Good afternoon and welcome to VirTra's Business Update Call. My name is Shamali [ph] and I will be your operator for today's call. Joining us for today's presentation are the company's Chairman and CEO, Bob Ferris; and Chief Accounting Officer, Marsha Foxx. Following their remarks we will open up the call for questions from VirTra's institutional analysts and investors. Before we begin the call, I would like to provide VirTra's safe harbor statement that includes cautions regarding forward-looking statements made during this call. During this presentation, management may discuss financial projections, information or expectations about the company's products and services or markets or otherwise make statements about the future, which are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. The company does not undertake any obligation to update them as required by law. Finally, I would like to remind everyone that this call will be made available for replay via a link in the Investor Relations section of the company's website at www.virtra.com. Now I'd like to turn the call over to VirTra's Chairman and CEO, Mr. Bob Ferris. Sir, please proceed.

Thank you, Shamali, and thank you everyone for joining us this afternoon. After the market closed today, we issued our press release that provided a business update highlighting some of our recent accomplishments and providing selected financial disclosures we can provide at this time. Our results for 2021, demonstrate another highly successful year for VirTra with record orders as we continue to grow our market-leading position and law enforcement and military with world-class training solutions. Orders for 2021 grew 37% year-over-year to a record $32.7 million and we are particularly proud of these results as they came despite COVID-related restrictions, that limited our ability to participate in trade shows and visit prospective customers. Over the last several months, we have had a number of noteworthy business wins that I want to highlight for you. Internationally in early January, we received two sizable orders in two different countries, totally in $2.7 million for multiple simulators, real world consequence devices, recoil kits and other tools along with installation training courses. These are both follow-on orders from countries where we have already established sales with the repeat business demonstrating the value add and customer loyalty that our products and services and gender. In North America we were very excited to announce in December that we were awarded the standing offer from the Government of Canada to supply marksmanship and judgmental use of force simulation technology to their main police force, the Royal Canadian Mounted Police or our RCMP and all other law enforcement related agencies, such as the Border Protection and correction facilities just to name a few. This standing offer allows the Government in Canada to repeatedly purchase our products and services at pre-arrange prices from VirTra as part of a countrywide effort to standardized purchasing from one simulation training company; that is most important to note about this is the standing offer it expands our market share, expands those who will benefit from VirTra's industry-leading products and does so without needing to individually compete for each order from each agency. In fact, we are already seeing evidence of business not possible this award with our first order that we announced in February. In our market, a win like Canada is possible only once every decade or so. And our sales team and product line-up outperformed all others in our market when it mattered most. Before I go into more detail about our operational initiatives and progress within the context of our growth strategy, I'm going to turn the call over to our Chief Accounting Officer, Marsha Foxx to provide a financial update and discuss the process of our independent audit. Marsha?

Thank you, Bob and good afternoon, everyone. It's a pleasure to be speaking to you today. Since the independent audit of our financial statements has not yet been completed, we will not at this time be reviewing our full financial results for the fourth quarter and full year ended December 31, 2021, but plan to release them as soon as they are available as we continue to work with our auditor to complete the audit and file our 10 K. As Bob mentioned, during 2021, we received orders totalling $32.7 million, a 37% increase from 2020 of $23.8 million. Note that orders may not directly correlate to reported revenue over the same periods due to differences in physical delivery of our products, order structure, and other related items, but we feel this metric is important in showing the strong growth our business continues to achieve. While we have not finalized our balance sheet as of December 31, 2021, we can report that we have estimated cash and cash equivalents of $19.7 million as of December 31, 2021, keeping us in a healthy financial position. I would now like to cover are the status of our audit and 10-K filing. As disclosed in our press release, we have filed a Form 12b-25 with the US Securities and Exchange Commission to disclose our inability to file the annual report on form 10-K for the year ended December 31, 2021 by the due date of March 31, 2022. And we are also not expected to do so within the 15-day extension period, allowed by the form. We would characterize this delay as growing pains of a smaller, but growing company that is strengthening its infrastructure to catch up with the success of its business. As we have grown significantly over the past several years with continuous new sales records, our back office infrastructure has been increasingly strained. Last year, we reached a point where it made sense to implement a new company-wide enterprise resource planning or ERP system. This ERP system is consolidating three independent systems, and we are excited about the future improvements in our operating efficiency that this has taken time to integrate, even with hiring an ERP consulting firm a year ago, to help us and to accelerate the process. Compounding these growing pains was a global pandemic with COVID-19 that put additional pressure on our integration work, supply chain and staff through remote work and other challenges. It has been difficult at times to manage these various initiatives while still delivering for our growing customers, simultaneously with COVID-related restrictions and integrating the largest back office overhaul we have implemented in our company's history. None of these delays are indicative of a lack of effort and Bob and I continue to be impressed with our staff's incredible work ethic and commitment towards successfully completing our audit in the near future. That concludes my prepared remarks. I'll now turn it back to Bob.

