Greetings. Welcome to the VirTra Inc. 2024 Annual Meeting of Stockholders call. At this time, all participants are in a listen-only mode. If you would like to ask a question during this presentation, please click on the Ask Question box on the left side of your screen, type in your question, and hit Submit. Please note, this conference is being recorded. I will now turn the conference over to your host, John Givens, Chairman and CEO of VirTra. John, please go ahead.
Good afternoon. Will the meeting please come to order? My name is John Givens, and I'm Chairman and CEO of VirTra. Welcome to the twenty twenty-four Annual Meeting of the Stockholders of VirTra and the first since two thousand and nineteen live in our offices in Chandler, Arizona. This meeting is being held in person and also webcast live. The webcast will be posted on our website for a period of time after the meeting. The matters in which the stockholders at this meeting are voting are: elect five directors, ratify the appointment of Haynie & Company as the company's independent registered public accounting firm for the years ending December thirty one, twenty twenty-four, and transact any other business that may properly come here in the meeting. I'd like to begin the meeting by introducing the current members of our company's board of directors.
They are, besides myself, we have Jeffrey Brown. Jeff? Greg Johnson. Thank you, Greg. Jim McDonald, who is currently a director, has declined to be nominated for re-election to the board and is not present today. I'd like to also introduce our board nominees, Lieutenant General Retired Maria Gervais and Mike Ayers. We also have present, Alana Boudreau, our CFO, and I'd also like to recognize in attendance today, the founder of VirTra, Bob Ferris. Faye Matsumura, who serves as our outside corporate legal counsel, is attending remotely. Faye will serve as the secretary of the meeting and record the proceedings.
She has delivered the Affidavit of Issuer Direct Corporation as the mailing of the notice of the meeting, which states that on September sixth, twenty twenty-four, notice of internet availability of proxy material was mailed to all stockholders of record as of the close of business of August twenty-sixth, twenty twenty-four, the record date for the meeting. This affidavit is available if any stockholder wishes to examine it and will be filed with the minutes of this meeting. I'll now discuss the procedures for transacting the business in this meeting. When an item of business on the agenda is before the meeting for consideration, we ask stockholders to limit their participation to one question and one follow-up per person to ensure everyone has an opportunity to engage. Questions and comments should be specific to the business item currently under discussion.
If you wish to ask such a question or make such a statement, please raise your hand, and if you haven't submitted a card to Greg in the back, he'll collect those. And those comments should be related to the agenda items and business for this meeting. An opportunity to raise other questions and comments will be provided after voting on the proposal described in the proxy statement. For any questions that cannot be addressed during this meeting for individual matters or concerns, please feel free to contact our investor relations at vtsi@gateway-grp.com. And also, Alec Wilson from our investor relations is in the back of the room for those of you live, if you want to meet with him about your personal question. I hereby appoint a representative of Issuer Direct and Jim Skoulakis as inspectors of election for the meeting and any adjournment or postponement of the meeting.
The inspectors have the stockholder list of the company as of the close of business on August twenty-sixth, twenty twenty-four, the record date for the meeting, which shows the stockholders and the respective number of shares entitled to vote at this meeting. This list is available if any stockholder wishes to examine it and will be filed with the minutes of this meeting. Issuer Direct, which has been tabulating proxies, has advised us that the quorum is present at this meeting, so I declare the meeting duly and lawfully convened. The meeting is now open and ready for business. The first item of business is the election of five directors of the company. The proxy statement made available to you either listed the company's nominees for directors.
The board's Nominating and Corporate Governance Committee, headed by Greg Johnson, spent a considerable amount of time and effort in making recommendations to the board. The committee examined the need to have sufficient continuity of the board level, given all the significant changes that we've recently had, and given the significant leadership changes that have occurred, the committee also considered subject matter expertise, the board composition, continuity planning, and good governance. In light of all this, the committee made the following recommendations, which were accepted and approved by the board: the retention and inclusion of Jeffrey Brown and Greg Johnson in their current roles as independent directors so as to provide continuity of business. The retention and inclusion of John Givens in his current role as an inside director, so as to provide a bridge between the board and management.
