Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 13, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | VirTra, Inc | |
Entity Central Index Key | 1,085,243 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 7,911,807 | |
Trading Symbol | VTSI | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
Condensed Balance Sheets (Unaud
Condensed Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 7,873,980 | $ 5,080,445 |
Accounts receivable, net | 1,871,919 | 1,478,135 |
Notes receivable, current | 507,095 | |
Inventory, net | 1,868,047 | 1,720,438 |
Unbilled revenue | 471,005 | 1,222,047 |
Prepaid expenses and other current assets | 736,329 | 586,439 |
Total current assets | 13,328,375 | 10,087,504 |
Property and equipment, net | 752,148 | 677,273 |
Notes receivable, long-term | 171,715 | |
Deferred tax assets, net | 1,850,000 | 2,710,182 |
Investment in That's Eatertainment Corp. (f/k/a MREC) | 1,240,793 | 1,374,933 |
TOTAL ASSETS | 17,343,031 | 14,849,892 |
CURRENT LIABILITIES | ||
Accounts payable | 449,707 | 535,795 |
Accrued compensation and related costs | 1,046,674 | 593,491 |
Accrued expenses and other current liabilities | 653,272 | 243,573 |
Note payable, current | 11,250 | 11,250 |
Deferred revenue, short-term | 1,900,167 | 2,391,905 |
Total current liabilities | 4,061,070 | 3,776,014 |
Long-term liabilities: | ||
Deferred revenue, long-term | 788,126 | 601,007 |
Deferred rent liability | 34,352 | 75,444 |
Note payable, long-term | 11,250 | |
Total long-term liabilities | 822,478 | 687,701 |
Total liabilities | 4,883,548 | 4,463,715 |
Commitments and contingencies | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, $0.0001 par value; 2,500,000 authorized; no shares issued or outstanding | ||
Common stock, value | 794 | 793 |
Treasury stock at cost; 23,467 shares outstanding as of September 30, 2018 and December 31, 2017 | (112,109) | (112,109) |
Additional paid-in capital | 14,939,718 | 14,954,563 |
Accumulated deficit | (2,368,920) | (4,457,070) |
Total stockholders' equity | 12,459,483 | 10,386,177 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 17,343,031 | 14,849,892 |
Class A Common Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Common stock, value | ||
Class B Common Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Common stock, value |
Condensed Balance Sheets (Una_2
Condensed Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 2,500,000 | 2,500,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 7,935,274 | 7,927,774 |
Common stock, shares outstanding | 7,911,807 | 7,904,307 |
Treasury stock, shares outstanding | 23,467 | 23,467 |
Class A Common Stock [Member] | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 2,500,000 | 2,500,000 |
Common stock, shares issued | ||
Common stock, shares outstanding | ||
Class B Common Stock [Member] | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 7,500,000 | 7,500,000 |
Common stock, shares issued | ||
Common stock, shares outstanding |
Condensed Statements of Operati
Condensed Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
REVENUES | ||||
Total revenue | $ 3,546,586 | $ 4,686,445 | $ 15,495,697 | $ 14,147,297 |
Cost of sales | 1,461,754 | 1,573,384 | 5,452,906 | 4,853,796 |
Gross profit | 2,084,832 | 3,113,061 | 10,042,791 | 9,293,501 |
OPERATING EXPENSES | ||||
General and administrative | 1,681,668 | 2,050,395 | 6,167,952 | 5,515,455 |
Research and development | 323,626 | 310,848 | 996,908 | 931,954 |
Net operating expense | 2,005,294 | 2,361,243 | 7,164,860 | 6,447,409 |
Income from operations | 79,538 | 751,818 | 2,877,931 | 2,846,092 |
OTHER INCOME (EXPENSE) | ||||
Other income | 21,032 | 14,813 | 86,508 | 52,410 |
Other expense | (3,570) | (221) | (4,542) | (4,113) |
Net other income | 17,462 | 14,592 | 81,966 | 48,297 |
Income before income taxes | 97,000 | 766,410 | 2,959,897 | 2,894,389 |
Income tax expense | 36,000 | 24,285 | 871,747 | 102,285 |
NET INCOME | $ 61,000 | $ 742,125 | $ 2,088,150 | $ 2,792,104 |
Earnings per common share | ||||
Basic | $ 0.01 | $ 0.09 | $ 0.26 | $ 0.35 |
Diluted | $ 0.01 | $ 0.09 | $ 0.25 | $ 0.33 |
Weighted average shares outstanding | ||||
Basic | 7,911,807 | 7,918,114 | 7,907,864 | 7,924,475 |
Diluted | 8,247,841 | 8,339,283 | 8,256,098 | 8,418,463 |
Net Sales [Member] | ||||
REVENUES | ||||
Total revenue | $ 3,503,868 | $ 4,645,593 | $ 14,977,397 | $ 13,902,215 |
Royalties/Licensing Fees [Member] | ||||
REVENUES | ||||
Total revenue | $ 42,718 | $ 40,852 | $ 518,300 | $ 245,082 |
Condensed Statement of Stockhol
Condensed Statement of Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2018 - USD ($) | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-In Capital [Member] | Treasury Stock [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2017 | $ 793 | $ 14,954,563 | $ (112,109) | $ (4,457,070) | $ 10,386,177 | |
Balance, shares at Dec. 31, 2017 | 7,927,774 | |||||
Stock options exercised | $ 1 | 10,499 | $ 10,500 | |||
Stock options exercised, shares | 7,500 | 7,500 | ||||
Stock options repurchased | (32,000) | $ (32,000) | ||||
Stock options repurchased, shares | ||||||
Stock based compensation | 6,656 | 6,656 | ||||
Stock based compensation, shares | ||||||
Net income | 2,088,150 | 2,088,150 | ||||
Balance at Sep. 30, 2018 | $ 794 | $ 14,939,718 | $ (112,109) | $ (2,368,920) | $ 12,459,483 | |
Balance, shares at Sep. 30, 2018 | 7,935,274 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities: | ||
Net income | $ 2,088,150 | $ 2,792,104 |
Adjustments to reconcile net income to net cash provided by operating activities | ||
Impairment of investment in That's Eatertainment Corp. (f/k/a MREC) | 134,140 | |
Depreciation | 217,952 | 204,527 |
Stock compensation | 6,656 | 160,351 |
Compensation associated with stock option repurchase | 44,900 | 115,550 |
Changes in operating assets and liabilities: | ||
Accounts and notes receivable | (1,072,594) | 233,241 |
Inventory | (147,609) | (369,206) |
Deferred taxes | 860,181 | |
