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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~March~~June 3130, 2025

☐	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.

(Exact name of registrant as specified in its charter)

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

295 E. Corporate Place, Chandler, AZ		85225
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area 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 (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 ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

Large, accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by 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 Act). Yes ☐ No ☒

As of ~~May~~August 128, 2025, the registrant had 11,261,588 shares of common stock outstanding.

TABLE OF CONTENTS

			~~PAGE NO.~~	PAGE NO.
PART I	FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited)	~~F-1~~	F-1
		Condensed Balance Sheets as of March 31, 2025, and December 31, 2024	F-1
		Condensed Balance Sheets as of June 30, 2025 and December 31, 2024		F-1
		Condensed Statements of Operations for the Three Months ended March 31, 2025 and 2024	F-2
		Condensed Statements of Operations for the Three and Six Months ended June 30, 2025 and 2024		F-2
		Condensed Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2025 and 2024	F-3
		Condensed Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2025 and 2024		F-3
		Condensed Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024	F-4
		Condensed Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024		F-4
		Notes to the Unaudited Financial Statements	~~F-5~~	F-5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3	3
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8	9
	Item 4.	Controls and Procedures	8	9
PART II	OTHER INFORMATION
	Item 1.	Legal Proceedings	9	10
	Item 1A.	Risk Factors	9	10
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9	10
	Item 3.	Defaults Upon Senior Securities	9	10
	Item 4.	Mine Safety Disclosures	9	10
	Item 5.	Other Information	9	10
	Item 6.	Exhibits	9	10
	SIGNATURES		10	11

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VIRTRA, INC.

CONDENSED BALANCE SHEETS

(~~Unaudited~~unaudited)

	March 31,		December 31,
	June 30, 2025		December 31, 2024
	2025		2024
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1720,~~612~~697,~~626~~354	$	18,040,827
Accounts receivable, net		86,~~905~~447,~~570~~542		8,005,452
Inventory, net		1412,~~987~~806,~~491~~733		14,583,400
Unbilled revenue		21,~~108~~587,~~976~~422		2,570,441
Prepaid expenses and other current assets		12,~~616~~610,~~686~~223		1,273,115
Total current assets		4544,~~231~~149,~~349~~274		44,473,235
Long-term assets:
Property and equipment, net		16,~~318~~451,~~615~~233		16,204,663
Operating lease right-of-use asset, net		~~395~~352,~~231~~730		437,095
Intangible assets, net		~~556~~2,~~429~~744,180		558,651
Security deposits, long-term		3515,~~691~~979		35,691
Other assets, long-term		148,177		148,177
Deferred tax asset, net		43,~~111~~508,~~630~~399		3,595,574
Total long-term assets		2123,~~565~~220,~~773~~698		20,979,851
Total assets	$	6667,~~797~~369,~~122~~972	$	65,453,086
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,~~216~~034,~~094~~497	$	957,384
Accrued compensation and related costs		1,~~094~~005,~~053~~621		1,253,544
Accrued expenses and other current liabilities		1554,006~~,591~~		657,114
Note payable, current		~~228~~227,~~452~~849		230,787
Operating lease liability, short-term		~~192~~194,~~669~~917		192,410
Deferred revenue, short-term		67,~~235~~011,~~630~~943		6,355,316
Total current liabilities		910,~~973~~028,~~489~~833		9,646,555
Long-term liabilities:
Deferred revenue, long-term		2,~~113~~381,~~385~~845		2,282,996
Note payable, long-term		7,~~504~~441,~~157~~512		7,567,536
Operating lease liability, long-term		~~221~~174,~~628~~696		265,111
Other long term liabilities		-		-
Other long-term liabilities		-		-
Total long-term liabilities		9,~~839~~998,~~170~~053		10,115,643
Total liabilities		1920,~~812~~026,~~659~~886		19,762,198
Commitments and contingencies (See Note 11)		-		-
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; 11,260,209 and 11,255,709 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively		1,126		1,125
Common stock $0.0001 par value; 50,000,000 shares authorized; 11,261,588 shares issued and outstanding as of June 30, 2025, and 11,255,709 shares issued and outstanding as of December 31, 2024		1,126		1,125
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		-		-
Additional paid-in capital		3233,~~944~~127,~~626~~935		32,915,112
Retained Earnings		14,~~038~~214,~~711~~025		12,774,651
Total stockholders’ equity		4647,~~984~~343,~~463~~086		45,690,888
Total liabilities and stockholders’ equity	$	6667,~~797~~369,~~122~~972	$	65,453,086

See accompanying notes to unaudited condensed financial statements.

F-1

VIRTRA, INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

	2025			2024
+	June 30, 2025			June 30, 2024			June 30, 2025			June 30, 2024
	Three Months Ended March 31,
	Three Months Ended						Six Months Ended
	2025			2024
	June 30, 2025			June 30, 2024			June 30, 2025			June 30, 2024
				(restated)
										(Restated)
Revenues:
Net sales	$	76,~~160~~978,~~247~~938		$	76,~~346~~075,~~421~~040		$	14,139,185		$	13,421,461
Total revenue		76,~~160~~978,~~247~~938			76,~~346~~075,~~421~~040			14,139,185			13,421,461
Cost of sales		12,~~963~~166,~~367~~461			2550,~~632,257~~424			4,129,828			3,182,682
Gross profit		54,~~196~~812,~~880~~477			45,~~714~~524,~~164~~616			10,009,357			10,238,779
Operating expenses:
General and administrative		3,~~219~~289,~~950~~995			3,~~370~~537,~~422~~910			6,509,945			6,908,332
Research and development		~~609~~608,~~127~~116			~~693~~855,~~380~~285			1,217,243			1,548,665
Net operating expense		3,~~829~~898,~~077~~111			4,~~063~~393,~~802~~195			7,727,188			8,456,997
Income from operations		1,367,803			650,362
Income (loss) from operations		914,366			1,131,421			2,282,169			1,781,782
Other income (expense):
Other income		7277,~~010~~873			~~396~~156,~~693~~870			149,883			486,141
Other (expense)		(73,753	)		(67,422	)
Gain on forgiveness of note payable		-						-			-
Net other income (expense)		(1,743	)		329,271
Other (expense) income		(825,925	)		-			(899,677	)		-
Income before provision for income taxes		1,366,060			979,633
Net other income (expense)		(748,052	)		156,870			(749,794	)		486,141
Provision for income taxes		102,000			511,437
Income (Loss) before provision for income taxes		166,314			1,288,291			1,532,375			2,267,923
Net income	$	1,264,060		$	468,196
Provision (Benefit) for income taxes		(9,000	)		87,564			93,000			599,000
Net income per common share:
Net income (loss)	$	175,314		$	1,200,727		$	1,439,375		$	1,668,923
Basic	$	0.11		$	0.04
Net income (loss) per common share:
Diluted	$	0.11		$	0.04
Basic	$	0.02		$	0.11		$	0.13		$	0.15
Weighted average shares outstanding:
Diluted	$	0.02		$	0.11		$	0.13		$	0.15
Basic		11,162,037			10,959,298
Weighted average shares outstanding:
Diluted		11,162,037			10,961,188
Basic		11,261,588			11,063,366			11,260,902			10,885,964
Diluted		11,261,588			11,065,866			11,260,902			10,885,964

See accompanying notes to unaudited condensed financial statements.

