GlobeNewswire Inc | Nov 10, 2020 04:05PM EST

November 10, 2020

TEMPE, Ariz., Nov. 10, 2020 (GLOBE NEWSWIRE) -- VirTra, Inc. (NASDAQVTSI) (VirTra), a global provider of training simulators for the law enforcement, military, educational and commercial markets, reported results for the third quarter and nine months ended September 30, 2020. The financial statements are available on VirTras website andhere.

Third Quarter2020and Recent Highlights:

-- Awarded $1.9 million IDIQ (indefinite delivery/indefinite quantity) contract to develop training content in support of the Air Force Research Laboratorys Airman Decision Making and Interface Research (ADMIRE) program as a result of recent partnership with Infoscitex (IST) -- Received $1.5 million order from the U.S. Department of Homeland Securitys Federal Law Enforcement Training Centers (FLETC), which will result in VirTras simulators being installed at all four of FLETCs training centers by December 2020 -- Received $863,000 order from U.S. Customs and Border Protection (CBP) for simulation training products and services, including new, drop-in recoil kits -- Appointed military simulation training expert, John Givens, to the Companys board of directors to fill the vacancy left by Mitchell Saltzs passing -- Backlog increased to a record $14.4 million as of September 30, 2020

Third Quarter and Nine Month2020 Financial Highlights:

All figures in millions, except per Q3 Q3 % ? YTD YTD % ?share data 2020 2019 2020 2019Total Revenue $6.4 $6.7 -4% $12.5 $12.8 -2% Gross Profit $4.0 $3.8 6% $7.1 $7.1 1%Gross Margin 61.9% 55.9% 11% 57.0% 55.2% 3% Net Income/Loss $0.9 $0.9 -7% ($0.1) ($0.0) N/ADiluted EPS $0.11 $0.12 -8% ($0.02) ($0.00) N/A

Management Commentary

Despite our sales and installation teams facing the inherent challenges of a pandemic, our talented staff adapted to changing circumstances to produce financial results for the third quarter that were essentially in-line with our near record performance last year and new sales that exceeded last years performance, said Bob Ferris, chairman and chief executive officer of VirTra. Financially, the quarter was highlighted by revenue of $6.4 million, net income of $0.9 million, which drove EPS of $0.11 and adjusted EBITDA of $1.6 million, and perhaps most impressive, a record backlog of $14.4 million. Operationally, we built upon our relationship with FLETC, a national leader in law enforcement training, and we expanded our footprint in the military market with the $1.9 million contract we received through our partnership with IST on the ADMIRE program for the benefit of the Department of Defense.

In 2019, we surged in the latter part of the year to deliver our 14th consecutive year of topline growth. While challenges to installations persist, the financial results of this quarter coupled with our increasing backlog demonstrate that, despite the unprecedented COVID-19 related headwinds, VirTra continues to effectively sell and service the essential needs of our customers. We are cautiously optimistic that, should the macro environment in the fourth quarter be similar to what it was in the third, we will deliver strong results for the rest of 2020.

Third Quarter 2020 Financial Results

Total revenue decreased 4% to $6.4 million from $6.7 million in the third quarter of 2019. The decrease in total revenue was due to reduced equipment installations due to COVID-19 travel restrictions.

Gross profit increased 6% to $4.0 million (61.9% of total revenue) from $3.8 million (55.9% of total revenue) in the third quarter of 2019. The increase in gross profit was primarily due to reduced direct material costs and travel costs resulting from reduced sales.

Operating expense was $2.7 million compared to $2.5 million in the third quarter of 2019. The increase in operating expense was mainly due to a $266,000 impairment in the investment in Thats Eatertainment Corp. (TEC) which was recorded as operating expense.

Operating income was $1.2 million compared to $1.2 million in the third quarter of 2019.

Net income totaled $868,000, or $0.11 per diluted share, compared to net income of $937,000, or $0.12 per diluted share, in the third quarter of 2019.