The inclusion of Lieutenant General (Ret.) Maria Gervais and Michael Ayers, given their significant subject matter expertise in military training and law enforcement, respectively. In accordance with the bylaws of the company, stockholders are required to provide advance notice of their intent to nominate candidates for directors and provide certain information as required by the SEC's proxy rules. While we received one self-nomination, we did not receive certain information as required by SEC's proxy rules. Therefore, I declare the nominations for directors closed. A motion to elect five directors as described in the proxy statement is now in order.
Mr. Chairman, my name is Greg Johnson, and as a stockholder, I hereby move that each of the company's nominees be elected as directors to serve until the next annual meeting of stockholders, or until their respective successors are elected and qualified.
Does anyone second the motion?
My name is Jeffrey Brown, and I'm a stockholder, and I second.
Are there any questions or comments on this motion? If there are no discussions, I'd like to move on to the next item in the agenda and then have the Inspector of Elections announce the votes that have been received on each matter after we have presented each agenda item. The next item of business is to ratify the appointment of Haynie & Company as the company's independent registered public accounting firm for the year ending December thirty-one, twenty twenty-four. The appointment of Haynie & Company is discussed in the proxy statement that was made available to you earlier. A motion to ratify the auditor appointment, as described in the proxy statement, is now in order.
This is Jeff- Jeffrey Brown again, and I hereby move that the stockholders ratify the appointment of Haynie & Company as our independent registered public accounting firm for the current year.
Does anyone second the motion?
Mr. Chairman, Greg Johnson. I second the motion.
Are there any questions or comments on this motion? Are there any other matters to be properly considered at this meeting? Since there's no further motion to be properly considered at this meeting, I will now call the vote on these items. The Inspector of Elections will report on these results of the voting later in the meeting after tabulation has been completed. We'll now wait for the tabulation to occur. We got everything. Did anybody vote here? Okay. While we wait, I'd like to open the meeting to any questions that stockholders may have. If you have a question relating to the company, but not to matters already voted on in this meeting, you may raise them while the vote is being tabulated. Only matters that concern all stockholders should be raised at this time.
Any matters of individual concern to the stockholder should be raised directly to our investor relations professional. Greg, do you have the first question?
Yes. The impact of the U.S. government continuing resolution, what is the status of the contracts and what's happening with respect to the continuing resolution?
The continuing resolutions have been resolved in bits and pieces, so they pushed it further down the line. They have released funds, and we are seeing contracts, discussions with the individuals who are posting those, requests for proposals, and our current contracts have not had any interruptions whatsoever.
Mr. Chairman, we had some questions about some of the people that are up for election today. I'd prefer to leave those questions till after the meeting ends and we have tabulation complete.
Uh, agreed.
So I will leave those out for now. Another question about the Continuing Resolution, although somewhat changed. Can we get some context on whether there's any temporary headwinds in the context of the Continuing Resolution or any other headwinds?
See headwinds. So the Continuing Resolution definitely impacted many areas, not just military contracts, but also federally funded grants. The headwinds that I can report today, and I'm glad to report, is that several of the grants for the law enforcement have been opened, and some of those folks have already been awarded contracts, so we're starting to see that flow. I don't know what the impact will be if those headwinds will be stalled, if they don't come to another resolution. I'm not sure exactly when. I think it's December timeframe, but we don't expect any additional issues. But we have seen those headwinds coming open with grants and then also our military contracts. We started seeing the release of RFPs and requests for information from market research.
There's a question regarding a potential revenue that may be associated with or coming as a result of your former association with Bohemia. Do you see that as being advantageous to VirTra?
Yeah, I kind of get this question a lot. What's the relationship like between VirTra and Bohemia? Well, I started VirTra. I mean, I started Bohemia, so I started that as a number one employee. And the relationship there is, I'm in contact with British Aerospace Engineering and the new president, and they wanna do business with us. So we have a lot of systems that are out there running VBS, Virtual Battlespace, which is their product, and tying that together with our SIM and the multitude of small arms weapons training contracts that are out there that you can find. VBS now runs on VirTra system, and we're partnering with them in two different regards.
