating lease right of use assets, net, operating lease liability – short-term, and operating lease liability – long-term on its balance sheets.

Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate used at adoption was 4.5%. Significant judgement is required when determining the Company’s incremental borrowing rate. The Company uses the implicit rate when readily determinable. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Effective June 1, 2022, the Company obtained a right-of-use asset in exchange for a new operating lease liability in the amount of $840,855. Effective January 1, 2019, the Company obtained a right-of-use asset in exchange for a new operating lease liability in the amount of $1,721,380 and derecognized $46,523 deferred rent for an adjusted operating lease right-of-use asset in the net amount of $1,674,857.

F-10

September 30, 2017 December 31, 2016

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

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

Schedule of Balance Sheet Classification of Lease Assets and Liabilities

Balance Sheet Classification	June 30, 2023			December 31, 2022
Assets
Operating lease right-of-use assets, beginning of period	$	1,212,814		$	784,306
Additional property in Orlando		-			840,843
Amortization for the period ended		(244,580	)		(412,335	)
Total operating lease right-of-use asset	$	968,234		$	1,212,814
Liabilities
Current
Operating lease liability, short-term	$	569,692		$	557,683
Non-current
Operating lease liability, long-term		450,337			720,023
Total lease liabilities	$	1,020,029		$	1,277,706

Future minimum lease payments as of June 30, 2023, under non-cancelable operating leases are as follows:

Schedule of Future Minimum Lease Payments


2023	$	345,999
2024		317,377
2025		191,478
2026		196,314
2027		99,383

Total lease payments		1,150,551
Less: imputed interest		(130,522	)
Operating lease liability	$	1,020,029

Rent expenses for the six months ended June 30, 2023, and 2022 were $284,139 and $404,453, respectively.

Note 6. Accrued Expenses

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

Schedule of Accrued Compensation and Related Costs

	June 30, 2023		December 31, 2022
Salaries and wages payable	$	409,804	$	502,940
Employee benefits payable		30,751		31,618
Accrued paid time off (PTO)		690,107		590,491
Profit sharing payable		522,488		369,841

Total accrued compensation and related costs	$	1,653,150	$	1,494,890

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

Schedule of Accrued Expenses and Other Current Liabilities

	June 30, 2023		December 31, 2022
Manufacturer’s warranties	$	308,000	$	358,000
Taxes payable		5,198,435		1,294,110
Miscellaneous payable		127,466		265,812

Total accrued expenses and other current liabilties	$	5,633,901	$	1,917,922

F-11

September 30, 2017 December 31, 2016

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

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

Note 7. Note Payable

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

	June 30, 2023		December 31, 2022

Short-term liabilities
Note payable, principal	$	246,215	$	227,324
Accrued interest to date		5,648		5,213

Note Payable, short-term	$	251,863	$	232,537

Long-term liabilities
Note payable, principal	$	7,932,521	$	8,050,116

Note payable, long tern	$	7,932,521	$	8,050,116

Note 8. Related Party Transactions

During the six months ended June 30, 2023, one Board member and the Company’s Co-CEO each purchased 10,000 shares of common stock, $0.0001 par value per share (the “Common Stock”), pursuant to the exercise of previously awarded stock options at the exercise price of $27,202. Also, during the six months ended June 30, 2023, the Company redeemed 10,000 previously award stock options nearing expiration from the Company’s Co-CEO, which resulted in a total of $21,150 in additional compensation expense.

During the six months ended June 30, 2022, the Company redeemed 17,500 previously awarded stock options nearing expiration from the Company’s Co-CEO and former COO. The redemption eliminated the stock options and resulted in a total of $47,800 in additional compensation expense in 2022. Also, during the six months ended June 30, 2022, the Company issued 5,000 shares of Common Stock to one member of the Board of Directors for previously awarded stock options at an exercise price of $12,725.

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 granted a total of 392,223, and 288,889 Restricted Stock Units (RSUs), 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, 168,090 Restricted Stock Units were forfeited upon the departure of the Chief Operating Officer.

On December 1, 2022, the Company granted a total of 15,000 RSUs to its Chief Financial Officer, which can be awarded based on achievement of performance goals over the next three years. On January 1, 2023, the Company issued 42,735 RSUs to a new member of the Board of Directors which can be awarded only upon a sale of the Company.