F-2

VIRTRA, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Shares		Amount		Shares		Amount		Capital		Stock		Earnings		Total
	Preferred Stock				Common Stock				Additional Paid-In		Treasury		Accumulated
									Additional
	Preferred Stock				Common Stock				Paid in		Treasury		Accumulated
	Shares		Amount		Shares		Amount		Capital		Stock		Earnings		Total
Three Months Ended March 31, 2025
Six Months Ended June 30, 2025
Balance at December 31, 2024		-	$	-		11,255,709	$	1,125	$	32,915,112	$	-	$	12,774,651	$	45,690,888
Balance, December 31, 2024		-	$	-		11,255,709	$	1,125	$	32,915,112		$-	$	12,774,651	$	45,690,888
Stock reserved for future services		-		-		-		-		29,514		-		-		29,514
Stock options exercised		-		-		-		-		-						-
RSUs issued (stock for services)		-		-		4,500		1		-		-		-		1
Stock reserved for future services		-		-		-		-		29,514				-		29,514
RSUs issued (stock for services)		-		-		4,500		1		-				-		1
Net income		-		-		-		-		-		-		1,264,060		1,264,060
Balance at March 31, 2025		-	$	-		11,260,209	$	1,126	$	32,944,626	$	-	$	14,038,711	$	46,984,463
Balance, March 31, 2025		-		-		11,260,209	$	1,126		32,944,626		-		14,038,711		46,984,463
Stock options exercised		-		-		-		-		-		-		-		-
Stock reserved for future services		-		-		-		-		183,309		-		-		183,309
RSUs issued (stock for services)		-		-		1,379		-		-		-		-		-
Net income		-		-		-		-		-		-		175,314		175,314
Balance, June 30, 2025		-	$	-		11,261,588	$	1,126	$	33,127,935	$	-	$	14,214,025	$	47,343,086
Six Months Ended June 30, 2024
(Restated)
Balance, Dec 31, 2023		-	$	-		11,107,230	$	1,109	$	31,957,765	$	-	$	11,410,970	$	43,369,844
Stock options exercised		-		-		2,500		1		10,749		-		-		10,750
Stock reserved for future services		-		-		-		-		139,999		-		-		139,999
Net income		-		-		-		-		-		-		468,196		468,196
Balance, March 31,2024		-		-		11,109,730		1,110		32,108,513		-		11,879,166		43,988,789
Balance		-		-		11,109,730		1,110		32,108,513		-		11,879,166		43,988,789
Stock options exercised		-		-		2,500		1		9,400		-		-		9,401
Stock reserved for future services		-		-		-		-		212,004		-		-		212,004
Net income		-		-		-		-		-		-		1,200,727		1,200,727
Balance, June 30,2024		-	$	-		11,112,230	$	1,111	$	32,329,917	$	-	$	13,079,893	$	45,410,921
Balance		-	$	-		11,112,230	$	1,111	$	32,329,917	$	-	$	13,079,893	$	45,410,921

	Preferred Stock				Common Stock				Additional Paid-In		Treasury		Accumulated Earnings
	Shares		Amount		Shares		Amount		Capital		Stock		(Restated)		Total
Three Months Ended March 31, 2024
Balance at December 31, 2023		-	$	-		11,107,230	$	1,109	$	31,957,765	$	-	$	11,410,970	$	43,369,844
Balance		-	$	-		11,107,230	$	1,109	$	31,957,765	$	-	$	11,410,970	$	43,369,844
Stock options exercised		-		-		2,500		1		10,749		-		-		10,750
Stock reserved for future services		-		-		-		-		139,999		-		-		139,999
Net income		-		-		-		-		-		-		468,196		468,196
Balance at March 31, 2024		-	$	-		11,109,730	$	1,110	$	32,108,513	$	-	$	11,879,166	$	43,988,789
Balance		-	$	-		11,109,730	$	1,110	$	32,108,513	$	-	$	11,879,166	$	43,988,789

See accompanying notes to unaudited condensed financial statements.

F-3

VIRTRA, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	2025			2024
	Three Months Ended March 31
	Six Months Ended June 30
	2025			2024
				(Restated)
Cash flows from operating activities:
Net income (loss)	$	1,264,060		$	468,196
Net income	$	1,439,375		$	1,668,923
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		~~316~~829,~~640~~841			~~236~~525,~~547~~077
Right of use amortization		4184,~~864~~365			~~127~~197,~~893~~312
Employee stock compensation		29212,~~514~~823			~~139~~352,~~999~~005
Bad debt expense		(15,334	)		245,089
Changes in operating assets and liabilities:
Accounts receivable, net		~~(884~~1,~~782~~557,910	)		57,~~926~~347,~~870~~700
Inventory, net		~~(404~~1,~~091~~776,667	)		~~112~~(1,~~420~~065,835	)
Deferred taxes		~~(516~~87,~~055~~175	)		(33149,~~203~~958	)
Unbilled revenue		~~461~~983,~~463~~019			(~~571~~280,~~759~~044	)
Prepaid expenses and other current assets		(~~343~~1,~~571~~337,108	)		74(1,~~091~~046,213	)
Accounts payable and other accrued expenses		448,503			(246,905	)
Other assets		19,712			-
Operating lease right of use		(43,223	)		(137,291	)
Accounts payable and other accrued expenses		(273,918	)		(4,967,236	)
Deferred revenue		(289,297	)		(1,205,438	)
Operating lease right of use		(87,907	)		(207,208	)
Net cash provided by operating activities		65,691			5,136,509
Deferred revenue		755,476			(1,106,299	)
Net cash provided by operating activities		6,047,430			1,268,224
Cash flows from investing activities:
Purchase of intangible assets		-			-
Internal intangible assets		(2,265,489	)		-
Purchase of property and equipment		(~~428~~996,~~371~~452	)		(1,~~546~~608,~~772~~798	)
Net cash (used in) investing activities		(~~428~~3,~~371~~261,941	)		(1,~~546~~608,~~772~~798	)
Cash flows from financing activities:
Principal payments of debt		(65128,~~521~~962	)		(35117,~~152~~785	)
Stock issued for options exercised		-			1020,~~750~~151
Net cash (used in) financing activities		(65128,~~521~~962	)		(2497,~~402~~634	)
Net increase (decrease) in cash		~~(428~~2,~~201~~656,527	)		3(438,~~565,335~~208	)
Cash and restricted cash, beginning of period		18,040,827			18,849,842
Cash and restricted cash, end of period	$	1720,~~612~~697,~~626~~354		$	2218,~~415~~411,~~177~~634
Supplemental disclosure of cash flow information:
Income taxes paid (refunded)	$	20720,951		$	245,~~002~~314,387
Interest paid	$	56116,~~974~~415		$	6184,~~552~~403

See accompanying notes to unaudited condensed financial statements.

F-4

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note 1. Organization and Significant Accounting Policies

Organization and Business Operations

VirTra, Inc. (the “Company,” “VirTra,” “we,” “us” or “our”), located in Chandler, Arizona, is a global provider of judgmental use of force training simulators, and firearms training simulators ~~and driving simulators~~ for the law enforcement, military, educational and commercial 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 its products worldwide through a direct sales force and international distribution partners. The original business started in 1993 as Ferris Productions, Inc. Inand ~~September 2001, Ferris Productions, Inc. merged with GameCom, Inc. to~~ ultimately ~~become~~ became VirTra, Inc., a Nevada corporation.

Basis of Presentation

The unaudited financial statements included herein have been prepared by us without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our audited financial statements for the year ended December 31, 2024 included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on March 27, 2025. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted as permitted by the SEC, although we believe the disclosures that are made are adequate to make the information presented herein not misleading.

The accompanying unaudited financial statements reflect, in our opinion, all normal recurring adjustments necessary to present fairly our financial position on ~~March~~June 3130, 2025, and the results of our operations and cash flows for the periods presented. We derived the December 31, 2024, balance sheet data from audited financial statements; however, we did not include all disclosures required by GAAP.

Interim results are subject to seasonal variations, and the results of operations for the three and six months ended ~~March~~June 3130, 2025, are not necessarily indicative of the results to be expected for the full year.

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 as 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 ~~credit~~doubtful ~~losses and notes receivable~~accounts, inventory reserves, accrual for warranty reserves, the carrying value of long-lived assets and intangible assets, income tax valuation allowances, ~~the carrying value of cost basis investments,~~ and the allocation of the transaction price to the performance obligations in our contracts with customers.

Revenue Recognition

The Company adopted the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customer (Topic 606) (“ASC 606”) on January 1, 2018, and the Company elected to use the modified retrospective transition method which requires application of ASC 606 to uncompleted contracts at the date of adoption. The adoption of ASC 606 did not have a material impact on the financial statements.

Under ASC 606, the Company must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the Company satisfies a performance obligation. Significant judgment is necessary when making these determinations.