One, to have a closer integration, and then two, just to do business development as well, so we can combine the two sales teams and go after additional, additional work. And then some of the other products that we're working on, at that relationship is. I mean, I don't know how to answer that because we're really tied closely. I mean, with me starting it, they still call me and ask questions and want advice, and how do I sell, and those sorts of things. So it's, it's a partnership that will go on for quite some time.
We have some questions regarding the current cash balances of the company, and questions regarding what the board and company have considered to do with these cash reserves. Suggestions would include, you know, the buyback of shares, the payment of a dividend, or are we aware of any immediate uses of the funds?
I could tell you, the cash balance in the bank is just to make sure that we function on a daily basis for a year. And as all of you know, VirTra didn't have a real problem with Epicor, so there was no reporting, there was no historical data. So it was kind of hard when I came in to see what is the trajectory, what is our baseline, and where can we go from there. So my initial thought was, and it still stands today, is make sure they have all salaries covered for a year and a good portion of the expenses.
And then I like to use this statement as I like to keep my powder dry because there's competing technologies, there's other companies, there's things that we may want to bolt on and attach to the company, and I wanna make sure that I have enough cash available. And also, if we win larger production contracts, I have to make an investment in order, in hardware and people, to take that to the next level. Up until this point, I now have a year worth of data, we can now start looking at long-term planning, in a real way, just not in a, "Hey, this is what we'd like to do," but in a real fashion to be able to get there.
In fact, Mr. Chairman, we have spent some way to proceed on some major key items and events coming. Can you talk about those for a second?
Yeah, we spent it on the... as reported before, we spent $2.5 million on an upgrade for our machine shop, which those that are attending live will get to see in some of the parts. And what that's provided us for is I've identified, I don't wanna put three shifts of people on, I wanna automate. So we've attached automation, and we're running systems through the night and over the weekends and still kicking out parts, and they're at high quality. We've invested in quality testing tools, and we've invested in talent and skill. Rather than, we're growing a lot of that, but sometimes it's necessary to buy that skill and that talent to leapfrog your competition.
There's a generic question about shareholder value, and this particular shareholder expressed concern that perhaps the company is underperforming. Do you have any thoughts about performance?
Yeah, well, no one should ever be thinking that they're overperforming. So I come from a position that we can always do better, and we can always drive further. What I will tell you today, though, is that VirTra's in a much better place to scale and drive that performance going forward. It wasn't positioned in the past because, again, visibility of the financials, the processes and production internally, and then we weren't taking advantage of the customer base that we currently had. And the sales organization, we restructured for some of those same reasons, and we're starting to see some of those, reaping some of those benefits. So from that perspective, I always feel like we're underperforming, and the stock is underperforming. It should be somewhere in the, you know, $8-$10 range, given what we've been doing.
Mr. Chairman, there's also some questions about, we've spent a considerable amount of time, you know, working on several aspects of the business. One of the aspects of the business with this question is about sales. And in particular, the question is, "Is our sales force working with the various agencies that purchase our equipment to write free grants? In other words, are we acting as a resource to the potential buyers of our product to make them more accessible or, or...
100%, 100%. So there's a fine line there, not even a gray area. It's a very fine line that what you can do to help write those grants because we are a vendor. However, we have a grant proposal process here, where if we're working with a customer and we get to the quote stage, and they said, "We don't have the money," we still give them a quote, and then we enter it into the database, and we put it in the proposal stage. At the proposal stage, we have specialists internally that's in that environment with the grants and knows a lot about it and is helping to guide those grants through the Senate subcommittee hearings that we've attended to drive the requirements. We're giving them all the language that they would need.
We're also partnered with several grant-writing groups. I don't want to mention them all, but several grant-writing groups that we've put in contact with the customer, and then we keep chatting with them and helping them get through that process. There's always quite a large pipeline in that process because when you only of 18,000 police departments around the country, if you only have about 3,500 to 4,500 that have pretty large budgets and over 25 police officers, that leaves quite a few that we can capture with other things that we're doing, so they have that need, and they're trying to do so many things with the staff that they have, so we do what we can to alleviate that, and we recognize that there's a lot of opportunity on the table there to capture.