Unbilled revenue | 751,042 | (1,617,346) |
Prepaid expenses and other current assets | (149,890) | (410,221) |
Accounts payable and other accrued expenses | 776,795 | 787,795 |
Deferred revenue and deferred rent | (345,711) | 653,168 |
Net cash provided by operating activities | 3,164,012 | 2,549,964 |
Cash flows from investing activities: | ||
Purchase of property and equipment | (292,827) | (83,410) |
Net cash used in investing activities | (292,827) | (83,410) |
Cash flows from financing activities: | ||
Treasury stock | (96,633) | |
Repurchase of stock options | (76,900) | (182,550) |
Repurchase of stock warrants | (773,495) | |
N/P Payable - Profiles | (11,250) | (11,250) |
Stock options exercised | 10,500 | |
Net cash used in financing activities | (77,650) | (1,063,928) |
Net increase in cash | 2,793,535 | 1,402,626 |
Cash, beginning of period | 5,080,445 | 3,703,579 |
Cash, end of period | 7,873,980 | 5,106,205 |
Supplemental disclosure of cash flow information: | ||
Cash paid: Taxes | 102,543 | 78,000 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Conversion of accounts to notes receivable | 693,044 | |
Investment in That's Eatertainment (f/k/a/ MREC) | $ 1,516,246 |
Organization, Business Operatio
Organization, Business Operations and Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Organization, Business Operations and Significant Accounting Policies | NOTE 1. ORGANIZATION, BUSINESS OPERATIONS and significant accounting policies VirTra, Inc. (the “Company” or “VirTra”), located in Tempe, Arizona, is engaged in the sale and development of judgmental use of force training simulators and firearms training simulators for law enforcement, military and commercial uses. The Company sells simulators and related products worldwide through a direct sales force and international distribution partners. The original business started in 1993 as Ferris Productions, Inc. In September 2001, Ferris Productions, Inc. merged with GameCom, Inc. to ultimately become VirTra Systems, Inc., a Texas corporation. Effective as of October 1, 2016, the Company completed a conversion from a Texas corporation to a Nevada corporation pursuant to a plan that was approved by the Company’s Board of Directors on June 23, 2016 and by its shareholders on September 16, 2016. As part of the Plan of Conversion, the Company filed Articles of Incorporation in Nevada, whereby it changed its name from VirTra Systems, Inc. to VirTra, Inc. and revised its capitalization. Effective October 20, 2016, the Company effected a 1-for-10 reverse stock split of its issued and outstanding common stock and effective February 12, 2018, the Company effected a 1-for-2 reverse stock split of its issued and outstanding common stock (together, the “Reverse Stock Splits”). All references to shares of the Company’s common stock in this report refer to the number of shares of common stock after giving effect to the Reverse Stock Splits. Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Certain information and note disclosures normally included in complete annual financial statements prepared in accordance with GAAP have been condensed or omitted. However, the Company believes that the disclosures included in these unaudited condensed financial statements are adequate to make the information presented not misleading. In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments, which include normal recurring adjustments, considered necessary for a fair presentation of such interim results. The results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results for any subsequent period. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2018. 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 at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant accounting estimates in these financial statements include valuation assumptions for share-based payments, the allowance for doubtful accounts receivable and notes receivable, reserves of obsolete and slow-moving inventory, the accrual for warranty reserves, the carrying value of long-lived assets, the income tax valuation allowance and the carrying value of cost basis investments. Reclassifications Certain reclassifications have been made to the 2017 financial statements to conform to the 2018 financial statement presentation. These reclassifications had no effect on net earnings or cash flows as previously reported. Significant Accounting Policies Aside from the adoption of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers,” as described below, there have been no other material changes to the significant accounting policies or recent accounting pronouncements previously disclosed in the annual financial statements in the Company’s Form 10-K for the fiscal year ended December 31, 2017. Revenue Recognition The Company records revenue from contracts with customers in accordance with ASC Topic 606, “Revenue from Contracts with Customers.” 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. The Company’s primary sources of revenue are derived from simulator and accessories sales, training and installation, the sale of customizable software and the sale of extended warranties. Sales discounts and bad debt allowance are presented in the financial statements as reductions in determining net revenues. Credit sales are recorded as current assets. Prepaid deposits received at the time of sale and extended warranties purchased are recorded as current liabilities until earned. The following briefly summarizes the nature of our performance obligations and revenue recognition: Performance Obligation Method of Recognition Simulator and accessories Upon transfer of control Installation and training Upon completion or over period of services being rendered Extended service-type warranty Deferred and recognized over life of extended warranty Customized software Upon transfer of control 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, contract assets and liabilities associated with the revenue recognized