Adjusted EBITDA was $1.6 million compared to $1.4 in the third quarter of 2019.

Financial Results for the Nine Months Ended September 30, 2020

Total revenue was $12.5 million compared to $12.8 million in the first nine months of 2019. The change in total revenue was due to reduced equipment installations due to COVID-19 travel restrictions.

Gross profit was $7.1 million (57.0% of total revenue) compared to $7.1 million (55.2% of total revenue) in the first nine months of 2019. The slight increase in gross profit was primarily due to sales volume and product mix, which tends to remain fairly consistent as a percentage of total revenue when compared annually.

Operating expense was $7.3 million compared to $7.2 million in the first nine months of 2019. The increase in net operating expense was primarily due to a $406,000 impairment in the investment of TEC, which was recorded as operating expense and was offset by reduced selling, general, and administrative costs from COVID-19 restrictions on travel and tradeshows.

Loss from operations was $115,000 compared to a loss from operations of $94,000 in the first nine months of 2019.

Net loss totaled $123,000, or $(0.02) per diluted share, compared to net loss of $10,000, or $(0.00) per diluted share in the comparable period a year ago.

Adjusted EBITDA was $615,000 compared to adjusted EBITDA of $339,000 in the first nine months of 2019.

At September 30, 2020, backlog totaled approximately $14.4 million, a $3.1 million increase compared to backlog of $11.3 million as of September 30, 2019. Accounts receivable and unbilled revenues totaled approximately $6.2 million as of September 30, 2020, compared to $5.9 million at December 31, 2019, an increase of $325,000. Cash and cash equivalents totaled $4.1 million at September 30, 2020 compared to cash and cash equivalents and certificates of deposit of $3.3 million at December 31, 2019, an increase of $0.8 million.

Conference Call

VirTra management will hold a conference call today (November 10, 2020) at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results. VirTras chairman and CEO, Bob Ferris, and CFO, Judy Henry, will host the call, followed by a question and answer period.

U.S. dial-in number: 844-602-0380International number: 862-298-0970

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact VirTras IR team at 949-574-3860.

The conference call will be broadcast live and available for replay here and via the investor relations section of the companys website.

A replay of the conference call will be available after 7:30 p.m. Eastern time on the same day through November 24, 2020.

Toll-free replay number: 877-481-4010International replay number: 919-882-2331Replay ID: 38151

About VirTra

VirTra (NASDAQ: VTSI) is a global provider of judgmental use of force training simulators, firearms training simulators and driving simulators for the law enforcement, military, educational and commercial markets. The companys patented technologies, software, and scenarios provide intense training for de-escalation, judgmental use-of-force, marksmanship and related training that mimics real-world situations. VirTras mission is to save and improve lives worldwide through practical and highly effective virtual reality and simulator technology. Learn more about the company at www.VirTra.com.

About the Presentation of Adjusted EBITDA

Adjusted earnings before interest, income taxes, depreciation and amortization and before other non-operating costs and income (Adjusted EBITDA) is a non-GAAP financial measure. Adjusted EBITDA also includes non-cash stock option expense and other than temporary impairment loss on investments. Other companies may calculate Adjusted EBITDA differently. VirTra 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 VirTras investors regarding VirTras 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 VirTras industry, several of which present 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 VirTras 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, cash flows from operating activities and other consolidated income or cash flows statement data prepared in accordance with GAAP or as a measure of profitability or liquidity. A reconciliation of net income to Adjusted EBITDA is provided in the following tables:

Three Months Ended Nine Months Ended September September Increase % September September Increase % 30, 30, 30, 30, 2020 2019 (Decrease) Change 2020 2019 (Decrease) Change Net Income $ 868,084 $ 937,107 $ (69,023 ) -7 % $ (122,586 ) $ (9,526 ) $ (113,060 ) 1187 %(Loss) Adjustments: Provision for 354,941 347,787 7,154 2 % 40,467 23,539 16,928 72 % income taxes Depreciation and 95,259 77,259 18,000 23 % 274,866 222,471 52,395 24 % amortizationEBITDA $ 1,318,284 $ 1,362,153 $ (43,869 ) -3 % $ 192,747 $ 236,484 $ (43,737 ) -18 % Impairment loss on That?s 266,000 - 266,000 100 % 406,000 - 406,000 100 % Eatertainment, related party Reserve for note 9,461 - 9,461 100 % 220,997 102,473 118,524 116 % receivableAdjusted EBITDA $ 1,593,745 $ 1,362,153 $ 231,592 17 % $ 819,744 $ 338,957 $ 480,787 142 %

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, 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 document are made based on our current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, you should specifically consider various factors, uncertainties and risks that could affect our future results or operations. These factors, uncertainties and risks may cause our actual results to differ materially from any forward-looking statement set forth in the reports we file with or furnish to the Securities and Exchange Commission (the SEC). You should carefully consider these risk and uncertainties described and other information contained in the reports we file with or furnish to the SECbefore making any investment decision with respect to our securities. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

Investor Relations Contact:

Matt Glover or Charlie Schumacher VTSI@gatewayir.com949-574-3860

VirTra, Inc.Condensed Balance Sheets September 30, December 31, 2020 2019 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 4,097,484 $ 1,415,091 Certificates of deposit - 1,915,000 Accounts receivable, net 2,523,131 2,307,972 Interest receivable - 7,340 Inventory, net 3,441,764 1,949,414 Unbilled revenue 3,689,442 3,579,942 Prepaid expenses and other 461,612 353,975 current assets Total current assets 14,213,433 11,528,734 Long-term assets: Property and equipment, net 1,089,385 1,028,198 Operating lease right-of-use 1,169,876 1,390,873 asset, net Intangible assets, net 266,843 217,930 That?s Eatertainment note receivable, 285,288 291,110 long term, net, related party Security deposits, long-term 19,712 19,712 Other assets, long-term 332,990 351,236 Deferred tax asset, net 1,712,000 1,792,000 Investment in That?s 434,000 840,000 Eatertainment, related party Total long-term assets 5,310,094 5,931,059 Total assets $ 19,523,527 $ 17,459,793 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable $ 649,293 $ 621,127 Accrued compensation and 995,946 611,487 related costs Accrued expenses and other 557,891 334,751 current liabilities Note payable, current 601,696 - Operating lease liability, 315,476 297,244 short-term Deferred revenue, short-term 3,369,569 2,490,845 Total current liabilities 6,489,871 4,355,454 Long-term liabilities: Deferred revenue, long-term 1,321,857 1,748,257 Note payable, long-term 724,265 - Operating lease liability, 935,622 1,174,882 long-term Total long-term liabilities 2,981,744 2,923,139 Total liabilities 9,471,615 7,278,593 Commitments and contingencies (See Note 11) Stockholders? equity: Preferred stock $0.0001 par value; 2,500,000 authorized; no shares issued or outstanding - - Common stock $0.0001 par value; 50,000,000 shares authorized; 7,767,530 shares issued and outstanding as of September 778 775 30, 2020 and 7,745,030 shares issued and outstanding as of December 31, 2019 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 - - Additional paid-in capital 13,887,975 13,894,680 Accumulated deficit (3,836,841 ) (3,714,255 ) Total stockholders? equity 10,051,912 10,181,200 Total liabilities and $ 19,523,527 $ 17,459,793 stockholders? equity See accompanying notes to unaudited condensed financial statements.