F-12

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 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 1,840 shares to pay the tax withholding liability) and 7,407 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 $199,475 and $70,497 related to the RSUs for the six months ended June 30, 2023, and 2022, respectively. The Company recorded expenses of $24,063 and $26,250 for the three months ended June 30, 2023 and 2022, respectively.

Profit Sharing

~~As part of the benefit package maintained by the Company, the Profit Sharing~~VirTra 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~~six months ended ~~September~~June 30, ~~2017~~2023, and ~~2016, respectively. Profit sharing expense~~2022, $300,000 and $150,000 was ~~$403,709 and $325,678~~expensed to operations for ~~the nine months ended September 30, 2017 and 2016, respectively.~~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”) and~~each unit of Modern Round issued and outstanding as of the effective time of the merger automatically converted into the right to receive approximately 1.2277 shares of MREC common stock. As a result of the Merger Agreement, the Company held 1,676,748 shares of MREC common stock, options to purchase 153,459 shares of MREC common stock at an exercise price of $0.41 per share, and conditional warrants to purchase 1,676,747 shares of MREC common stock at an exercise price of $0.20 per share.

~~F-9~~

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

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

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

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

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

The Co-Venture Agreement grants MREC an exclusive non-transferrable license to use the Company’s technology solely for use at locations to operate the concept, as defined in the Co-Venture Agreement. The license would become non-exclusive if the first U.S. location is not opened within 24 months of the effective date and at least one location is opened outside the U.S. and Canada within five years of the Co-Venture Agreement date, the respective milestone dates. Throughout the duration of the Co-Venture Agreement, MREC will pay the Company a royalty based on gross revenue, as defined and subject to certain minimum royalties commencing with the first twelve-month period subsequent to the respective milestone date of June 1, 2017. If the total royalty payments for locations in the United States and Canada together do not total at least the minimum royalty 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.

~~F-10~~

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.

~~F-11~~

~~Note 8.~~ 10. Stockholders’ Equity

Stock Repurchase

On October 25, 2016, the Company’s Board of Directors authorized the repurchase of up to ~~$1,000,000~~$1 million of its common stock ~~through December 31, 2017.~~under Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. Purchases made pursuant to this authorization ~~were to~~will be made in the open market, in privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule ~~10b-18 of the SEC.~~10b-18. The timing, manner, price and amount of any repurchases ~~were to~~will be determined by the Company atin its discretion and ~~were to~~will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. ~~During the nine months ended September 30, 2017, the Company repurchased 20,939 shares at a cost~~On 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, and~~Directors authorized an additional $1 million be allocated for the ~~nine month period ending September 30, 2017 VirTra repurchased 20,939 shares~~repurchase of VirTra’s stock ~~to hold in treasury at~~under the existing 10b-18 plan. The stock repurchase program was suspended as a ~~total cost basis~~result of ~~$96,634 pursuant~~interim 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 ~~issues~~issued non-qualified ~~incentive~~ stock options to key employees, officers and directors under a ~~Stock Option Compensation~~stock option compensation plan approved by the Board of Directors in 2009. Terms of ~~the~~ option grants are at the discretion of the Board of Directors ~~but historically have been~~and are generally seven years. ~~During~~Upon the exercise of these options, the Company expects to issue new authorized shares of its common stock. The following table summarizes all non-qualified stock options as of:

Schedule of Non-qualified Stock Options

	June 30, 2023					December 31, 2022
	Number of Stock			Weighted Exercise		Number of Stock			Weighted Exercise
	Options			Price		Options			Price
Options outstanding, beginning of year		45,000		$	4.26		112,500		$	3.51
Granted		-			-		-			-
Redeemed		(10,000	)		5.04		(27,500	)		2.44
Exercised		(10,000	)		2.72		(17,500	)		2.33
Expired / terminated		-			-		(22,500	)		4.05
Options outstanding, end of period		25,000		$	4.57		45,000		$	4.26
Options exercisable, end of period		25,000		$	4.57		45,000		$	4.26