and the following table illustrates the disaggregation disclosure by customer’s location and performance obligation. Three Months Ended September 30, 2018 2017 Domestic International Total Domestic International Total Simulators and accessories $ 2,836,375 $ 14,352 $ 2,850,727 $ 2,363,067 $ 1,418,263 $ 3,781,330 Warranties 462,182 33,141 495,323 1,189,378 (648,319 ) 541,059 Customized software 55,000 - 55,000 313,113 92,400 405,513 Installation and training 102,818 - 102,818 (93,238 ) 10,929 (82,309 ) Licensing and royalties 42,718 - 42,718 40,852 - 40,852 Total Revenue $ 3,499,093 $ 47,493 $ 3,546,586 $ 3,813,172 $ 873,273 $ 4,686,445 Nine Months Ended September 30, 2018 2017 Domestic International Total Domestic International Total Simulators and accessories $ 10,697,520 $ 1,959,217 $ 12,656,737 $ 9,240,301 $ 2,382,883 $ 11,623,184 Warranties 1,370,318 148,226 1,518,544 1,189,378 179,422 1,368,800 Customized software 456,673 11,940 468,613 467,713 200,160 667,873 Installation and training 250,988 82,515 333,503 273,093 (30,735 ) 242,358 Licensing and royalties 518,300 - 518,300 245,082 - 245,082 Total Revenue $ 13,293,799 $ 2,201,898 $ 15,495,697 $ 11,415,567 $ 2,731,730 $ 14,147,297 Adoption of New Accounting Standards Between May 2014 and December 2016, the FASB issued several Accounting Standards Updates (each, an “ASU” and collectively, “ASUs”) on Revenue from Contracts with Customers (Topic 606). These ASUs supersede nearly all existing revenue recognition guidance under current GAAP and requires an entity to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The standards are effective for annual periods beginning after December 15, 2017, and interim periods therein, and permit the use of either the full retrospective or modified retrospective transition method. This standard was adopted on January 1, 2018 and the Company elected to use the modified retrospective transition method which requires application of ASU 2014-09 to uncompleted contracts at the date of adoption. The adoption of the ASUs under 2014-09 did not have a material impact on the financial statements. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”), which requires that equity investments, except for those accounted for under the equity method or those that result in consolidation of the investee, be measured at fair value, with subsequent changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. This standard was adopted on January 1, 2018, including all interim reporting periods within the fiscal year. The Company wrote-down its investment in That’s Eatertainment Corp. (“TEC”), f/k/a Modern Round Entertainment Corp. (“MREC”), a related party, to fair value in 2017. The Company believes the adoption of ASU 2016-01 did not have a material impact on its financial statements. Upon adoption, the Company has elected to utilize the cost minus impairment approach as the investment in TEC does not have a readily determinable fair value as of the reporting date. See Note 6. Collaboration Agreement. In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force),” to provide guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. The amendments should be applied using a retrospective transition method, and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of 2016-18 did not have a material impact on the financial statement presentation. In February 2017, the FASB issued ASU No. 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets,” to clarify the scope of Subtopic 610-20, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets,” and to add guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. The amendments are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, which is the same time as the amendments in ASU No. 2014-09, and early adoption is permitted. The adoption of 2017-05 did not have a material impact on the financial statements. In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,” to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, “Compensation—Stock Compensation,” to a change to the terms or conditions of a share-based payment award. The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. The amendments are effective for fiscal years beginning after December 15, 2017 and should be applied prospectively to an award modified on or after the adoption date. The adoption of 2017-09 did not have a material impact on the financial statements. Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02 – “Leases (Topic 842),” which requires lessees to put most leases on their balance sheets by recognizing lease assets and lease liabilities for those leases classified as operating leases under previous guidance. This ASU will be effective for the Company on January 1, 2019, with early adoption permitted. While the Company is evaluating the impact, adoption of ASU 2016-02 is expected to have a significant impact on the Company’s Condensed Balance Sheet with no material impact to its Condensed Statement of Operations. In July 2017, the FASB issued ASU No. 2017-11 – “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815) Part I. Accounting for Certain Financial Instruments with Down Round Features and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.” Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down round features. Part II simply replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. This ASU is effective for public companies for the annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, with early adoption permitted. The Company does not expect 2017-11 to have a material impact on the financial statements. In June 2018, the FASB issued ASU No. 2018-07, “Compensation–Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” to simplify the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contract with Customers. The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year, with early adoption permitted. The Company does not expect 2018-07 to have a material impact on the financial statements. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which provides another transition method in addition to the existing transition method by allowing entities to initially apply the new leases standard at the adoption date (such as January 1, 2019, for calendar-year-end public business entities) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests. This additional transition method changes only “when” an entity is required to initially apply the transition requirements of the new lease standard; it does not change “how” those requirements apply. For entities that have not adopted Topic 842 before the issuance of this ASU, the effective date and transition requirements for the amendments are the same as the effective date and transition requirements in ASU 2016-02. The Company does not expect 2018-11 to have a material impact on the financial statements. |