Thanks Marsha and thank you for your incredible work on the audit. To build on Marsha's last point, we believe these are growing pains of a company that has an incredibly bright future ahead, and we will certainly keep investors apprised of our progress. Although I want to reiterate my belief that VirTra from a business owner's perspective is in perhaps the strongest position in its history. Our confidence in the value proposition of VirTra is growing, especially as the world witnesses, the critical need of police officers and war fighters to be trained at the highest levels possible. The tragic war in Ukraine highlights the importance of our industry-leading training technology and we are profoundly humbled that Ukraine selected VirTra's products for their training needs long before the war began. Our thoughts and prayers go out to the war fighters in Ukraine who must call upon their training and skills to fight and each and every day. As COVID-related travel restrictions start to subside, we can get back to our normal trade show schedule and expand visiting prospective customers with onsite demonstrations. VirTra excels in these environments, as we can better prove efficacy of our world-class products and services when experienced firsthand. I'm really excited to be able to get back in front of our current and perspective customers to show off our differentiated recoil kit technology, simulation and training capabilities just to name a few. Over our history, we have spent considerably more time and capital than anyone else in select product categories to develop technology, content and software that is remarkably superior to competitor's offerings. I believe these hard-earned advantages are being validated as we are seeing some evidence of our competition, spending less money and time on items that directly compete with our established products. Now…

[Operator instructions] Our first question will come from the line of Jaeson Schmidt with Lake Street Capital. Please proceed with your question.

Hey guys, thanks for taking my questions. I know you're probably a bit limited on what you can say before the financials are out, but Bob curious if you could provide any color around how backlog is tracking and really how order patterns have been at least for the start of this year?

Yeah. Thanks for the question. Yeah, this year is looking good. Our sales pipeline appears to be healthy and obviously last year fourth quarter, we had a very strong quarter with, approximately $8.3 million in new sales order in fourth quarter of last year, which is fantastic. So that momentum appears to be continuing into 2022.

Okay. No, good to hear. And you noted some inflationary pressure is not terribly rising as everyone seems to be in the same boat, but can you just talk about how the supply chain is impacting you and I guess going off those inflationary pressures, are you looking to do any price increases or passing along some of those price increases you're seeing?

Yes. We have, we are, and we have implemented some price increases and we planned it to do that as needed. So yes, the beginning of your question though, was more on stocking and supply chain and in that regard, we've really hard on two prong approach. One is create a more robust supply chain for us by sometimes designing in parts that have much higher availability that sometimes has involved electrical design reworks. Those have already been most all completed that were necessary and we started that a while ago. The second has more to do with stocking components and when we find supply making sure that we increase our stock levels in case that those become in shorter supply and we've been and very successful in doing that. So right now those two approaches have combined as well as some other workloads that have been allocated to better insulate ourselves from specific situations on specific products, but we've been able to really continue to sell and deliver simulators and we've heard some in the market and I don't know how widespread this is, but, I'd heard the other day that there was a competitor of ours that weren't able to deliver that they had had supply chain issues and we have -- and they were really and they were complimenting us and how -- and how we were able to do that. So I'm not sure exactly how prolific that is with our competitors, but I do know that VirTra for the majority of our product lines are well stocked and then those that have any issue, we do lean forward and we will increase the stock levels as a insulation against having to deny a purchase order or inform a client that we're outta stock on something. We'd much prefer to have a extra inventory and be prepared for that. We're fortunate, we're in a position where we're able to do that.

Okay. That makes sense. And then just the last one from me, and I'll jump back into queue, just looking at the audit, just want to make sure I understand this. You're consolidating three independent systems into one ERP, but is some of this delay related to any sort of recognition practices?