Restatement of year over year revenue numbers for Q1

During the audit of the 2024 financial statements, it was discovered that due to issues in the implementation of new accounting software, a revenue line was missing in 2023. This occurred when a deposit from a 2021 customer was not accurately entered into the 2021 initial launch of the new accounting system. $747,977 of revenue was recorded in the first quarter of 2024 instead of in 2023. This indicates that Q1 of 2024 was overstated by the $747,977, this adjustment was made in the audited financials of year ending 2024. This means that Q1 comparatives of 2024 to 2025 will continually show the decrease in YOY of $747,977.

F-5

VIRTRA, INC.~~NOTES TO FINANCIAL STATEMENTS(Unaudited)~~

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Restatement of Year over Year Revenue Numbers for 2024

During the audit of the 2024 financial statements, it was discovered that due to issues in the implementation of new accounting software, a revenue line was missing in 2023. This occurred when a deposit from a 2021 customer was not accurately entered into the 2021 initial launch of the new accounting system. $747,977 of revenue was recorded in the first quarter of 2024 instead of in 2023, resulting in an overstatement of revenues for the quarter ending March 31, 2024, of $747,977. This adjustment was made in the audited financials of year ending 2024; however, this means that comparatives from 2024 to 2025 will continue to show the decrease of $747,977.

Sources of Revenues

The Company’s primary sources of revenue are derived from simulator and accessories sales, training and installation, the sale of customizable software, the sale of customized content scenarios, and the sale of extended service-type warranties. 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 STEP Program Deferred and recognized over the life of the contract 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 ~~expended~~expanded) Design and prototyping Recognized at the completion of each agreed upon milestone 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 straight-line basis over the period of services being rendered for the extended service-type warranties as these warranties represent a performance obligation to “stand ready to perform” over the duration of the warranties. As such, the warranty service is performed continuously over the warranty period.

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

F-6

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Disaggregation of Revenue

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

F-6

VIRTRA, INC.NOTES TO FINANCIAL STATEMENTS(Unaudited)

Schedule of Disaggregation of Revenue

Commercial

Government

International

Total

Commercial

Government

International

Total

Three Months Ended March 31

Three Months Ended June 30

2025

2024

Commercial

Government

International

Total

Commercial

Government

International

Total

Simulators and accessories

24106,~~378~~113

13,~~971~~221,~~324~~977

1,~~768~~174,~~635~~154

34,~~764~~502,~~337~~244

75136,~~780~~571

31,~~811~~927,~~257~~438

~~530~~477,~~280~~837

42,~~417~~541,~~317~~846

Extended Service-type warranties

3541,~~925~~432

~~913~~1,~~321~~007,989

2024,~~865~~885

~~970~~1,~~111~~074,306

-72,000

~~870~~1,~~803~~332,049

422,~~202~~103

~~875~~1,~~005~~426,152

Customized software and content

6630,~~781~~841

~~101,832~~-

~~168~~30,~~613~~841

~~265~~17,~~406~~127

-82,500

~~265~~99,~~406~~627

Installation and training

43,~~388~~486

~~179~~150,~~266~~812

17153,~~050~~552

~~200~~307,~~704~~850

-4,196

~~236~~157,~~339~~691

56,~~164~~650

~~241~~168,~~503~~537

Design & Prototyping

129,~~115,890~~861

~~583~~863,~~326~~582

STEP

12,~~753~~392

~~908~~1,~~820~~002,663

3028,~~019~~781

~~940~~1,~~592~~033,836

~~954~~965,~~349~~810

9,~~515~~486

~~963~~975,~~864~~296

Total Revenue

66153,~~444~~423

5,~~155~~444,~~402~~143

1,~~938~~381,~~401~~372

76,~~160~~978,~~247~~938

75212,~~780~~767

65,~~721~~263,~~480~~697

~~549~~598,~~161~~576

76,~~346~~075,~~421~~040

Commercial customers include selling through prime contractors for military or law enforcement contracts, domestically. Government customers are defined as directly selling to government agencies. For the three months ended March 31, 2025, governmental customers comprised $5,155,402, or 72% of total net sales, commercial customers comprised $66,444 or 1% of total net sales and international customers comprised $1,938,401 or 27% of total net sales. By comparison, for the three months ended March 31, 2024, governmental customers comprised $6,721,480, or 91% of total net sales, commercial customers comprised $75,780 or 1% of total net sales and international customers comprised $549,161, or 7% of total net sales. For the three months ended March 31, 2025, and 2024, the Company recorded $940,592 and $963,864, respectively, in STEP revenue, or 13% and 12%, respectively, of total net sales.

	Commercial		Government		International		Total		Commercial		Government		International		Total
	Six Months Ended June 30
	(restated)
	2025								2024
	Commercial		Government		International		Total		Commercial		Government		International		Total
Simulators and accessories	$	130,491	$	5,193,300	$	2,942,789	$	8,266,580	$	212,351	$	5,738,695	$	1,008,119	$	6,959,165
Extended Service-type warranties		77,357		1,921,310		45,750		2,044,417		72,000		2,202,851		26,305		2,301,156
Customized software and content		-		97,622		101,832		199,454		-		282,533		82,500		365,033
Installation and training		7,875		330,078		170,601		508,554		4,196		394,030		11,814		410,040
Design & Prototyping		-		1,145,751		-		1,145,751		-		1,446,908		-		1,446,908
STEP		4,145		1,911,483		58,801		1,974,429		-		1,920,159		19,000		1,939,159
Total Revenue	$	219,868	$	10,599,544	$	3,319,773	$	14,139,185	$	288,547	$	11,985,176	$	1,147,738	$	13,421,461

Commercial customers include selling through prime contractors for military or law enforcement contracts domestically. Government customers are defined as directly selling to government agencies. For the three months ended June 30, 2025, governmental customers comprised $5,444,143 or 78% of total net sales, commercial customers comprised $153,423 or 2% of total net sales and international customers comprised $1,381,371 or 20% of total net sales. By comparison, for the three months ended June 30, 2024, governmental customers comprised $5,263,697 or 87% of total net sales, commercial customers comprised $212,767 or 4% of total net sales and international customers comprised $598,576 or 10% of total net sales. For the six months ended June 30, 2025, governmental customers comprised $10,599,544 or 75% of total net sales, commercial customers comprised $219,868 or 2% of total net sales and international customers comprised $3,319,773 or 23% of total net sales. By comparison, for the six months ended June 30, 2024, governmental customers comprised $11,985,176 or 89% of total net sales, commercial customers comprised $288,547 or 2% of total net sales and international customers comprised $1,147,738 or 9% of total net sales. For the six months ended June 30, 2025, and 2024, the Company recorded $1,974,429 and $1,939,159, respectively, in STEP revenue, or 14% and 14%, respectively, of total net sales.

Segment Information

Information related to the Company’s reportable operating business segments is shown below. The Company’s reportable segments are reported in a manner consistent with the way management evaluates the businesses. The results of operations are regularly reviewed by the Company’s chief operating decision maker (“CODM”), the Chief Executive Officer. The Company identifies its reportable business segments based on differences in products and services. The accounting policies of the business segments are the same as those described in the summary of significant accounting policies. To evaluate each reportable segment’s performance, the CODM uses income from operations as a measure of profit and loss. The CODM compares operational performance against management expectations when making decisions regarding allocation of operating and capital resources to each segment.

The Company has identified the following business segments

● Simulators and Accessories- These include all variations of the VirTra simulator, Simulated recoil kits, Return first devices, Taser©, OC Spray, low light devices and refill options. ● Extended Service-type warranties – Warranties on all products past 1 or more years ● Customized software and Custom content- Contracts with specific suppliers who have ask for content related directly to their situations that we design and film or specific software request for there system only ● Installation and Training – Installation of our simulators at the specific sites as well as extra training classes preformed onsite, virtually or at the VirTra Training Center ● Design and Prototyping – Specific contracts related to hardware development for specific customers ● Subscription Training Equipment Partnership (STEP)™ is a program that allows agencies to utilize VirTra’s simulator products, accessories, and V-VICTA interactive coursework on a subscription basis.