... Greg, can you come up here? He just got up.
We have a question online.
Online, that's a-
Question online.
We have a question online that says they can't hear you.
Let me grab this. Sorry.
For those of you that couldn't hear Greg in the beginning, we'll make sure that in the minutes, we'll be able to capture those. Apologize.
All right, the next question, Mr. Chairman, is a comment, sort of posed as a question, and that is, this shareholder expresses some concern that perhaps the company isn't requiring directors to have skin in the game, and this shareholder, in particular, calls me out for not having sufficient skin in the game in order to sit as a director, and I'm asking for the company's comment on that.
I don't know how to answer for you, Greg. Would you like to make a comment, Greg, yourself? Feel free.
It's not just directed specifically to me.
Yeah.
It's just using me as an example.
Yeah, I know. I've been in the position a year, and I'm trying to figure that out. My specific... There's also been questions of why I haven't purchased more, and I have. I will tell you that certainly that's a very legitimate question. My unique one, I'll answer specifically, is that this unexpected opportunity to come to VirTra at this point in my career, many years of me designing and committing funds into long-term personal investments, balance, and strategy, those funds, I didn't expect to come to a publicly traded company. And although right now my personal portfolio is not easily liquidated, it in no way changes my 100% confidence and support in VirTra.
I wouldn't be here if I didn't expect this company to be wildly successful, and I wish I had more liquidity in my investments so I could purchase VTSI stock. We have, when our portfolio funds have become available, I did purchase VirTra stock versus rolling it into another long-term investment. That may not be what you wanna hear, but it's as simple as that. So I was already retired. Bob snatched me out of retirement, and my wife still tells me that I'm a miserable failure at retirement. It lasted four days. So we don't have. I guess we don't have a requirement, and I haven't researched what or why that is, so I'll take the heat on that one.
Just one of the many things I'm tackling, that wasn't at the top of my list, but I understand why people ask that question, and I really wish I could put more in because I'm be much wealthier when this is wherever it goes, so.
Yeah, I guess my comment would be, no matter what company I've worked with over the thirty-five years I've been doing this, that is a common response among shareholders, that the directors should be buying more. I don't think a lot of shareholders realize the scrutiny and restrictions that the SEC and the NASDAQ have for us as directors and senior management. If we buy stock in our company, you get 50% of the people that think you're doing it because you have inside information, and it can actually trigger a lawsuit. It, for those of us that sit in the position, it becomes a, in very many respects, an illiquid investment because there are times when you can and can't sell, which are limited for us.
But there's also the perception that if you're selling, there must be a reason why you're selling, and it's not necessarily related to something personally. I'll tell you that for me personally, VirTra is the only company I've worked with that I have not been a founder of. So where I deploy my capital is companies that I help to found and actually provide the seed capital to get started, and I ultimately take to public, and that's how I hold my position. I met Bob, how many years ago? Two thousand and six, I think, was the first time?
Yeah.
So-
Long time ago.
I worked for the company for or with the company for four, 12, 14 years before doing anything like this.
Does that include all the years you worked for free?
Yeah, exactly.
Greg, um-
Is there a question there?
Do you want to ask Jim?
Hmm?
Jim, what about... Yeah, there's a question here for you. It's about a product more.
I think that's a legitimate question.
Yeah, yeah, yeah. Please, go ahead.
Do you wanna answer it?
Go and read it, and I'll answer it.
Oh, I-
Does VirTra still have the virtual range product, and has the company looked at marketing it more with the high cost of ammunition?
Absolutely. We make some of our sales off of that in the marksmanship training. That product's called the V-ST, and you'll get to see it on our tour. It's a range. You can go up to five screens, and there's five, six individuals that can be on each screen. So you'll see an eighteen-lane system on the tour today. I apologize for those that aren't here in person.
Greg, I'm gonna take two more questions. I've been told that the votes are in.
Okay. These questions, Mr. Chairman, are related specifically to the directors. So I guess I would ask you, do you want to talk about it now or after the vote?
What's the nature?