Not really. That's not the issue. The issue as I understand it is much more around the integration of three systems, the ERP and all of the work that's involved in that reintegration and then having working with the auditors on that. And so that's really, obviously COVID did not help because that created additional complexities of the whole supply chain. I already just mentioned about having extra stock of certain parts and that all tracks through the new ERP system. And then you also have obviously a lot of remote work. We also during the turn of the year, we also were in the midst of moving part of our departments over to the other facility that created complications as well. So we had a lot of things and in the midst of all of that, we actually had record number of orders coming in from clients. So we love having robust sales and having sales come in, but we did have a rusher sales, right, as we're trying to transition from a single accounting system and siloed systems into an integrated higher scale enterprise level system that is necessary for the kind of volumes and scope that we want this company to grow into.

Okay. That's helpful caller. Thanks a lot, guys.

Thank you.

[Operator instructions] And our next question comes on the line of Richard Baldry with ROTH Capital. Please proceed with your question.

Thanks. Maybe not getting into the number side of the business, but maybe looking at planning so we can gauge your confidence, can you talk about like hiring plans for this year, maybe comparable to last year, changes to quotas or quota allocated? So we get a feel for how you're feeling about, how you exited the year and how you're growing into next year? Thanks.

Thanks, Richard. I think one thing I can share with you is that as of today, we have 122 employees at VirTra. We are actively recruiting for 11 additional positions. So if we can fill those 11 positions, , we would be at about 133 employees. So, we are confident about the outlook for our company. And, we do feel about the Canada opportunity is early. We just won it recently. We did announce initial sale on it, and so we -- but we do expect that could contribute quite a bit to the overall growth of the company and in the months and years to come. And we are committed to having a right size company and make sure that we hire appropriately based on the opportunities we see -- that we see and opportunities that frankly are also confirmed opportunities. So we also want to be careful that we don't get overly optimistic. We want to be realistic, but we are encouraged with what we're seeing.

And can you talk a little bit more about the transition into the new facilities, how far along that is when you think it'd be sort of, I don’t know if there's a fully complete or if it's going to be a work in progress for a while.

Yeah. The area that probably is our longest lead time area in that is our CNC machine side of the company. And that has to do with the preferred location for them at that facility takes time to make that available for them. And so I see them, they're probably the last group to get moved over and we will likely move over most all of the rest of the company prior to them. Now, they are also heavily positioned in the small suite. So as you may know, we have two least area -- two leased facilities that are separated by a parking lot, actually a shared parking lot and one of those is a smaller area that actually used to be a satellite office for a bank, and that got converted to have our CNC machine area and that area is probably going to be the last area to move over. So we currently have part of our company at the new facility. We also have some tenant improvements that are going on at the new facility. Anyone who's lived in Phoenix, Arizona in the summer and had clients come in to see projects in process, will appreciate we are adding air conditioning to the warehouse section of the building and that's underway. And that's a very critical component, especially with some of the higher tolerance work that we do. We need the advantage of controlled environments that HVAC provides. So the swamp coolers on the building are adequate. So, we're making those improvements and that does though create a bit of time that we anticipated that in our planning.

We last to the extent if you're comfortable, but it looks like cash went down a small amount quarter to quarter, based on your current estimate. Do you think that has more to do with sort of ramping up the new facility and inventory safety stocks, etcetera, versus operations, or is there any way to think about sort of what the drivers of that usage would be?

Yes. Great, great question and actually you answered part of it there. Both of those are absolutely true. We did spend more money in building up inventories of certain components that we feared might be hard to obtain in the future. And we wanted to secure -- we wanted to secure stock. There is some additional monies at that time into the tenant improvements at the new facility. And then the other area that I think is going to be part of our flow is realize that we had a overall sales order just jumped about 37% year over year for the year for 2021 with that occurring and because we do a lot of work with governments. Keep in mind, there will be some -- there will be some times where we're waiting on payments and we've had to put upfront money down for components or other cost of goods sold. So I think there will be -- there will be some flex -- some modifications on, there will be some flow on quarter to quarter based on just the scaling up of the company that we're looking forward to have happen. So…

And our next question comes from the line of Allen Klee with Maxim Group. Please proceed with your question.

Hi, this is Derek Greenberg on for Allen. I was wonder if you could maybe provide an update on the IDIQ contract, and the standing off the contract you guys received and just how that's progressing and possibly if you've seen any additional opportunities as part of the IDIQ.

Are you referring to the customers and border protection IDIQ?

Yes. Yes.