The Company did not have any non-vested stock options outstanding as of June 30, 2023, and December 31, 2022. The weighted average contractual term for options outstanding and exercisable on June 30, 2023, and 2022 was 7 years. The aggregate intrinsic value of the options outstanding and exercisable on June 30, 2023, and 2022 was $9,750 and $56,700, respectively. For the three months ended ~~September~~June 30, ~~2017~~2023, and ~~2016,~~2022, the Company ~~issued 13,750~~received payments related to the exercise of options in the amount of $10,475 and ~~11,250 stock options, with a weighted average~~$4,750, respectively, and for the six months ended June 30, 2023 and 2023, the Company received $27,202 and $12,725, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price of ~~$3.76~~the underlying options and ~~$4.20 per share, respectively. During~~ the ~~nine months ended September 30, 2017 and 2016, the Company issued 41,250 and 33,750 stock options, with a weighted average exercise price of $4.42 and $3.08 per share, respectively.~~

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

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

2017 Equity Incentive Plan

On August 23, 2017, our board approved, subject to shareholder approval at the annual meeting of shareholders on October 6, 2017, the 2017 Equity Incentive Plan (the “Equity Plan”). The Equity Plan is intended to make available incentives that will assist us to attract, retainThrough June 30, 2023, 224,133 and ~~motivate employees, including officers, consultants and directors. We may provide these incentives through the grant of stock options, stock appreciation rights,~~288,889 restricted stock awards and 14,057 and 10,543restricted ~~stock units, performance~~ shares ~~and units and other cash-based or stock-based awards.~~

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

~~Awards may be~~have been granted under the Equity Plan to our employees, including officers, directors or consultants or those of any present or future parent or subsidiary corporation or other affiliated entity. All awards will be evidenced by a written agreement between usthe Company’s Co-CEO’s and ~~the holder of the award and may include any of the following:~~former COO, respectively.

Common stock ~~options, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units and cash-based awards and other stock-based awards.~~activity

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

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

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

~~F-12~~

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

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

~~Stock compensation expense was $42,376 and $30,000 for~~During the three months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~2023, one Board member purchased 2,500 shares of Common Stock ~~compensation expense was $160,351 and $93,990 for~~pursuant to the ~~nine months ended September 30, 2017 and 2016, respectively. There are 20,000 non-vested~~exercise of previously awarded stock options ~~as of September 30, 2017. Of that amount, 10,000 options will vest equally in Octo~~ ~~ber 2017 and October 2018.~~

~~Warrants~~

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

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

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

Effective August 16, 2017, the Company and the MREC affiliate holders entered into an agreement (the “Warrant Buyout Agreement”) whereby the Company acknowledged the assignment of the Tranche 1 Warrants to MREC and agreed to repurchase them at a price of $3.924$4.19 per share, ~~of common stock issuable by the Company pursuant to the net exercise terms of the Warrants~~ for a total of ~~$678,505.~~

~~In addition,~~$10,475. During 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~~six months ended June 30, 2023, one board member and one 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~~Co-CEO’s purchased 10,000 shares for ~~the immediate exercise on a net exercise basis of 48,415 shares of the Company’s common stock. The purchase price for the Tranche 2 Warrants of~~ a total ~~of $94,990 is based on a~~ price of $3.924 per share of common stock issuable on a net exercise basis based on 24,208 shares of the Company’s common stock. The aggregate purchase price of the Tranche 1 Warrants and the Tranche 2 Warrants was $773,495.$27,202.

Note 11. Subsequent Events

None.

F-13

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

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

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

~~Note 9. 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.

On December 1, 2017, the Company redeemed from 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 split of the Company’s common stock, par value $0.0001 per share with resulting fractional shares to be rounded up to the next higher whole number of shares. The record date for shareholders entitled to participate in the Reverse Split shall be the market effective date as established by FINRA, which was effectuated on March 2, 2018. Except as otherwise indicated, all references to common stock, share data, per share data and related information depict the 1-for-2 Reverse Stock Split as if it was effective and as if it had occurred at the beginning of the earliest period presented.

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

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

~~F-14~~

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, ~~2016~~2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Company’s ~~Post-Qualification Offering Circular Amendment No. 1 to~~Annual Report on Form ~~1-A~~10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on ~~February 21, 2018.~~March 31, 2023.

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~~people acting on our behalf are expressly qualified in their entirety by this cautionary statement.