F-7

VIRTRA, INC.~~NOTES TO FINANCIAL STATEMENTS(Unaudited)~~

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

The Company has identified the following business segments:

	●	Simulators and Accessories- These include all variations of the VirTra simulator, Simulated recoil kits, Return first devices, Taser©, OC Spray, low light devices and refill options.
	●	Extended Service-type warranties – Warranties on all products past 1 or more years
	●	Customized software and Custom content- Contracts with specific suppliers who have asked for content related directly to their situations that we design and film or specific software requests for their system only
	●	Installation and Training – Installation of our simulators at the specific sites as well as extra training classes preformed onsite, virtually or at the VirTra Training Center
	●	Design and Prototyping – Specific contracts related to hardware development for specific customers
	●	Subscription Training Equipment Partnership (STEP)™ is a program that allows agencies to utilize VirTra’s simulator products, accessories, and V-VICTA interactive coursework on a subscription basis.

Schedule of Segment

Sale of product	2025		2024
	Three Months Ending March 31,
	Three months ending June 30,
Sale of product	2025		2024
Simulators and accessories	$	34,~~764~~502,~~337~~244	$	42,~~417~~541,~~317~~846
Extended Service-type warranties		~~970~~1,~~111~~074,306		~~875~~1,~~005~~426,152
Customized software and content		~~168~~30,~~613~~841		~~265~~99,~~406~~627
Installation and training		~~200~~307,~~704~~850		~~241~~168,~~503~~537
Design & Prototyping		129,~~115,890~~861		~~583~~863,~~326~~582
STEP		~~940~~1,~~592~~033,836		~~963~~975,~~864~~296
Total consolidated	$	76,~~160~~978,~~247~~938	$	76,~~346~~075,~~421~~040
Revenue	$	76,~~160~~978,~~247~~938	$	76,~~346~~075,~~421~~040

Depreciation and amortization	2025		2024
Simulators and accessories	$	~~102~~165,~~862~~220	$	6041,~~804~~542
Extended Service-type warranties		~~7,664~~-		~~7,664~~-
Customized software and content		~~1,581~~249		~~1,581~~-
Installation and training		~~1,585~~-		~~1,585~~-
Design & Prototyping		3022,~~956~~141		1813,~~877~~325
STEP		~~122~~144,~~672~~756		~~122~~108,~~972~~000
Corporate		47180,~~098~~835		20127,~~840~~390
Total consolidated	$	~~314~~513,~~418~~201	$	~~234~~290,~~323~~257
Depreciation and amortization	$	~~314~~513,~~418.00~~201	$	~~234~~290,~~323~~257

Segment income (loss)	2025			2024
Simulators and accessories	$	2,~~891~~433,~~320~~140		$	2,~~230~~314,~~706~~552
Extended Service-type warranties		1,~~032~~148,~~367~~142			~~875~~2,~~005~~057,114
Customized software and content		~~283~~130,~~787~~959			~~291~~73,~~853~~180
Installation and training		-396,~~248~~527			447,~~365~~237
Design & Prototyping		~~167~~114,~~303~~626			~~463~~589,~~914~~731
STEP		~~825~~889,~~351~~081			~~848~~442,~~322~~799
Corporate		-3(4,~~932~~637,~~820~~161	)		-(4,~~245~~323,~~963~~886	)
Total	$	1175,~~264,060~~314		$	~~468~~1,~~202~~200,727
Segment income (loss)	$	1175,~~264,060~~314		$	~~468~~1,~~202~~200,727

Expenditures for segment assets	2025		2024
Simulators and accessories	$	12,871	$	1,460,997
Extended Service-type warranties		-		-
Customized software and content		-		-
Installation and training		-		-
Design & Prototyping		-		-
STEP		411,560		59,793
Corporate purchases		3,940		12,187
Expenditures for segment assets	$	428,371	$	1,532,977

Segment assets	2025		2024
Simulators and accessories	$	27,749,997	$	26,186,523
Extended Service-type warranties		-		-
Customized software and content		622,678		401,034
Installation and training		-		-
Design & Prototyping		367,092		637,462
STEP		1,235,650		1,011,546
Corporate Assets		36,821,704		41,139,831
Segment assets	$	66,797,122	$	69,376,396

F-8

VIRTRA, INC.~~NOTES TO FINANCIAL STATEMENTS(Unaudited)~~

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Expenditures for segment assets	2025		2024
Simulators and accessories	$	451,772	$	1,340,048
Extended Service-type warranties		-		-
Customized software and content		2,265,489		-
Installation and training		-		-
Design & Prototyping		-		-
STEP		48,445		90,600
Corporate purchases		23,197		-
Expenditures for segment assets	$	2,788,903	$	1,430,648

Segment assets	2025		2024
Simulators and accessories	$	23,417,010	$	26,238,698
Extended Service-type warranties		-		-
Customized software and content		365,638		466,778
Installation and training		-		-
Design & Prototyping		248,548		275,184
STEP		1,139,339		986,717
Corporate Assets		42,199,436		36,797,222
Segment assets	$	67,369,972	$	64,764,599

Sale of product	2025		2024
	Six months ending June 30,
Sale of product	2025		2024
Simulators and accessories	$	8,266,580	$	6,959,165
Extended Service-type warranties		2,044,417		2,301,156
Customized software and content		199,454		365,033
Installation and training		508,554		410,040
Design & Prototyping		1,145,751		1,446,908
STEP		1,974,429		1,939,159
Total consolidated	$	14,139,185	$	13,421,461
Revenue	$	14,139,185	$	13,421,461

Depreciation and amortization
Simulators and accessories	$	238,346	$	102,346
Extended Service-type warranties		-		7,664
Customized software and content		498		1,581
Installation and training		-		1,585
Design & Prototyping		44,281		32,202
STEP		259,997		230,972
Corporate		286,718		148,230
Total consolidated	$	829,840	$	524,580
Depreciation and amortization	$	829,840	$	524,580

F-9

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Segment income (loss)
Simulators and accessories	$	5,324,460		$	4,545,259
Extended Service-type warranties		2,180,509			2,932,119
Customized software and content		414,746			365,033
Installation and training		93,279			51,602
Design & Prototyping		281,930			1,053,645
STEP		1,714,433			1,291,121
Corporate		(8,569,982	)		(8,569,856	)
Total	$	1,439,375		$	1,668,923
Segment income (loss)	$	1,439,375		$	1,668,923

Expenditures for segment assets
Simulators and accessories	$	464,643	$	1,354,793
Extended Service-type warranties		-		-
Customized software and content		2,265,489		-
Installation and training		-		-
Design & Prototyping		-		-
STEP		460,005		150,392
Corporate purchases		27,137		12,187
Expenditures for segment assets	$	3,217,274	$	1,517,372

Segment assets
Simulators and accessories	$	23,417,010	$	26,238,698
Extended Service-type warranties		-		-
Customized software and content		365,638		466,778
Installation and training		-		-
Design & Prototyping		248,548		275,184
STEP		1,139,339		986,717
Corporate Assets		42,199,436		36,797,222
Segment assets	$	67,369,972	$	64,764,599

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 both current and long-term liabilities under deferred revenue on the accompanying balance sheet. asAs of ~~March~~June 3130, 2025, there was $34,~~853~~295,~~491~~ 680 in current and 18$39,~~258~~115 in long -term. On December 31, 2024, there was only a current liability totaling $3,755,187. Changes in deferred revenue amounts related to customer deposits will fluctuate from year to year based upon the mix of customers ~~required~~ 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 $2,~~382~~716,~~139~~263 and $2,600,129 onas ~~March~~of 31June 30, 2025, and December 31, 2024, respectively. Deferred revenue for separately priced extended warranties longer than one year totaled $2,~~056~~342,~~653~~730 and $2,207,950 onas ~~March~~of 31June 30, 2025, and December 31, 2024, respectively. The accrual for the one-year manufacturer’s warranty liability totaled $~~224~~227,000 and $212,000 onas ~~March~~of 31June 30, 2025, and December 31, 2024, respectively. During the ~~three~~ six months ended ~~March~~June 3130, 2025, and 2024, the Company recognized revenue of $~~970~~2,~~111~~044,417 and $~~875~~2,~~005~~301,156, respectively, related to the extended service-type warranties that were 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-10

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

STEP Revenue

The Company’s STEP operations consist principally of leasing its simulator products under operating agreements expiring in one year. At the commencement of a STEP agreement, any lease payments received are deferred and no income is recognized. Subsequently, payments are amortized and recognized as revenue on a straight-line basis over the term of the agreement. The agreements are generally for a period of 12 months and can be renewed for an additional 12-month period up to two additional 12-month period maximum of 36-months for the ~~entire~~ entire agreement. This is a change from prior years which allowed for renewals up to 48 months for a total of 60 months. Agreements may be terminated by either party upon written notice of termination at least ~~sixty~~60 days prior to the end of the 12-month period. The payments are generally fixed for the first year of the agreement, with increases in payments in subsequent years to be mutually agreed upon. The ~~agreements~~ agreements do not include variable lease payments or free rent periods. In addition, the agreements do not provide for the underlying assets to be purchased at their fair market values at interim periods or at maturity. Each STEP agreement comes with full customer support ~~and~~ and stand-ready advance replacement parts to maintain each system for the duration of the lease. The amount that the Company expects to derive from the STEP equipment following the end of the agreement term is dependent upon the number of agreement terms renewed. The ~~agreements~~ agreements do not include a residual value guarantee. Management notes with the 4-year history of providing this service and additional revenue stream, the Company has only had cancellation of a total of 89 STEP agreements before the 5-year end date of the contract, ~~this~~which equates to less than 5% of all agreements.