Notes Receivable
Notes Receivable | 9 Months Ended |
Sep. 30, 2018 | |
Receivables [Abstract] | |
Notes Receivable | NOTE 2. NOTES RECEIVABLE An unsecured promissory note was executed on March 23, 2018 by a customer converting its past-due trade receivable from the sale of goods and services in the amount of $400,906 due in full on or before February, 2020. The note bears interest at the rate of ten percent (10%) per annum and required installment payments of $20,000 principal and interest are due monthly on the 21 st The Company accepted an unsecured convertible promissory note (the “Convertible Note”) from TEC in the amount of $292,138 for a portion of their minimum royalty payment due as of May 31, 2018. The note bears interest at the rate of five percent (5%) per annum and contains a provision requiring remittance of not less than 20% of the net proceeds of any private or public offering of its securities in reduction of the Convertible Note. The note has a conversion right, at the sole discretion of the Company, to convert the outstanding balance of principal and accrued interest at any time for shares of common stock of TEC. Prior to the due date, the Company may elect to convert the Convertible Note for shares of common stock in TEC at a twenty-five percent (25%) discount to the price of shares sold to the public in a public offering in connection with a go-public transaction. The issuance of common stock upon conversion shall be made without charge to the Company. No fractional shares shall be issued upon conversion and in lieu of fractional shares, TEC will pay the Company the amount of any obligation that is not converted. Any unpaid balance of principal and accrued interest becomes due and collectible on the earlier of (i) August 1, 2019 (maturity date), or (ii) if declared due and payable in the event of Default. The note principle and accrued interest due as of September 30, 2018 was $294,573, both are classified as current. No reserve for uncollectability has been recorded for the three and nine months ended September 30, 2018. See Note 6. |
Inventory
Inventory | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Inventory | NOTE 3. INVENTORY Inventory, net consisted of the following as of: September 30, 2018 December 31, 2017 Raw materials $ 1,973,078 $ 1,825,469 Reserve (105,031 ) (105,031 ) Inventory, net $ 1,868,047 $ 1,720,438 |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | NOTE 4. Property and Equipment Property and equipment, net consisted of the following as of: September 30, 2018 December 31, 2017 Computer equipment $ 1,054,004 $ 861,925 Furniture and office equipment 207,921 202,867 Machinery and equipment 1,021,188 925,494 Leasehold improvements 324,313 324,313 Total property and equipment 2,607,426 2,314,599 Less: Accumulated depreciation (1,855,278 ) (1,637,326 ) Property and equipment, net $ 752,148 $ 677,273 Depreciation expense was $74,746 and $65,570 for the three months ended September 30, 2018 and 2017, respectively. Depreciation expense was $217,952 and $204,527 for the nine months ended September 30, 2018 and 2017, respectively. |
Accrued Expenses
Accrued Expenses | 9 Months Ended |
Sep. 30, 2018 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | NOTE 5. Accrued Expenses Accrued compensation and related costs consisted of the following as of: September 30, 2018 December 31, 2017 Salaries and wages payable $ 316,957 $ 115,481 401(k) contributions payable 13,520 30,532 Accrued paid time off (PTO) 257,623 257,751 Profit sharing payable 458,574 189,727 Total accrued compensation and related costs $ 1,046,674 $ 593,491 Accrued expenses and other current liabilities consisted of the following as of: September 30, 2018 December 31, 2017 Manufacturer’s warranties $ 390,488 $ 135,000 Loss contingencies 40,000 - Taxes payable 222,784 108,573 Total accrued expenses and other current liabilities $ 653,272 $ 243,573 |
Collaboration Agreement
Collaboration Agreement | 9 Months Ended |
Sep. 30, 2018 | |
Collaboration Agreement | |
Collaboration Agreement | NOTE 6. Collaboration Agreement On January 16, 2015, the Company entered into a Co-Venture Agreement (the “Co-Venture Agreement”) with Modern Round, LLC (“MR”), a wholly-owned subsidiary of TEC, formerly MREC, a related party. TEC is a restaurant and entertainment concept centered on its indoor virtual reality shooting experience. The Co-Venture Agreement provides TEC access to certain software and equipment relating to the Company’s products in exchange for royalties. The Co-Venture Agreement grants TEC an exclusive non-transferrable license to use the Company’s technology solely for use at locations to operate the concept, as defined in the Co-Venture Agreement. Throughout the duration of the Co-Venture Agreement, TEC will pay the Company a royalty based on gross revenue, as defined and subject to certain minimum royalties commencing with the first twelve-month period subsequent to the respective milestone date of June 1, 2017. If the total royalty payments for locations in the United States and Canada together do not total