Okay. Yeah, that customs and border remains an incredible customer for VirTra and their IDIQ seems to be well used by them. They continue to invest in VirTra. They've already invested considerably in VirTra. I think overall we are approaching probably $200 million of equipment that we have sold throughout the years that are simulation-training related equipment that's market wide, but that gives you just a little bit of the scale of after all of these years and we started selling in 2004, our first simulators. There's a lot of our equipment out in the field and customers of border protection has a large amount of our products and we are very excited because since we are a very popular brand throughout the federal law enforcement community, and because the presidential administration is very focused on trying to increase police training and policing throughout America and fund the police has been -- has actually been a slogan that they've put out there. We feel very fortunate that we're in a good position to where the company and the products that they've -- that the federal government has vetted for police training has really been VirTra products and they seems like they're looking for federal agencies to take some leadership role in sharing what they learn on how to train police and sharing that with the state and local police agencies and we really are excited to see that happen and obviously we want to support and encourage that. So that as you know, one of our challenges is just educating those who don't even know that there's effective deescalation and autism and use of force training that's available for them in an affordable and reasonable way versus trying to hire actors or do other things like that. So, we're really encouraged by it we expect that they will continue to make good use of the IDIQ that was awarded with VirTra being the supplier.

Okay, great. Yeah. That's very helpful. Thank you. And then if you could maybe touch, I think on the last call, you might have mentioned that you guys are in the process of developing additional products in the pipeline and trying to get patents for that. I was wondering if maybe you could touch on timing, or if you see this as a potential opportunity, if they're the next fiscal year.

Yes, I definitely expect that work that we have in the development pipeline will be making their debut during this upcoming year and yeah, I think we have some really amazing things in the pipeline that I think some of which will really kind of surprise ice people and if we've done our job in keeping it, keeping it under wraps, then there'd be there'd be rather amazed by what we bring out, but our policy on that is to keep it under wraps until of course it's time to release. So, but yeah, we've made good progress and we've had some important breakthroughs in that area. Some of which came through a massive tenacity for success of just weaken. We really don't -- we want people to have a good work life balance, but I have to admit we've had some research and development projects that have required. We can more -- far more, we can work than I'm comfortable with, but I'm honored to have a staff that is willing to put in the extra time to achieve success especially when it's hard.

Great. Now that sounds very promising. Thank you. And then I guess my last question would just be on, maybe if you could touch on the partnership with Action Target, if you're seeing any additional client wins, you're receiving as a part of that, or just how that's progressing overall?

Yeah, so I'll just give for the benefit of everyone on the call, a little summary of that. So we announced a partnership with Action Target. Action Target is probably the number one company in the world for supplying live fire ranges for police departments and they also supply a lot of ranges for military as well, but they're very dominant in police forces. They also supply ranges for commercial ventures. So you can, think of a local shooting -- live fire shooting range. And they have a very good reputation based out Utah, our neighbors to the West of us and they're just a great group of folks really well respected in the industry and so we ended up working with them on a partnership. They felt we were number one in the world in some relation training, and we felt they were number one in the world with life fire ranges. And so we decided that we would be stronger if we worked together. And so we collaborate with us sharing certain client information with them and obviously we have customers who might need live fire ranges, and they ask us, who we recommend and vice versa, even at the point of working in conjunction with them. So we come in as a team. So you can imagine if somebody wanted to do training and they needed both live fire training, and they needed simulation training, then they could have Action Target and VirTra come together to supply an overall package to satisfy their needs, where Action Target is best of breed in their category and VirTra is best of breed in our category, it's a great solution versus maybe picking somebody who has a mediocre product in live fire and a mediocre simulation product. And so we think this is a great idea into the future. We're seeing some success with it. It is still relatively new and our teams I think are still learning how to best leverage each other's contacts and now knowledge base. And I think there's still room for us to improve, but I do think that that action target is a really wonderful group to work alongside and they're very committed to effective training. They're just focused on live fire, whereas we're focused on simulation. So it's a great -- it's a great work relationship between us and them.

Great. Thank you. That's very helpful.

And at this time, this concludes our question-and-session. I'll now like to turn the call back over to Mr. Ferris for his closing remarks.

Thank you. We really appreciate everyone taking the time to join us today. Please know we are hard at work building and inventing the world's most effective simulation training products so that the war fighter and the peace officer can serve their country and community, accomplish their mission and make it home safely. I firmly believe the best days for VirTra are ahead of us. Be safe, take care, and God bless.

Thank you for joining us today for VirTra's conference call. You may now disconnect.