Concentration of Credit Risk and Major Customers and Suppliers

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, certificates of deposit, and accounts receivable.

The Company’s cash, cash equivalents and certificates of deposit are maintained with financial institutions with high credit standings and are FDIC insured deposits. The FDIC insures deposits according to the ownership category in which the funds are insured and how the accounts are titled. The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. The Company had uninsured cash and cash equivalents of $1720,~~112~~197,~~626~~354 and $17,540,827 as of ~~March~~June 3130, 2025, and December 31, 2024, respectively.

F-9

VIRTRA, INC.NOTES TO FINANCIAL STATEMENTS(Unaudited)

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 estimated losses. Historically, the Company has experienced minimal charges relative to doubtful accounts.

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

As of ~~March~~June 3130, 2025, the Company had 3two customers that accounted for 1131%, ~~13%,~~ and 2513% respectively, of total accounts receivable. As of ~~December~~ December 31, 2024, the Company had two customers that accounted for 28% and 13% of total accounts receivable.

~~For~~As ~~the~~of ~~three~~June ~~months ended March 31~~30, 2025 ~~and 2024~~, the Company had ~~one~~two ~~customer~~suppliers ~~accounting~~that accounted for 1429% and 17% of the total ~~revenue~~accounts ~~and another accounting for 10%~~payable.

For the six months ended June 30, 2025, the Company had one customer that accounted for 13% of total revenue and for six months ended June 30, 2024, the Company had 2 customers that accounted for 14% and 12% of total revenue.

F-11

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Net Income per Common Share

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

Schedule of Earnings Per Share

		Three Months End March 31
	2025		2024
		2025		2024
	Three Months Ended June 30
				(restated)
	2025		2024
Net Income	$	1175,~~264,060~~314	$	~~468~~1,~~196~~200,727
Weighted average common stock outstanding		11,~~162~~261,~~037~~588		1011,~~959~~063,~~298~~366
Incremental shares from stock options		-		12,~~890~~500
Weighted average common stock outstanding, diluted		11,~~162~~261,~~037~~588		1011,~~961~~065,~~188~~866
Net Income per common share and common equivalent share
Basic	$	0.1102	$	0.0411
Diluted	$	0.1102	$	0.0411

	2025		2024
	Six Months Ended June 30
	2025		2024
Net Income	$	1,439,375	$	1,668,923
Weighted average common stock outstanding		11,260,902		10,885,964
Incremental shares from stock options		-		-
Weighted average common stock outstanding, diluted		11,260,902		10,885,964

Net Income per common share and common equivalent share
Basic	$	0.13	$	0.15
Diluted	$	0.13	$	0.15

Note 2. Inventory

Inventory consisted of the following as of:

Schedule of Inventory

	March 31, 2025			December 31, 2024
	June 30, 2025			December 31, 2024
Raw materials, WIP, finished goods and materials being inspected	$	15,474,862		$	15,070,771
Raw materials, WIP, finished goods and Materials being inspected	$	13,294,104		$	15,070,771
Reserve		(487,371	)		(487,371	)
Total Inventory	$	1412,~~987~~806,~~491~~733		$	14,583,400

The Company regularly evaluates the useful life of its spare parts inventory but did not have any cause to reclassify any this quarter.

F-12

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note 3. Property and Equipment

Property and equipment consisted of the following as of:

Schedule of Property and Equipment

		March 31, 2025			December 31, 2024
	June 30, 2025			December 31, 2024
Land	$	1,778,987		$	1,778,987
Building & building improvements		11,523,813			11,523,813
Building & Building Improvements		11,544,847			11,523,813
Computer equipment		1,~~301~~303,~~700~~864			1,301,700
Furniture and office equipment		349,669			349,669
Machinery and equipment		4,~~381~~833,~~623~~395			4,368,752
STEP equipment		23,~~973~~021,~~335~~780			2,561,775
Leasehold improvements		340,703			336,763
Total property and equipment		22,649,830			22,221,459
Construction in Progress		44,666			-
Less: Accumulated depreciation and amortization		(6,331,215	)		(6,016,796	)
Total property and equipment		23,217,911			22,221,459
Property and equipment, net	$	16,318,615		$	16,204,663
Less: Accumulated depreciation and amortization		(6,766,678	)		(6,016,796	)
Property and equipment, net	$	16,451,233		$	16,204,663

Depreciation expenses, including STEP depreciation, were $~~314~~749,~~418~~879 and $~~234~~520,~~324~~633 for the ~~three~~six months ended ~~March~~June 3130, 2025, and 2024, respectively.

F-10

VIRTRA, INC.NOTES TO FINANCIAL STATEMENTS(Unaudited)

Note 4. Intangible Assets

Intangible asset consisted of the following as of:

Schedule of Intangible Assets

	March 31, 2025			December 31, 2024
	June 30, 2025			December 31, 2024
Patents	$	160,000		$	160,000
Capitalized media content		451,244			451,244
Acquired lease intangible assets		-			-
Capitalized Software		2,265,489			-
Total intangible assets		~~611~~2,~~244~~876,733			611,244
Less accumulated amortization		(54132,~~815~~553	)		(52,593	)
Intangible assets, net	$	~~556~~2,~~429~~744,180		$	558,651

Amortization ~~expense~~expenses ~~was~~were $280,~~222~~453 and $24,~~222~~936 for the ~~three~~six months ended ~~March~~June 3130, 2025, and 2024, respectively. In the second quarter, the Company reclassified capitalized software development costs associated with V-XR from work in progress to an intangible asset upon the sale and delivery of the initial unit. The asset is being amortized over five years, reflecting its estimated useful life as determined through comprehensive evaluation.

F-13

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note 5. Leases

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~~its machine shop at 2169 East 5th St., Tempe, Arizona 85284. In April 2019, the Company relocated the machine shop from the 5th St. location to 7910 South Kyrene Road, located within the same business complex as its ~~main~~head 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 30, 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.

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 ~~judgment~~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~~ 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-11~~Based on the requirements to move and leave the building in compliance with the company’s lease term, VirTra chose to use the holdover option in the lease agreement for the period of one additional month. The cost of this was split with the subtenant, this extended the lease through May 31, 2024, at which time VirTra entirely vacated the property.