at least the minimum royalty amount specified in the agreement, TEC may pay to VirTra the difference between the amount of total royalty payments and the minimum specified in the agreement to maintain exclusivity. On August 16, 2017, the Company entered into the first amendment to the Co-Venture Agreement to permit TEC to sublicense the VirTra Technology to third party operators of stand-alone location-based entertainment companies. TEC agreed to pay the Company royalties for any such sublicenses in an amount equal to 10% of the revenue paid to TEC in cases where TEC pays for the cost of the equipment for such location or 14% of the revenue paid to TEC in cases where it does not pay for the cost of the equipment. For the three months ended September 30, 2018 and 2017, respectively, the Company recognized license fee income (royalties) from TEC of $41,038 and $40,852. For the nine months ended September 30, 2018 and 2017, respectively, the Company recognized license fee income (royalties) from TEC of $512,545 and $245,082. As a result of entering into the Co-Venture Agreement and related amendment, the Company holds, as of September 30, 2018, 3,353,495 shares of TEC common stock representing approximately 8.4% of the issued and outstanding common shares of TEC. The investment generally would be categorized within Level 3 of the fair value hierarchy. The Company determined a bona fide offer by TEC to sell investments for an amount less than the carrying amount of the Company’s investment occurred and an impairment loss of $134,140 was taken in June, 2018, to write-down the TEC investment to the estimated fair value. The Company recorded its investment at the estimated fair value of $1,240,793 and $1,374,933 at September 30, 2018 and December 31, 2017, respectively. During the three and nine months ended September 30, 2018, the Company recognized an impairment loss on its investment in TEC of $134,140 as operating expense. In addition, at September 30, 2018, the Company holds a warrant to purchase 153,459 shares of TEC common stock at an exercise price of $0.41 per share. This warrant became exercisable on the date of grant and expires on the tenth anniversary of the date of grant, if not earlier pursuant to the terms of the option. On July 23, 2018, the Company entered into the second amendment to the Co-Venture Agreement with TEC to (i) confirm the minimum royalty deficiency benefit due for the royalty period ended May 31, 2018; (ii) establish payment terms for the minimum royalty deficiency benefit due, to include both cash and promissory note; (iii) clarify the exclusivity provisions of the Agreement; and (iv) amend the minimum royalty calculations to only TEC branded facilities. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 7. Related Party Transactions During the three and nine months ended September 30, 2018 and 2017, respectively, the Company issued the following options to purchase shares of the Company’s common stock to the Company’s CEO, COO, members of the Board of Directors and senior staff. All options expire within seven years of grant date. Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Number of stock options granted - 13,750 - 41,250 Weighted average purchase price $ - $ 3.76 $ - $ 4.42 During the three and nine months ended September 30, 2018 and 2017, respectively, the Company redeemed stock options from the CEO, COO and an Executive Vice President that had previously been awarded. As a result, the Company recorded additional compensation expense as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Number of stock options redeemed - 30,000 22,500 55,000 Redemption value $ - $ 97,300 $ 76,900 $ 182,550 Amount previously expensed (2011) - (32,000 ) (32,000) (67,000 ) Additional compensation expense $ - $ 65,300 $ 44,900 $ 115,550 During the three and nine months ended September 30, 2018 and 2017, respectively, the CEO exercised stock options that had previously been awarded. As a result, the Company recorded additional equity as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Number of stock options exercised - - 7,500 - Exercise price per share - - $ 1.40 - Exercise value $ - $ - $ 10,500 $ - |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 8. Commitments and Contingencies The Company currently leases its machine shop building located at 2169 East Fifth St., Tempe, Arizona 85284. The current lease obligation expires in November, 2018. The Company plans to relocate its machine shop from the Fifth St. location to the same complex that its corporate office is located. On May 18, 2018, the Company executed a lease amendment for its existing corporate office space located at 7970 South Kyrene Road, Tempe, Arizona 85284, to extend its lease obligation from September 2019 to September 2023. Under the terms of the lease amendment, the Company also leased a new machine shop building located at 7910 South Kyrene Road, Tempe, Arizona 85284 to become effective upon completion of leasehold improvements on or after October 1, 2018 with a lease obligation to September 2023. Future minimum lease payments as of September 30, 2018 under non-cancelable operating leases are as follows: Building Lease Schedule 2018 $ 84,967 2019 345,331 2020 362,703 2021 373,525 2022 384,776 2023 295,091 Total $ 1,846,393 The Company has a deferred rent liability of $34,352 and $75,444 as of September 30, 2018 and December 31, 2017, respectively, relative to the increasing future minimum lease payments. Rent expense, including pro-rata share of common area charges was $120,655 and $117,068 for the three months ended September 30, 2018 and 2017, respectively. Rent expense, including pro-rate share of common are charges was $356,513 and $352,899 for the nine months ended September 30, 2018 and 2017, respectively. General or Threatened Litigation From time to time, the Company is notified of threatened 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. As of September 30, 2018, the Company has initiated a declaratory judgment action in the Superior Court of the State of Arizona |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | Note 9. Stockholders’ Equity Stock Options The Company previously issued non-qualified incentive stock options to key employees, officers and directors under a Stock Option Compensation plan approved by the Board of Directors in 2009. The plan remains in effect for ten (10) years from the Effective Date or unless terminated earlier by the Company. Terms of the option grants are at the discretion of the Board of Directors but historically have been seven years. See Note 7. Related Party Transactions for discussion of the issuance of stock options for shares of the Company’s common stock during the three and nine months ended September 30, 2018 and 2017. 