~~OVERVIEW~~Business Overview

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

The VirTra firearms training simulator allows marksmanship and realistic scenario-based training ~~that does not require live ammunition~~to take place daily without the need for a shooting range, protective equipment, role players, safety officers, or ~~less-than-lethal munitions, which can both save money and provide certain~~a scenario-based training ~~capabilities unavailable to live fire exercises.~~site. We have developed a higher standard in simulation training including capabilities such as: multi-screen, ~~video based~~video-based scenarios, unique scenario authoring ability, superior training scenarios, the patented ~~Threat-Fire™~~Threat-Fire® shoot-back system, powerful gas-powered simulated recoil weapons, and more. The simulator also allows students to receive immediate feedback from the instructor without the potential for sustaining injuries by the instructor or the students. The instructor can teach and re-mediate critical issues, while placing realistic stress on the students due to the realism and safe training environment created by the VirTra simulator.

Business Strategy

We ~~also~~have two main customer groups, namely, law enforcement and military. These are ~~engaged in licensing~~very different markets and require different sales and marketing programs as well as personnel. Our focus is to expand the market share and scope of our ~~technology~~training simulators sales to ~~Modern Round Entertainment Corporation (“MREC”), a developer and operator of a combined dining and entertainment concept centered on an indoor shooting experience.~~these identified customer groups by pursuing the following key growth strategies:

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

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

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

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

~~Simulator~~ Product Offerings

Our simulator products include the following:

●

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

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

	●○	A key feature of the V-300™ shows how quickly judgment decisions must be made, and, sometimes, if they are not made immediately and accurately, it can lead to the possible loss of lives. This feature, among others, supports our value proposition to our customers is that best practices is being prepared enough for the surprises that could be around every corner and the ability to safely neutralize any life-threatening encounters.

●

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

○

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

●

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

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

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

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

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

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

	●	V-Author™ Software – allows users to create, edit, and train with content specific to agency’s objectives and environments. V-Author™ is an easy-to-use application capable of almost unlimited custom scenarios, skill drills, targeting exercises and firearms courseware proven to be highly effective for users of VirTra simulation products.

	●	Simulated Recoil –Kits - a wide range of highly realistic and reliable simulated recoil kits/weapons

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

	●	VirTra has installed a volumetric video capture studio in order to create training scenarios that could work in either screen-based simulators or in headset-based simulators. Volumetric video realism far exceeds that of computer-generated avatars which likely gives VirTra a strategic advantage for highly desired de-escalation training, especially when simulating human interaction is required.

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

Results of operations for the three and six months ended June 30, 2023, and June 30, 2022

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

Revenues.~~Revenues~~Net sales were ~~$4,686,445~~$10,336,903 for the three months ended ~~September~~June 30, ~~2017~~2023, compared to ~~$3,041,701~~$7,997,383 for the same period in ~~2016 and $14,147,297~~2022, an increase of $2,339,520 or 29%. Net sales were $20,363,838 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023, compared to ~~$12,649,963~~$14,750,611 for the same period in ~~2016.~~2022, an increase of $5,613,227, or 38% The increase in revenues for the three and six months ended June 30, 2023, resulted from an improvement in operations which helped to move through the backlog and ship orders at a record pace.

Cost of Sales. Cost of sales were $4,416,202 for the three months ended June 30, 2023, compared to $3,253,651 for the same period in 2022, an increase of $1,162,551, or 36%. Cost of sales were $7,494,199 for the six months ended June 30, 2023, compared to $6,319,789, or 19% increase. The increase was partly related to the increase in the amount of products shipping in the quarter. There was also a one-time inventory adjustment made when we went live with our new ERP system, which had the effect of increasing the cost of sales for this quarter.

Gross Profit. Gross profit was $5,920,701 for the three months ended June 30, 2023, compared to $4,743,732 for the same period in 2022, an increase of $1,176,969, or 25%. Gross profit was $12,869,639 for the six months ended June 30, 2023 compared to $8,430,822 for the same period in 2022, an increase of $4,438,817, or 53%. The gross profit margin for the three months ended June 30, 2023, and 2022 was 57% and 59%, respectively. The gross profit margin was 63% for the six months ended June 30, 2023 and 57% for the same period in 2022. The increase in gross profit was driven by the mix of systems sold with a streamlined production line to help lower cost of goods sold in comparison to the growth of sales.