~~VIRTRA~~The balance sheet classification of lease assets and liabilities as of June 30, ~~INC.NOTES~~2025, TOare ~~FINANCIAL~~as ~~STATEMENTS(Unaudited)~~follows:

Balance Sheet Classification	~~March~~June 3130, 2025			December 31, 2024
Assets
Operating lease right-of-use assets, December 31, 2024	$	437,095		$	716,687
Amortization for the three months ended March 31, 2025		(41,864	)		(279,592	)
Operating lease right-of-use assets	$	437,095		$	716,687
Total operating lease right-of-use asset, March 31, 2025	$	395,231		$	437,095
Amortization for the six months ended June 30, 2025		(84,365	)		(279,592	)
Amortization		(84,365	)		(279,592	)
Total operating lease right-of-use asset, Jun 30, 2025	$	352,730		$	437,095
Total operating lease right-of-use asset	$	352,730		$	437,095
Liabilities
Current
Operating lease liability, short-term	$	~~192~~194,~~669~~917		$	192,410
Non-current
Operating lease liability, long-term		~~221~~174,~~628~~696			265,111
Total lease liabilities	$	~~414~~369,~~297~~613		$	457,~~520~~521

~~Future minimum lease payments as of March 31, 2025, under non~~F-~~cancellable operating leases are as follows:~~14

VIRTRA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Future minimum lease payments as of June 30, 2025, under non-cancellable operating leases are as follows:

2025	$	144,204
NON-Cancelable operating leases
2026		196,311
2025	$	97,634
2026		196,664
2027		99,382
Total Lease Payments		~~439~~393,~~897~~680
Less: imputed interest		(2524,~~600~~067	)
Operating Lease Liability	$	~~414~~369,~~297~~613

Rent expenses for the ~~three~~six months ended ~~March~~June 3130, 2025, and 2024 were $4793,~~205~~624 and $~~204~~335,~~235~~316, respectively.

Note 6. Accrued Expenses

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

		March 31, 2025		December 31,2024
	June 30, 2025		December 31, 2024
Salaries and wages payable	$	~~248~~451,~~283~~151	$	545,592
Employee benefits payable		5435,~~099~~890		34,125
Accrued paid time off (PTO)		~~332~~331,~~701~~909		322,406
Profit sharing payable		~~458~~186,~~970~~671		351,421
Total accrued compensation and related costs	$	1,~~094~~005,~~053~~621	$	1,253,544

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

	March 31, 2025		December 31, 2024
	June 30, 2025		December 31, 2024
Manufacturer’s warranties	$	~~224~~227,000	$	212,000
Taxes payable		~~637~~142,~~583~~972		-
Miscellaneous payable		~~145~~184,~~008~~034		445,114
Total accrued expenses and other current liabilities	$	1554,006~~,591~~	$	657,114

VirTra settled a lease dispute on the Kyrene Property (signed in 2018) in February 2025. The entire expense was recorded in the 2024 financial statements, but the cash payout was not completed inuntil February of 2025.

Note 7. ~~Notes~~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.

F-1215

VIRTRA, INC.~~NOTES TO FINANCIAL STATEMENTS(Unaudited)~~

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note payable amounts consist of the following:

Schedule of Notes Payable

	March 31, 2025		December 31, 2024
	June 30, 2025		December 31, 2024
Short-term liabilities
Note payable, principal	$	~~217~~216,~~877~~922	$	218,890
Accrued interest to date		10,~~575~~927		11,897
Note Payable, short-term	$	~~228~~227,~~452~~849	$	230,787
Long-term liabilities
Note payable, principal	$	7,~~504~~441,~~157~~512	$	7,567,536
Note payable, long term	$	7,~~504~~441,~~157~~512	$	7,567,536

Note 8. Related Party Transactions

None.

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 or threatened litigation at this time. ~~The Company settled a lease dispute on the Kyrene property (signed in 2018) in February 2025. See Note 6.~~

Restricted Stock Unit Grants

~~There~~During ~~were~~the nothree ~~awards~~months ended June 30, 2025, an employee was granted 1,379 shares of ~~Restricted~~common ~~Stock~~stock ~~units~~pursuant ~~during~~to the ~~three~~vesting ~~months~~of ~~ending~~a ~~March~~Restricted ~~31,~~Stock Unit ~~2025~~grant.

Profit Sharing

VirTra provides a discretionary profit-sharing program that pays out a percentage of Company profits each year as a cash bonus to eligible employees. The cash payment is typically split into two equal payments and distributed pro-rata in April and October of the following year to only active employees. For the ~~three~~six months ended ~~March~~June 3130, 2025, and 2024, $~~107~~(65,~~549~~182) was credited to operations to account for a true up to actual net income and $~~163~~313,500 was expensed to operations for profit sharing.

Note 10. Stockholders’ Equity

Common stock activity

During the ~~three~~six months ended ~~March~~June 3130, 2025, the Company settled restricted stock units that had been granted to a ~~director~~Vice President by issuing him 4 1,~~500~~379 shares.

Note 11. Subsequent Events

None

F-1316

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 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, 2024 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2025.

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

Business Overview

VirTra, Inc. (the “Company,” “VirTra,” “we,” “us” and “our”) is a global provider of judgmental use of force training ~~simulators,~~simulator and firearms training simulators ~~and driving simulators~~ for the law enforcement, military, educational and commercial 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 VirTra firearms training simulator allows marksmanship and realistic scenario-based training to take place daily without the need for a shooting range, protective equipment, role players, safety officers, or a scenario-based training site. We have developed a higher standard in simulation training including capabilities such as: multi-screen, video-based scenarios, unique scenario authoring ability, superior training scenarios, the patented 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 have two main customer groups, law enforcement and military with a plan to expand our product into the complementary markets of hospitals and private security. Our focus is to expand the market share and scope of our training simulators sales to these identified customer groups by pursuing the following key growth strategies:

● Build Our Core Business. Our goal is to profitably grow our market share by continuing to develop, produce and market the most effective simulators possible. Through disciplined growth in our business, we have achieved a solid balance sheet by increasing our working capital and limiting our bank debt. We plan to add staff to our experienced management team as needed to meet the expected increase in demand for our products and services as we increase our marketing and sales activities. ● Increase Total Addressable Market. We plan to increase the size of our total addressable market. This effort will focus on new marketing and new product and/or service offerings for the purpose of widening the number of types of customers who might consider our products or services uniquely compelling. ● Broaden Product Offerings. Since 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.

	●	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 in benefit for both our company and our stockholders.

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 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 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.

○ The V-ST PRO™ a highly realistic single screen firearms shooting and skills training simulator with the ability to scale to multiple screens creating superior training environments. The 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.

○

The V-ST PRO™ a highly realistic single screen firearms shooting and skills training simulator with the ability to scale to multiple screens creating superior training environments. The 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.

	●	VirTra’s Red Dot Optic Training, a 4-hour nationally-certified course developed with Victory First and Aimpoint, equips law enforcement officers with the skills to transition from iron sights to pistol-mounted red dot sights through 21 practical drills. Part of the V-VICTA program, it enhances accuracy and target acquisition while addressing optic failures, offered free to VirTra customers with an annual service agreement

	●	Subscription Training Equipment Partnership (STEP)™ is a program that allows agencies to utilize VirTra’s simulator products, accessories, and V-VICTA interactive coursework on a subscription basis.

	●	V-Author^®proprietary software allows users to create, edit, and train with content specific to the agency’s objectives and environments. V-Author is an easy-to-use application capable of almost unlimited custom scenarios, skill drills, targeting exercises, and firearms courses of fire. It also allows panoramic photos of any local location so users can train in their actual reality.

	●	Simulated Recoil Kits - a wide range of highly realistic and reliable simulated recoil kits/weapons made in the USA. VirTra’s True-Fire® recoil kits do not allow for faulty extra shots. Recoil kits use either CO2 or HPA greatly reducing the need for costly ammunition.

	●	Return Fire Device – the patented Threat-Fire® device applies real-world stress on the trainees during simulation training. Stress inoculation is a key component of training exercises. VirTra holds a patent for electronic simulation in simulation making the pairing of the device and the simulators a sourced item.

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

	●	V-XR is an extended reality headset-based training solution. It comes ready to use out of the box with two headsets, a trainer tablet, charging stations, a router, a casting device, and cables in a portable hard case, with a 3-year manufacturer’s warranty.