2017 Equity Incentive Plan On August 23, 2017 and October 6, 2017, respectively, the board of directors and shareholders approved the 2017 Equity Incentive Plan (the “Equity Plan”). The Equity Plan is intended to make available incentives that will assist us to attract, retain and motivate employees, including officers, consultants and directors. We may provide these incentives through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units and other cash-based or stock-based awards. A total of 1,187,500 shares of our common stock was initially authorized and reserved for issuance under the Equity Plan. This reserve will automatically increase on January 1, 2018 and each subsequent anniversary through 2027, by an amount equal to the smaller of (a) 3% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the board. On January 1, 2018, the amount authorized and reserved increased to 1,424,630 shares. Awards may be granted under the Equity Plan to our employees, including officers, directors or consultants or those of any present or future parent or subsidiary corporation or other affiliated entity. All awards will be evidenced by a written agreement between us and the holder of the award and may include any of the following: stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units and cash-based awards and other stock-based awards. To date, there have been no awards granted under this plan. The assumptions used in the Black-Scholes-Merton model for the periods ended September 30, 2018 and 2017, and the resulting estimates of weighted-average fair value per share of options granted during those periods, are as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Volatility - 96% to 98% - 96% to 101% Risk-free interest rate - 1-2% - 1-2% Expected term - 7 years - 7 years The following table summarizes all compensation plan stock options for the three and nine months ended September 30: Three Months Ended September 30, 2018 2017 Number of Weighted Number of Weighted Stock Options Exercise Price Stock Options Exercise Price Options outstanding, beginning of period 496,667 $ 1.82 560,417 $ 1.68 Granted - - 13,750 3.76 Redeemed - - (30,000 ) 1.20 Exercised - - - - Expired / terminated - - - - Options outstanding, end of period 496,667 $ 1.82 544,167 $ 1.76 Options exercisable, end of period 496,009 $ 1.81 534,167 $ 1.78 Nine Months Ended September 30, 2018 2017 Number of Weighted Number of Weighted Stock Options Exercise Price Stock Options Exercise Price Options outstanding, beginning of period 531,667 $ 1.80 557,917 $ 1.60 Granted - - 41,250 4.42 Redeemed (22,500 ) 1.70 (55,000 ) 1.22 Exercised (7,500 ) 1.40 - - Expired / terminated (5,000 ) 1.40 - - Options outstanding, end of period 496,667 $ 1.81 544,167 $ 1.85 Options exercisable, end of period 496,009 $ 1.81 534,167 $ 1.87 Stock compensation expense related to vesting and granting of stock options was $1,796 and $42,376 for the three months ended September 30, 2018 and 2017, respectively. Stock compensation expense was $6,656 and $160,351 for the nine months ended September 30, 2018 and 2017, respectively. There are 658 non-vested stock options and unrecognized stock-based compensation expense of $5,264 as of September 30, 2018 that will be fully vested and expensed by October 2018. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 10. SUBSEQUENT EVENTS On October 23, 2018, the Company executed a lease addendum for the 2169 E. Fifth Street location to extend the lease term for two (2) additional months to January 31, 2019, with all other lease terms remaining the same. See Note 8. Commitments and Contingencies. On October 29, 2018, the Company redeemed from an employee 10,000 previously awarded expiring stock options for cash total $29,500, of which $14,000 had previously been expensed in 2011, with the balance of $15,500 being recognized as additional compensation cost in October 2018. See Note 9. Stockholder’s Equity. |
Organization, Business Operat_2
Organization, Business Operations and Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Certain information and note disclosures normally included in complete annual financial statements prepared in accordance with GAAP have been condensed or omitted. However, the Company believes that the disclosures included in these unaudited condensed financial statements are adequate to make the information presented not misleading. In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments, which include normal recurring adjustments, considered necessary for a fair presentation of such interim results. The results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results for any subsequent period. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2018. |
Use of Estimates | 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 at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant accounting estimates in these financial statements include valuation assumptions for share-based payments, the allowance for doubtful accounts receivable and notes receivable, reserves of obsolete and slow-moving inventory, the accrual for warranty reserves, the carrying value of long-lived assets, the income tax valuation allowance and the carrying value of cost basis investments. |
