Replies to post #21993 on VirTra Inc (VTSI)

[E pluribus unum]

The F&S letter sounds to me like a "screw the market" when in reality, the market's perception of the stock is the only thing that matters.

Hallelujah on the third quarter sales. Maybe they're approaching a critical mass. However I think all this excess compensation is spitting in the eye of the market. Consider the changes between the first nine months of this year and the first nine months of last year.

Sales are up $571,960. There was some slippage in margin from 63.2% to 58.2% which had a negative impact of $28,598 on earnings. It's hard to get bent out of shape about that because VirTra lumps all of it's compensation in G&A expense so gross profit reflects revenues less direct costs of building product. Their sales are "delivered" prices that include shipping and installation. Who isn't getting reamed by increased shipping costs and airfares these days?

What gets me though is that G&A costs are $366,618 higher than for the same period a year ago. That is telling me that in addition to the costs of building and deliverying the systems, 64.1% of each additional sales dollar is incurring expenses in additional to the cost of building a system.

A 60% gross margin is great unless and until it costs another 64% in expenses to grow the sales. I have a hard time equating selling a dollar for 78 cents as the baseline for a turnaround.

By the company's own disclosure, the increment in expense is entirely attributed to additional compensation related costs. What that is telling me, and I consider myself part of "The Market" is that there is a "me first" culture there, that they draw their pay and when they get some sales they bonus themselves. Have they lost sight of the fact that something is supposed to be produced for that base pay. I recall from an earlier disclosure that directors fees are $10,000 per quarter per director. That equates to $160,000/year. The financials show a YTD expense of over $400,000 for options alone.

In the longer term, it makes one wonder whether their pricing is adequate. If they're marking up component costs alone 250% in order to generate a 60% margin, is that adequate in light of the incremental expense per incremental dollar of sales?