Results of operations for the three and six months ended ~~March~~June 3130, 2025, and ~~March~~June 3130, 2024

Revenues. Net sales were $76,~~160~~978,~~247~~938 for the three months ended ~~March~~June 3130, 2025, compared to $6,075,040 for the ~~restated~~same period in 2024, an increase of $7903,~~346~~898 or 15%. Net sales were $14,139,185 for the six months ended June 30, 2025, compared to $13,421,461 for the same period in in 2024, aan ~~decrease~~increase of $~~186~~717,~~174~~724 or 35%. The ~~decrease~~increase in revenue iscan ~~due~~be attributed to a ~~number~~more ofdifficult ~~customers~~Q2 ~~from~~in ~~our~~2024 ~~4th~~than ~~quarter~~a ~~bookings~~successful 2025. ~~that~~We ~~were~~are ~~not~~still ~~able~~struggling towith ~~accept~~a ~~delivery~~lack of bookings in ~~the~~Q1 ~~first~~and ~~quarter.~~Q2 Athat ~~large~~could ~~portion~~be ofconverted ~~the~~to ~~2024~~revenue, ~~backlog~~along ~~will~~with ~~convert~~many tobookings ~~revenue~~from ~~throughout~~2024 ~~the~~for ~~2025~~which ~~year~~customers have requested delayed deliveries.

Cost of Sales. Cost of sales ~~was~~were $12,~~963~~166,~~367~~461 for the three months ended ~~March~~June 3130, 2025, compared to $2550,~~632,257~~424 for the same period in in 2024, aan ~~decrease~~increase of $~~668~~1,~~890~~616,037 or 25294%. ~~This~~Cost ~~decrease~~of sales were $4,129,828 for the six months ended June 30, 2025, compared to $3,182,682 for the same period in ~~cost~~2024 or an increase of ~~sales~~947,146 ~~reflected~~or ~~our~~30%. ~~ability~~The todollar ~~streamline~~increase ~~our~~from ~~operations~~2024 to ~~help~~2025 ~~increase~~correlates to a reclassification of COGS labor related to our ~~margin~~development projects in 2024 that as an outlier lowered the COGS, whereas in 2025 we had normal COGS expense associated with such revenue.

Gross Profit. Gross profit was $54,~~196~~812,~~880~~477 for the three months ended ~~March~~June 3130, 2025, compared to $45,~~714~~524,~~164~~616 for the same period in 2024, ana ~~increase~~decrease of $~~482~~712,~~716~~139, or 13%. Gross profit was $10,009,357 for the six months ended June 30, 2025, compared to $10,238,779 for the same period in 2024, a decrease of $229,422, or 2%. The gross profit margin for the three months ended ~~March~~June 3130, 2025 and 2024 was 7369% and 6491%, respectively. ~~This~~ ~~increase~~The ingross profit margin for the six months ended June 30, 2025 and 2024 was 71% and 76%, respectively. This decline is solely driven by the ~~decrease~~increase in ~~cost~~Cost of ~~sales~~Sales as stated above.

Operating Expenses. Net operating expense was $3,~~829~~898,~~077~~111 for the three months ended ~~March~~June 3130, 2025, compared to $4,~~063~~393,~~802~~195 for the same period in 2024, a decrease of $~~234~~495,~~725~~084, or 611%. ~~This~~Net ~~decrease~~operating isexpense ~~occurring~~was ~~because~~$7,727,188 offor ~~our~~the ~~drive~~six months ended June 30, 2025, compared to ~~maintain~~$8,456,997 for the same period in 2024, a decrease of $729,809, or ~~lower~~9%. ~~our~~This ~~overhead~~decrease ~~costs~~comes from the Company’s efforts to lower ~~this~~overhead ~~year~~and operating costs as we navigate ~~the~~an ~~challenges~~increasingly ~~that~~difficult ~~will~~funding ~~come~~environment ~~with~~for ~~the~~our government ~~pauses in contracts~~customers.

Operating Income. Operating income was $1914,~~367,803~~366 for the three months ended ~~March~~June 3130, 2025, compared to ~~operating income of~~ $~~650~~1,~~362~~131,421 for the same period in 2024, an ~~increase~~a decrease of ~~717~~$217,~~441~~055 or ~~110~~19%. ~~This~~Operating ~~year~~income ~~over~~was ~~year~~$2,282,169 ~~increase~~for isthe ~~attributed~~six tomonths ~~our~~ended ~~savings~~June in30, ~~cost~~2025, ofcompared ~~goods~~to ~~and~~$1,781,782 ~~operating~~for the ~~expenses~~same ~~while maintaining~~period ~~close~~in ~~revenues~~2024, ~~results~~an increase of $500,387 or 28%.

Other ~~Income~~Expense. Other ~~expense~~income net of other ~~income~~expense was $1(748,~~743~~052) for the three months ended ~~March~~June 3130, 2025, compared to net other income of $~~329~~156,~~271~~870 for the same period in 2024, a decrease of $~~331~~904,~~014~~922, or ~~101~~577%, primarily ~~because~~from wegain/loss noon ~~longer~~foreign ~~have~~exchange adue ~~sublessee~~to ~~paying~~large ~~rental~~Canadian orders paying invoices. Other expense was $(749,794) for the six months ended June 30, 2025, compared to net other income of $486,141 for the same period in ~~2025~~2024, a decrease of $1,235,935, or 254%, primarily from gain/loss on foreign exchange.

Provision (Benefit) for Income Tax. Provision for income tax was $~~102~~9,000 for the three months ended ~~March~~June 3130, 2025, compared to $~~511~~87,~~437~~564 for the same period in 2024, a decrease of $96,564, or 110%. Provision for income tax was $93,000 for the six months ended June 30, 2025, compared to $599,000 for the same period in 2024, a decrease of $~~409~~506,~~437~~000, or 8084%. ~~Provision~~The provision for income tax is estimated quarterly applying both federal and state tax rates.

Net Income. Net income was $1175,~~264,060~~314 for the three months ended ~~March~~June 3130, 2025, compared to $1,200,727 for the same period in 2024, a ~~restated~~decrease ~~net~~of $1,025,413 or 85%. Net income ofwas $~~468~~1,~~196~~439,375 for the ~~same~~six months ended June 30, 2025, compared to $1,668,923 for the same period in 2024, ana ~~increase~~decrease of $~~795~~229,~~864~~548 or ~~170~~14%. The ~~fluctuation~~fluctuations in net income ~~relates~~relate to each respective section discussed above.

Adjusted Earnings Before Interest, Taxes, Depreciation and 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 accounting principles generally accepted in the United States of America (“GAAP”). Adjusted EBITDA should not be considered as an alternative for net income (loss), cash flows from operating activities and other income or cash flow statement data prepared in accordance with GAAP or as a measure of profitability or liquidity. A reconciliation of net loss to adjusted EBITDA is provided in the following table:

	For the Three Months Ended
	March 31,			March 31,		Increase			%
	2025			2024 (restated)		(Decrease)			Change
Net Income (Loss)	$	1,264,060		$	468,196	$	795,864			170	%
Adjustments:
Provision for income taxes		102,000			511,437		(409,437	)		(80	)%
Depreciation and amortization		316,640			236,547		80,093			34	%
Interest (net)		(21,251	)		54,575		75,826			139	%
EBITDA		1,661,449			1,270,755		390,694			31	%
Right of use amortization		41,864			127,893		(86,029	)		(67	)%
Adjusted EBITDA	$	1,703,313		$	1,398,648	$	304,665			22	%

Liquidity and Capital Resources. Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. The Company had $17,612,626 and $18,040,827 of cash and cash equivalents as of March 31 2025, and December 31, 2024, respectively. Working capital was $35,257,860 and $34,826,680 as of March 31, 2025, and December 31, 2024, respectively.

	For the Three Months Ended												For the Six Months Ended
													(Restated)
	June 30,			June 30,			Increase			%			June 30,			June 30,			Increase			%
	2025			2024			(Decrease)			Change			2025			2024			(Decrease)			Change

Net Income (Loss)	$	175,314		$	1,200,727		$	(1,025,413	)		-85	%	$	1,439,375		$	1,668,923		$	(229,548	)		-14	%
Adjustments:
Provision for income taxes		(9,000	)		87,564		$	(96,564	)		-110	%		93,000			599,000		$	(506,000	)		-84	%
Depreciation and amortization		513,693			288,777		$	224,916			310	%		830,333			525,570		$	304,763			186	%
Interest (net)		(26,876	)		(34,379	)	$	7,503			-22	%		(48,127	)		(88,957	)	$	40,830			-46	%
EBITDA	$	653,131		$	1,542,689		$	(889,558	)		-14	%	$	2,314581		$	2,704,536		$	281,038	)		-10	%
Right of use amortization		42,501			69,418		$	(26,917	)					84,365			199,493			(389,955	)

Adjusted EBITDA	$	695,632		$	1,612,107		$	(916,475	)		-57	%	$	2,398,946		$	2,904,029		$	(505,083	)		3	%

~~Net~~Liquidity ~~cash provided by operating activities was $65,691~~ and ~~$5,136,509~~Capital ~~for~~Resources the three months ended March 31, 2025 and 2024, respectively. Net cash provided by operating activities resulted primarily from an increase in accounts receivable and inventory, offset by decreased unbilled revenue and increased accounts payable.