Reclassifications | Reclassifications Certain reclassifications have been made to the 2017 financial statements to conform to the 2018 financial statement presentation. These reclassifications had no effect on net earnings or cash flows as previously reported. |
Significant Accounting Policies | Significant Accounting Policies Aside from the adoption of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers,” as described below, there have been no other material changes to the significant accounting policies or recent accounting pronouncements previously disclosed in the annual financial statements in the Company’s Form 10-K for the fiscal year ended December 31, 2017. |
Revenue Recognition | Revenue Recognition The Company records revenue from contracts with customers in accordance with ASC Topic 606, “Revenue from Contracts with Customers.” 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. The Company’s primary sources of revenue are derived from simulator and accessories sales, training and installation, the sale of customizable software and the sale of extended warranties. Sales discounts and bad debt allowance are presented in the financial statements as reductions in determining net revenues. Credit sales are recorded as current assets. Prepaid deposits received at the time of sale and extended warranties purchased are recorded as current liabilities until earned. The following briefly summarizes the nature of our performance obligations and revenue recognition: Performance Obligation Method of Recognition Simulator and accessories Upon transfer of control Installation and training Upon completion or over period of services being rendered Extended service-type warranty Deferred and recognized over life of extended warranty Customized software Upon transfer of control |
Disaggregation of Revenue | 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, contract assets and liabilities associated with the revenue recognized and the following table illustrates the disaggregation disclosure by customer’s location and performance obligation. Three Months Ended September 30, 2018 2017 Domestic International Total Domestic International Total Simulators and accessories $ 2,836,375 $ 14,352 $ 2,850,727 $ 2,363,067 $ 1,418,263 $ 3,781,330 Warranties 462,182 33,141 495,323 1,189,378 (648,319 ) 541,059 Customized software 55,000 - 55,000 313,113 92,400 405,513 Installation and training 102,818 - 102,818 (93,238 ) 10,929 (82,309 ) Licensing and royalties 42,718 - 42,718 40,852 - 40,852 Total Revenue $ 3,499,093 $ 47,493 $ 3,546,586 $ 3,813,172 $ 873,273 $ 4,686,445 Nine Months Ended September 30, 2018 2017 Domestic International Total Domestic International Total Simulators and accessories $ 10,697,520 $ 1,959,217 $ 12,656,737 $ 9,240,301 $ 2,382,883 $ 11,623,184 Warranties 1,370,318 148,226 1,518,544 1,189,378 179,422 1,368,800 Customized software 456,673 11,940 468,613 467,713 200,160 667,873 Installation and training 250,988 82,515 333,503 273,093 (30,735 ) 242,358 Licensing and royalties 518,300 - 518,300 245,082 - 245,082 Total Revenue $ 13,293,799 $ 2,201,898 $ 15,495,697 $ 11,415,567 $ 2,731,730 $ 14,147,297 |
Adoption of New Accounting Standards | Adoption of New Accounting Standards Between May 2014 and December 2016, the FASB issued several Accounting Standards Updates (each, an “ASU” and collectively, “ASUs”) on Revenue from Contracts with Customers (Topic 606). These ASUs supersede nearly all existing revenue recognition guidance under current GAAP and requires an entity to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The standards are effective for annual periods beginning after December 15, 2017, and interim periods therein, and permit the use of either the full retrospective or modified retrospective transition method. This standard was adopted on January 1, 2018 and the Company elected to use the modified retrospective transition method which requires application of ASU 2014-09 to uncompleted contracts at the date of adoption. The adoption of the ASUs under 2014-09 did not have a material impact on the financial statements. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”), which requires that equity investments, except for those accounted for under the equity method or those that result in consolidation of the investee, be measured at fair value, with subsequent changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. This standard was adopted on January 1, 2018, including all interim reporting periods within the fiscal year. The Company wrote-down its investment in That’s Eatertainment Corp. (“TEC”), f/k/a Modern Round Entertainment Corp. (“MREC”), a related party, to fair value in 2017. The Company believes the adoption of ASU 2016-01 did not have a material impact on its financial statements. Upon adoption, the Company has elected to utilize the cost minus impairment approach as the investment in TEC does not have a readily determinable fair value as of the reporting date. See Note 6. Collaboration Agreement. In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force),” to provide guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. The amendments should be applied using a retrospective transition method, and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of 2016-18 did not have a material impact on the financial statement presentation. In February 2017, the FASB issued ASU No. 