I think it's probably innocuous enough. So this question is: Can you speak to the value that can be added by having Lieutenant General Gervais on the board, what does she bring to the table compared to the connections and knowledge that the company may already have?
Well, that's very interesting because her and I both discussed that. So I worked on the vendor side, and I was convincing the government that the product that I had worked well. General Gervais brings the other side of the equation of how finances and how the government works, and their source selection, and how to speak, and the language in which to put there. She'll participate and be a reviewer on our Red Team for contracts. And if you've read her bio, she is, was the first general for the IVAS program, and a lot of the programs that we're going after. So there's not anybody on this planet that is better to work on the VirTra board with the military contracts that we're going after.
The Army has the largest budget when it comes to modeling and simulation in the environment we're in. The U.S. Marine Corps just kind of tags on to what we do. But once the Army has a Program of Record or a product they're using, then it's sold throughout the rest of the world because the U.S. Army is who looks at their products.
Okay. I think that's about all, Mr. Chairman. Unless there's another one that came online? Nothing yet?
Nope.
Sure. Mr. Chairman, one of the questions that's been raised by a couple of shareholders is, is there any sensibility or willingness of the company to consider the bonus compensation being based on the price of the shares and not on the profitability of the company?
Excellent question. I'm gonna answer it from the gut. Right now, we didn't know where the company should be. We've been correcting, and we've been doing everything we can to. I talked about gathering the data before and understanding where the baseline of the company is. At that point, the only thing you can really focus on is profitability, because that gets your product your production and your productivity under control, so as sales starts to scale. We're at that point now. I would say in the future, that is definitely a component that should be part of compensation, but at the moment, it's very hard because I, I will tell you, some things I just don't understand. We have some really great news that goes out, and the stock doesn't even move. It's kind of baffling to me.
We stopped putting out press releases that were just for fluff. I got tired of that, so I want, when a shareholder sees VirTra has a press release, I want them to say, "I got to read this because there's something good coming out." So, you've seen a lot of that happening, and I don't know where that'll be, but I know that we now have a year of data. We just had our budget summit this past week, and we've putting the budget together for twenty twenty-five, and we feel very confident in where we're heading. And we've done everything on the back end. We're excited about what we've done. We're very happy with the staffing that we have, and we have scalability built at every corner of this company.
So now I just got to keep whipping sales and hiring the right people and stealing people from other companies and put them in the right place. And, and I'm good at that. It's. But we've got everything in place now. Like I said before, if you want to put me at fault for not fixing sales at first, I'll take that, I'll take that heat. But the problem was, I would have won all kinds of customers, and I still wouldn't have been able to deliver. And that, that's the truth. So I'll, I'll take that, but I also take that challenge, so.
I think, Mr. Chairman, just to expand a bit, as I'm the chairman of the Compensation Committee of the Board of Directors, and amongst other discussions that we've had over the course of the past year, as you're aware, Mr. Chairman, is in addition to continuity and who sits on the board and that sort of thing, is how do we pay our people? And how do we ensure the continuity of the company and the retention of people? And what can we use and what can we not use? Traditionally, the company was set up to basically use a definable financial metric to create that. Although I think in the early days of the company, there was value in that.
As the company has evolved and grown much larger and expanded business into different areas, different metrics, KPIs, key performance indicators, were necessary. So, this year, we had several discussions about changing the nature of compensation and looking at other issues such as key performance indicators, setting specific KPIs for each person, and having discretionary award bonuses, and retracting some of the, financial metric only. That has not been entirely resolved. This board of directors will be tasked with setting the basis for next year's, compensation, and we'll be looking at many things. Historically, the SEC and the exchanges have been very negative on using the price of the stock.
So I don't think that will ever be something that we need, that we are able to do, but we fully understand that as shareholders, a lot of the barometer of the success is measured in the stock price and not necessarily what you don't see, which is the business and what's happening.
To that final one, I am focused on the fundamentals. Once you focus on the fundamentals, the stock, it lags, but it'll catch up. But if you guys ask me to focus on the share prices, I'm not gonna be out here building a company the way it needs to be built. I'll be trying to do everything I can to raise the stock price. While some of you may be very happy with that, it's a short-lived timeframe. I wanna grow this company into something that somebody wants.