~~Net~~Liquidity ~~cash~~is ~~used~~an inenterprise’s ~~investing~~ability ~~activities~~to ~~was~~generate ~~$428,371~~enough cash to meet its needs for ~~the~~cash ~~three~~requirements. ~~months~~The ~~ended~~Company ~~March~~had 31$20, ~~2025~~697,354 ~~compared~~and to$18,040,827 of ~~net~~ cash ~~used~~and incash ~~investing~~equivalents ~~activities~~ as of $1June 30,~~546,772~~ ~~for~~2025 ~~the~~and ~~three~~December ~~months ended March~~ 31, 2024, respectively. ~~Investing~~Working ~~activities~~capital inwas ~~2025~~$34,120,441 and ~~2024~~$34,826,680 as ~~consisted~~ of ~~purchases~~June of30, ~~property~~2025 and ~~equipment~~ December 31, 2024, respectively.

Net cash ~~used~~provided inby ~~financing~~operating activities was $656,~~521~~044,492 and $1,268,224 for the ~~three~~six months ended ~~March~~June 3130, 2025, ~~compared~~and ~~to $24~~2024,~~402~~ ~~used~~respectively. ~~in the three~~Net ~~months~~cash ~~ended~~provided ~~March~~by ~~31,~~operating ~~2024.~~activities Inresulted ~~both~~primarily ~~periods,~~from ~~cash~~the ~~was~~net ~~used~~income ~~primarily~~ for ~~principal~~both ~~payment~~periods ofand ~~debt.~~the Indecrease ~~2024,~~in ~~this~~accounts ~~was also offset~~receivable byas ~~the proceeds from the issuance of stock options which~~ we nohave ~~longer~~improved ~~have~~collection efforts.

Net cash used in investing activities was $3,261,941 for the six months ended June 30, 2025, compared to net cash used in investing activities of $1,608,798 for the comparable 2024 period. Investing activities in 2025 and 2024 consisted of converting the V-XR software development to an intangible asset valued at approximately $2.2 million.

Net cash used in financing activities was $126,024 for the six months ended June 30, 2025, compared to $97,634 used for the six months ended June 30, 2024. In both periods, cash was used primarily for principal payment of debt. In 2024, this was also offset by the proceeds from the issuance of stock options, which we no longer have in 2025.

Bookings and Backlog

The Company defines bookings as the total of newly signed contracts, awarded RFP’s and purchase orders received in a defined time period. The Company received bookings totaling $6.4.6 million for the three months ended ~~March~~and 31$11 million for the six month ending June 30, 2025. The Company has made one change to the booking qualifications in ~~4th~~the Qfourth quarter of 2024. We have strengthened the language in the STEP contract Terms and Conditions to guarantee the agreement for the full three-year term. This change secures future revenue and lowers our risk of unsigned or cancelled contracts. Since the change was only made in Q4the fourth quarter of 2024, we still estimate that there are approximately $54 million in renewable STEP contract options still outstanding. Based on current renewal rates, the Company believes 95% of those options will be exercised.

The Company defines backlog as the accumulation of bookings from signed contracts and purchase orders that are not started, or have uncompleted performance objectives, and cannot be recognized as revenue until delivered in a future quarter. The Company splits the backlog into three categories. The first is capital which includes sales of all the simulators, corresponding accessories, installs, training custom content and custom design work. The second and third are extended warranty agreements and STEP agreements that are deferred revenue recognized on a straight-line basis over the life of each respective agreement. As of ~~March~~June 3130, 2025, the Company’s backlog was $2118.28 million, consisting of $97.91 million in Capital, $5.87 million in Service and $~~5.5~~6 million in STEP.

Management estimates that most new capital bookings received in the first quarter of 2025 will be converted to revenue in 2025. Management recognizes that there are a percentage of capital contracts that will extend into 2026 by request of the customers. Management’s estimate for the conversion of backlog is based on current contract delivery dates; however, contract terms and install dates are subject to modification and are routinely changed at the request of the customer or due to factors outside the Company’s control.

With a new federal administration in place at the beginning of 2025, it is unknown what impact that will have on our bookings for the remainder of 2025. Budget cuts have been discussed and we have seen some grants and other federal funding frozen for most of the first quarter, but nothing definitive has occurred as of the date of this report.

Cash Requirements

Our management believes that our current capital resources will be adequate to continue operating our Company and maintaining our current business strategy for more than 12 months from the filing of this Quarterly Report. We are, however, open to raising additional funds from the capital markets, at a fair valuation, to purchase a business or assets, expand our production capacity, expand our product and services, 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, when it is needed, we will be forced to scale down our plans for expanded marketing and sales efforts.

Management estimates that most new capital bookings received in the second quarter of 2025 will be converted to revenue in 2025. Management recognizes that there are a percentage of capital contracts that will extend into 2026 by request of the customers. Management’s estimate for the conversion of backlog is based on current contract delivery dates; however, contract terms and install dates are subject to modification and are routinely changed at the request of the customer or due to factors outside the Company’s control.

With a new federal administration in place at the beginning of 2025, it is unknown what impact that will have on our bookings for the remainder of 2025. Budget cuts have been discussed and we have seen some grants and other federal funding frozen for most of the first and second quarter, but nothing definitive has occurred as of the date of this report.

Cash Requirements

Our management believes that our current capital resources will be adequate to continue operating the company and maintaining our current business strategy for more than 12 months from the filing of this Quarterly Report. We are, however, open to 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 and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our unaudited financial statements, which have been prepared in accordance with GAAP. The preparation of our unaudited financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of 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, the carrying value of cost basis 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 amounts could differ significantly from amounts previously estimated. For a discussion of our critical accounting policies, refer to Part I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024. Management believes ~~that~~ there have been no changes in our critical accounting policies during the three months ended ~~March~~June 3130, 2025.

Recent Accounting Pronouncements

See Note 1 to our financial statements, included in Part I, Item 1., Financial Information of this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

As of ~~March~~June 3130, 2025, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future ~~effect~~ 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 ~~guaranteed~~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.

Not required for smaller reporting companies.

ITEM 4. CONTROLS AND 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 and 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 ~~March~~June 3130, 2025, our disclosure controls and procedures were not effective. The ineffectiveness of 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 year ended December 31, 2024, filed with the SEC on March 27, 2025. These weaknesses were (i) lack of multiple levels of management review on complex business, accounting, and financial reporting issues and (ii) failure to implement adequate system and manual controls. As noted in the 10-K, report, until such time as we expand our staff to include additional accounting and executive personnel and accounting systems and procedures, it is likely the first material weakness will continue. With respect to the second material weakness, our Board of Directors has directed management to implement more effective system and manual controls and this process is currently underway.

Change in internal control over financial reporting

There has been no change in our internal control over financial reporting that occurred during the quarterly period ended ~~March~~June 3130, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, during the quarter ended ~~March~~June 3130, 2025, and continuing ~~through~~into 2025, we are implementing more formal review and documentation of workflow processes and ~~increased~~increasing 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 II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There is no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we are a party or of which any of our property is the subject.

ITEM 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

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, 2024.

	(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, 2024.

	(c)	None.

ITEM 6. EXHIBITS

Exhibit No.		Exhibit Description
31.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of the Principal Executive ~~Officers~~Officer 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 Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

910

SIGNATURES

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

	VIRTRA, INC.
Date: May 12, 2025	By:	/s/ John F. Givens II
Date: August 11, 2025	By:	/s/ John F. Givens II
		John F. Givens II
		Chief Executive Officer
		(principal executive officer)
	By:	/s/ Alanna Boudreau
		Chief Financial Officer
		(principal financial officer)

1011

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