VirTra, Inc. Condensed Statements of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, September September 30, September 30, 2020 30, 2019 2020 2019 Revenues: Net sales $ 6,395,356 $ 6,682,728 $ 12,472,106 $ 12,696,810 That?s Eatertainment royalties/ 16,005 28,561 45,247 100,993 licensing fees, related party Other royalties/ 2,360 2,120 4,310 21,257 licensing fees Total revenue 6,413,721 6,713,409 12,521,663 12,819,060 Cost of sales 2,446,455 2,957,865 5,381,403 5,748,001 Gross profit 3,967,266 3,755,544 7,140,260 7,071,059 Operating expenses: General and 2,250,348 2,127,422 6,050,798 6,074,213 administrative Research and 497,645 381,654 1,204,011 1,090,960 development Net operating 2,747,993 2,509,076 7,254,809 7,165,173 expense Income (loss) from 1,219,273 1,246,468 (114,549 ) (94,114 ) operations Other income (expense): Other income 7,067 38,426 45,359 114,158 Other expense (3,315 ) - (12,929 ) (6,031 ) Net other 3,752 38,426 32,430 108,127 income Income (loss) before 1,223,025 1,284,894 (82,119 ) 14,013 provision for income taxes Provision for 354,941 347,787 40,467 23,539 income taxes Net income $ 868,084 $ 937,107 $ (122,586 ) $ (9,526 ) (loss) Net income (loss) per common share: Basic $ 0.11 $ 0.12 $ (0.02 ) $ (0.00 ) Diluted $ 0.11 $ 0.12 $ (0.02 ) $ (0.00 ) Weighted average shares outstanding: Basic 7,760,799 7,745,030 7,753,034 7,748,543 Diluted 7,842,475 7,721,574 7,753,034 7,748,543 See accompanying notes to unaudited condensed financial statements.

VirTra, Inc.CondensedStatements of Cash Flows(Unaudited) Nine Months Ended September 30, September 30, 2020 2019 Cash flows from operating activities: Net loss $ (122,586 ) $ (9,526 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 274,866 434,405 Right of use amortization 220,997 - Reserve for note receivable 16,738 102,473 Deferred taxes 80,000 17,000 Impairment of investment in That?s 406,000 - Eatertainment, related party Changes in operating assets and liabilities: Accounts receivable, net (215,159 ) (129,398 ) That?s Eatertainment note receivable, (10,916 ) - net, related party Trade note receivable, net - 652 Interest receivable 7,340 3,923 Inventory, net (1,492,350 ) (1,206,098 ) Unbilled revenue (109,500 ) (1,422,221 ) Prepaid expenses and other current assets (107,637 ) (120,642 ) Other assets 18,246 (48,140 ) Security deposits, long-term - 320,044 Accounts payable and other accrued 635,765 799,915 expenses Payments on operating lease liability (221,028 ) (178,909 ) Deferred revenue 452,324 1,719,878 Net cash (used in) provided by operating (166,900 ) 283,356 activitiesCash flows from investing activities: - - Purchase of certificates of deposit - (3,560,000 ) Redemption of certificates of deposit 1,915,000 5,135,000 Purchase of intangible assets (55,580 ) (160,000 ) Purchase of property and equipment (329,386 ) (489,518 ) Proceeds from sale of property and - 2,631 equipmentNet cash provided by investing activities 1,530,034 928,113 Cash flows from financing activities: Repurchase of stock options (26,667 ) (16,110 ) N/P Payable -Profiles - (11,250 ) Stock options exercised 19,965 11,426 Purchase of treasury stock - (318,204 ) Note payable-PPP Loan 1,325,961 - Net cash provided by (used in) financing 1,319,259 (334,138 )activities Net increase in cash 2,682,393 877,331 Cash, beginning of period 1,415,091 2,500,381 Cash, end of period $ 4,097,484 $ 3,377,712 Supplemental disclosure of cash flow information: Cash (refunded) paid: Taxes (refunded) paid $ (39,533 ) $ 6,539 Interest paid 5,247 - Supplemental disclosure of non-cash investing and financing activities: Conversion of That?s Eatertainment note - 292,138 receivable to long term, related party See accompanying notes to unaudited condensed financial statements.