... Just to follow up on one thing, if you want me to do it later, let me know. It's when—what really, I guess, bothered me as a shareholder, when we found out that we're not involved, sorry, to move around. When we dilute the shareholders, we did not dilute the compensation bonus package to 30%. So in other words, you retrieved money, you were able to hit certain profitability, but it took out of the shareholder value.
Yeah, I under-
That is something I think and was very hurtful for a shareholder, and we didn't even know this was happening.
Well, I would-
We weren't told about it-
Yeah
as a shareholder, which I felt we should have been told.
I can't speak for the past.
You cannot.
I can't speak for the past, but what I will tell you, I'm incredibly transparent, probably to a fault. But what I will tell you is, you asked me why I'm keeping so much... I'm keeping a large cash balance in the bank. I can keep it spent right down to a small level, and then if something happens, I can go ahead and go out to the market, sell more shares, and dilute the shareholders, but that's not what I'm about. I'm about growing organically, and then when I absolutely need it, I'm going out to get it to buy another company, to bolt on something through acquisitions, to buy a competing technology, to enhance something that we're doing, or buy a company just for their developers or their engineering. That's what I'm doing.
So I don't have my hand around all of that and what the market's doing and who's doing what. There's been a lot of movement in our competition through acquisition of private equity firms and the lot, some going out of business, some selling stuff a lot cheaper. We're really looking at how all that plays out. I don't wanna make a silly mistake. I wanna get in early, but I wanna get in smart. That's how we look at it.
That was the question is based on the dilution of our shares.
I understand.
And there are other avenues to get an extensive money-
Understand that
which, you know, takes
Focus on your fundamentals, have a good business. You can borrow money.
Right.
I got it.
It's always dilutive to a company to raise funds.
Absolutely. I'm gonna move on, so we can... Oh, and there'll be time in the second session to ask additional questions.
Yeah, we can expand on that once we close down the meeting.
No, go ahead. Before-
Yeah, yeah. It's fine.
Yeah, but thanks for the question.
But we got it on the record for you, so. I understand the votes have been counted, and the preliminary report of the inspectors of election has been delivered to the company. Alana, will you please announce the results of the stockholders' vote?
The preliminary report of the inspectors of election indicates that John Givens, Jeffrey Brown, Greg Johnson, Maria Gervais, and Michael Ayers have been elected as directors by the stockholders. These candidates were elected by plurality vote. Ratification of the appointment of Haynie and Company as the company's independent registered public accounting firm for the year ending December thirty-first, twenty twenty-four, has been approved by the stockholders by affirmative vote of a majority of the votes present in person, via webcast or by the proxy at the meeting.
I hereby request that the final report of the inspector of elections be filed with the minutes of this meeting. You have now heard the results of the voting, and this completes the business to be conducted at this meeting. Since there is no other matters to come before the meeting, a motion to adjourn this meeting is now in order.
This is Jeffrey Brown. I hereby move that the meeting be adjourned.
Do I have a second for the motion?
I second the motion, Mr. Chairman.
All in favor of motion of adjournment, please signify by saying, "Aye.
Aye.
All those opposed, signify by saying, "No." The motion has been carried. I'd like to take this time and this opportunity to thank you for your attendance today. Also, please know that your interest in VirTra is very, very important to us. I know some of you have traveled from far away. Thank you for attending the live meeting and those that are our webcast. We try to answer as many questions as we can. I do wanna let everyone know that if we are a bit obscure on some of our answers, you have to understand that we're the only publicly traded company, and we have others that listen to this, and I wanna keep my competitive edge on technologies, what we're integrating, how we're integrating it. So please keep that in mind when asking questions.
We appreciate the incredible support of the stakeholders, and it's been critical to our success from the beginning until now and going forward for sure. I personally wanna thank the rest of you, and the best days are in front of us. Thank you, and God bless. I hereby declare this meeting adjourned.
This concludes today's conference, and you may disconnect at this time. Thank you for your participation.