Operating Expenses. Net operating expense was $3,992,098 for the three months ended June 30, 2023, compared to $3,702,109 for the same period in 2022, an increase of $289,989, or 8%. Net operating expense was $7,469,731 for the six months ended June 30, 2023 compared to $6,677,896 for the same period in 2022, an increase of $791,835, or 12%. The increase was primarily due to an increase in salaries and benefits due to additional ~~sales of simulators, accessories, warranties~~staff and ~~other services, with~~the expenses for the new Orlando office and a ~~portion of the~~$181,597 increase ~~as a result of increased royalty revenue.~~in research and development.

~~Cost of Sales.~~~~Cost of sales~~

Operating Income. Operating income was ~~$1,573,384~~$1,928,603 for the three months ended ~~September~~June 30, ~~2017~~2023, compared to ~~$1,345,181~~an operating income of $1,041,623 for the same period in ~~2016 and $4,853,796~~2022, an increase of $886,980 or 85%. Operating income was $5,399,908 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 compared to ~~$4,856,906~~$1,752,926 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, an increase ~~in sales~~ of ~~mix~~$3,646,982, or 208%.

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

~~Gross Profit.~~~~Gross profit~~other expense was ~~$3,113,061~~$75,522 for the three months ended ~~September~~June 30, ~~2017~~2023, compared to ~~$1,696,521~~net other expense of ($7,565) for the same period in ~~2016 with a gross profit margin~~2022, an increase of ~~66%~~$83,087, or 110%, primarily from the additional rental income from the sublet property. Other income net of other expense was $191,935 for the six months ended June 30, 2023 compared to other income net of other expense of ($17,794), an increase of $209,729, or 117 %.

Provision (Benefit) for Income Tax. Provision for income tax was $977,489 for the three months ended ~~September~~June 30, ~~2017~~2023, compared to ~~56%~~$246,684 for the same period in ~~2016. Gross profit~~2022, an increase of $730,805, or 296%. Provision for income tax was ~~$9,293,503~~$ 1,618,834 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023, compared to ~~$7,793,057~~$ 370,684 for the same period in ~~2016, with a gross profit margin~~2022, an increase of ~~66%~~$ 1,248,150, or 337%. Provision for income tax is estimated quarterly applying both federal and state tax rates.

Net Income. Net income was $1,026,636 for the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2023, compared to ~~62%~~net income of $787,374 for the same period in ~~2016. The gross profit improvement was a result of a reduction in the cost of manufacturing system and product components in our recently acquired machine shop,~~2022, an increase ~~in sales~~ of mix of higher margin products including training, service and warranty sales and a reduction in material costs due to higher volume purchases and more favorable pricing of raw materials and systems components in 2017$239,262 or 30%. Net income was $ 3,973,009 for the six months ended June 30, 2023, compared to ~~the same period in 2016.~~

~~Operating Expenses.~~ ~~Net operating expense was $2,361,243 for the three months ended September 30, 2017 compared to $1,700,835~~$1,364,448 for the same period in ~~2016. Net operating expense was $6,447,409 for the nine months ended September 30, 2017 compared to $5,363,678 for the same period in 2016.~~2022, an increase of $2,608,561, or 191%. The three month and nine month year over year increases were due to expanding staffing levels, annual increases in payroll and benefits for current staff, sales and marketing expansion, new research and development work, and IT infrastructure upgrades.

~~Net Income.~~Net income was $742,125 for the three months ended September 30, 2017 compared to a net loss of $10,083 for the same period in 2016. Net income was $2,792,104 for the nine months ended September 30, 2017 compared to $2,361,186 for the same period in 2016. The increasefluctuations in net income ~~resulted from increases in revenue and gross profit partially offset by an increase in operating expenses as noted~~relate to each respective section discussed above.

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

Explanation and Use of Non-GAAP Financial Measures:

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

	For the Three Months Ended									For the Six Months Ended
	June 30		June 30		Increase		%			June 30		June 30		Increase		%
	2023		2022		(Decrease)		Change			2023		2022		(Decrease)		Change

Net Income	$	1,026,635	$	787,374	$	239,261		30	%	$	3,973,009	$	1,364,448	$	2,608,561		191	%
Adjustments:
Provision for income taxes		977,489		246,684		730,805		296	%		1,618,834		370,684		1,248,150		337	%
Depreciation and amortization		253,911		230,942		22,969		10	%		481,481		446,688		34,793		8	%
Interest (net)		61,237				61,237		100	%		109,420				109,420		100	%
EBITDA	$	2,319,271	$	1,265,000	$	1,054,271		83	%	$	6,182,743	$	2,181,820	$	4,000,923		183	%
Right of use amortization		244,581		80,805		163,776		203	%		366,355		160,658		205,697		128	%

Adjusted EBITDA	$	2,563,852	$	1,345,805	$	1,218,047		91	%	$	6,549,098	$	2,342,478	$	4,206,620		180	%

~~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~~$13,342,974 and ~~$3,703,579 in~~$13,483,597 of cash and cash equivalents as of ~~September~~June 30, ~~2017~~2023, and December 31, ~~2016,~~2022, respectively. ~~The working~~Working capital was ~~$7,359,583~~$26,571,718 and ~~$5,268,654 for the periods ended September~~$24,339,089 as of June 30, ~~2017~~2023, and December 31, ~~2016,~~2022, respectively.

Net cash provided by operating activities was ~~$2,549,964~~$313,470 and ~~$2,569,636~~used in operating activities $2,778,270 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023, and ~~2016, respectively, resulting~~2022, respectively. Net cash provided by operating activities resulted primarily from ~~an increase in~~the net income ~~and significant changes in accounts receivables, unbilled revenue, inventory, prepaid expense and other current assets, accounts payable and other accrued expenses.~~for the 2023 period.

Net cash used in investing activities was ~~$83,410 and $468,115~~$345,640 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023, compared to net cash used in investing activities of $1,811,738 for the six months ended June 30, 2022. Investing activities in 2023 and ~~2016, respectively, resulting from a reduction in~~2022 consisted of purchases of intangible assets and purchases of property and equipment.

Net cash used in financing activities was ~~$1,063,928 and $497,143~~$108,453 for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively, resulting~~2023, compared to $102,324 for the six months ended June 30, 2022. In both periods, cash was used primarily for principal payment of debt offset by the proceeds from the ~~purchase of treasury stock, repurchase~~exercise of stock ~~warrants which~~options.

Bookings and Backlog

The Company defines bookings as the total of newly signed contracts and purchase orders received in a defined time period. The Company received bookings totaling $8.4 million for the six months ended June 30, 2023. The Company defines backlog as the accumulation of bookings that have not started or are uncompleted performance objectives and cannot be recognized as revenue until delivered in a future quarter. Backlog also includes extended warranty agreements and STEP agreements that are deferred revenue recognized on a straight-line basis over the life of each respective agreement. As of June 30, 2023, the Company’s backlog was ~~offset by~~$16.4 million. The breakout of this backlog includes $7.8 million in capital, $6.3 million in service and warranties, and $2.3 million in STEP contracts. Warranties/Service and STEP backlog calculated in this number is revenue that will be recognized on a ~~reduction~~straight-line basis over the next 7 years. In addition, there is $7 million in ~~repurchase~~renewable STEP contracts over the next 5 years. Management estimates the majority of ~~stock options.~~the new bookings received in the first six months of 2023 will be converted to revenue in 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.

Cash Requirements

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

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

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

~~Basis of Presentation and Use of Estimates~~

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

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

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

~~Cash and Cash Equivalents~~

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

~~Accounts Receivable and Allowance for Doubtful Accounts~~

We recognize an allowance for losses on accounts receivable based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. Accounts receivable are charged off after all reasonable collection efforts2022. Management believes that there have been ~~taken. As of September 30, 2017 and December 31, 2016, we maintained an allowance for doubtful accounts of $12,008 and $20,000, respectively.~~

~~Inventories~~

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

~~Investments in Other Companies~~

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

~~Property and Equipment~~

Property and equipment are carried at cost, net of depreciation. Gains or losses related to retirements or disposition of fixed assets are recognized in operations in the period incurred. Costs of normal repairs and maintenance are charged to expense as incurred, while betterments or renewals are capitalized. Depreciation commences at the time the assets are placed in service. Depreciation is provided using the straight-line method over the estimated economic lives of the assets or for leasehold improvements, over the shorter of the estimated useful life or the remaining lease term, which are summarized as follows:

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

~~Revenue Recognition and Deferred Revenue~~

~~Net revenues include sales of products and services and are net of discounts. Product sales consist of simulators, upgrade components, scenarios, scenario software, recoil kits, Threat-Fire~~^® and other accessories. Services include installation, training, limited warranties, service agreements and related support. Certain components of our sales include multiple elements comprising of both products and services. Our revenue recognition falls under ASC 605-25,~~Multiple Element Arrangements~~~~, with the delivery of the simulator and installation being two separate deliverables. Our delivery of the simulator and the installation has been assessed to qualify as separate units of accounting:~~

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

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

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

~~Products~~

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

~~Services~~

Services include installation of product, separately priced extended limited warranties on parts and labor and technical support. Revenue is recognized for service contracts as earned which is generally upon completion of installation or, if extended warranties, on a straight-line basis over the term of the contract. The Company offers a standard warranty on its products from manufacturing defects on a limited basis for a period of one year after purchase and also offers separately priced extended warranties for periods of up to four years beginning after the expiration of the standard one-year warranty. After the standard warranty expires butpolicies during the term of the extended warranty, if the device fails to operate properly from defects in materials and workmanship, the Company will repair or replace the defective product at no additional charge. The Company records a gross to net revenue adjustment for the one-year standard warranty and accrues annually the estimated cost of complying with the warranty agreements for all extended warranty years. Deferred revenue for separately priced extended warranties longer than one year totaled $2,376,371 and $2,014,571 as of Septembersix months ended June 30, ~~2017 and December 31, 2016, respectively.~~2023.

~~Income Taxes~~

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

~~Stock Based Compensation~~

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

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

Recent Accounting Pronouncements

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

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

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

~~OFF-BALANCE SHEET ARRANGEMENTS~~

As of ~~September~~June 30, ~~2017,~~2023, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

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

Not required for smaller reporting companies.

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

Evaluation of disclosure controls and procedures

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

~~We have not yet~~procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officers and principal financial officer, to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officers 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 officers and principal financial officer concluded that as of June 30, 2023, our disclosure controls and procedures ~~due to a transition period established by the rules~~were 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 of~~year ended December 31, 2022, filed with the SEC ~~for newly public companies.~~on March 31, 2023.

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

There ~~was~~has been no change in our internal control over financial reporting that occurred during the quarterly period ended ~~September~~June 30, ~~2017~~2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

However, during the quarter ended June 30, 2023, and continuing into 2023, 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.

PART IIII: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

WeThere is no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we are ~~not~~ a party toor of which any ~~other material litigation, nor, to~~of our property is the ~~knowledge of management, is any litigation threatened against us that may materially affect us. From time to time we are involved in legal proceedings occurring in the ordinary course of business.~~subject.

ITEM 1A. RISK FACTORS

Not required for smaller reporting companies.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~None.~~ None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

	(a)	None

	(b)	There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors since the filing with the SEC of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

~~(a) None.~~

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

ITEM 6. EXHIBITS

Exhibit No.	Exhibit ~~No.~~	Description

~~31.1~~10.1	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 ~~the~~ Principal Executive Officer pursuant to Section ~~302~~906 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

31.3	Certification of Principal Financial Officer pursuant to Section ~~302~~906 of the Sarbanes-Oxley Act of 2002.

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

101.INS	Inline XBRL Instance Document

101.SCH	Inline XBRL Taxonomy Extension Schema Document

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

~~101.LAB~~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

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

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

	VIRTRA, INC.

~~Dated: March 30, 2018~~Date: August 14, 2023	By:	/s/ Robert D. Ferris
		Robert D. Ferris
		~~Chief~~Co-Chief Executive Officer and President
		(principal executive officer)

	By:	/s/ ~~Judy Henry~~John F. Givens II
		~~Judy Henry,~~John F. Givens II
		Co-Chief Executive Officer
		(principal executive officer)

	By:	/s/ Alanna Boudreau
		Chief Financial Officer
		(principal financial ~~and principal accounting~~ officer)

	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

	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

	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

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

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

Building Lease Schedule

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

Total	$	517,546

	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

	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	%