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets,” to clarify the scope of Subtopic 610-20, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets,” and to add guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. The amendments are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, which is the same time as the amendments in ASU No. 2014-09, and early adoption is permitted. The adoption of 2017-05 did not have a material impact on the financial statements. In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,” to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, “Compensation—Stock Compensation,” to a change to the terms or conditions of a share-based payment award. The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. The amendments are effective for fiscal years beginning after December 15, 2017 and should be applied prospectively to an award modified on or after the adoption date. The adoption of 2017-09 did not have a material impact on the financial statements. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02 – “Leases (Topic 842),” which requires lessees to put most leases on their balance sheets by recognizing lease assets and lease liabilities for those leases classified as operating leases under previous guidance. This ASU will be effective for the Company on January 1, 2019, with early adoption permitted. While the Company is evaluating the impact, adoption of ASU 2016-02 is expected to have a significant impact on the Company’s Condensed Balance Sheet with no material impact to its Condensed Statement of Operations. In July 2017, the FASB issued ASU No. 2017-11 – “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815) Part I. Accounting for Certain Financial Instruments with Down Round Features and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.” Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down round features. Part II simply replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. This ASU is effective for public companies for the annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, with early adoption permitted. The Company does not expect 2017-11 to have a material impact on the financial statements. In June 2018, the FASB issued ASU No. 2018-07, “Compensation–Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” to simplify the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contract with Customers. The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year, with early adoption permitted. The Company does not expect 2018-07 to have a material impact on the financial statements. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which provides another transition method in addition to the existing transition method by allowing entities to initially apply the new leases standard at the adoption date (such as January 1, 2019, for calendar-year-end public business entities) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests. This additional transition method changes only “when” an entity is required to initially apply the transition requirements of the new lease standard; it does not change “how” those requirements apply. For entities that have not adopted Topic 842 before the issuance of this ASU, the effective date and transition requirements for the amendments are the same as the effective date and transition requirements in ASU 2016-02. The Company does not expect 2018-11 to have a material impact on the financial statements. |
Organization, Business Operat_3
Organization, Business Operations and Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Schedule of Disaggregation of Revenues | 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, contract assets and liabilities associated with the revenue recognized and the following table illustrates the disaggregation disclosure by customer’s location and performance obligation. Three Months Ended September 30, 2018 2017 Domestic International Total Domestic International Total Simulators and accessories $ 2,836,375 $ 14,352 $ 2,850,727 $ 2,363,067 $ 1,418,263 $ 3,781,330 Warranties 462,182 33,141 495,323 1,189,378 (648,319 ) 541,059 Customized software 55,000 - 55,000 313,113 92,400 405,513 Installation and training 102,818 - 102,818 (93,238 ) 10,929 (82,309 ) Licensing and royalties 42,718 - 42,718 40,852 - 40,852 Total Revenue $ 3,499,093 $ 47,493 $ 3,546,586 $ 3,813,172 $ 873,273 $ 4,686,445 Nine Months Ended September 30, 2018 2017 Domestic International Total Domestic International Total Simulators and accessories $ 10,697,520 $ 1,959,217 $ 12,656,737 $ 9,240,301 $ 2,382,883 $ 11,623,184 Warranties 1,370,318 148,226 1,518,544 1,189,378 179,422 1,368,800 Customized software 456,673 11,940 468,613 467,713 200,160 667,873 Installation and training 250,988 82,515 333,503 273,093 (30,735 ) 242,358 Licensing and royalties 518,300 - 518,300 245,082 - 245,082 Total Revenue $ 13,293,799 $ 2,201,898 $ 15,495,697 $ 11,415,567 $ 2,731,730 $ 14,147,297 |
Inventory (Tables)
Inventory (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory, Net | Inventory, net consisted of the following as of: September 30, 2018 December 31, 2017 Raw materials $ 1,973,078 $ 1,825,469 Reserve (105,031 ) (105,031 ) Inventory, net $ 1,868,047 $ 1,720,438 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment, Net | Property and equipment, net consisted of the following as of: September 30, 2018 December 31, 2017 Computer equipment $ 1,054,004 $ 861,925 Furniture and office equipment 207,921 202,867 Machinery and equipment 1,021,188 925,494 Leasehold improvements 324,313 324,313 Total property and equipment 2,607,426 2,314,599 Less: Accumulated depreciation (1,855,278 ) (1,637,326 ) Property and equipment, net $ 752,148 $ 677,273 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Compensation and Related Costs | Accrued compensation and related costs consisted of the following as of: September 30, 2018 December 31, 2017 Salaries and wages payable $ 316,957 $ 115,481 401(k) contributions payable 13,520 30,532 Accrued paid time off (PTO) 257,623 257,751 Profit sharing payable 458,574 189,727 Total accrued compensation and related costs $ 1,046,674 $ 593,491 |
Schedule of Accrued Expenses and Other Current Liabilities | Accrued expenses and other current liabilities consisted of the following as of: September 30, 2018 December 31, 2017 Manufacturer’s warranties $ 390,488 $ 135,000 Loss contingencies 40,000 - Taxes payable 222,784 108,573 Total accrued expenses and other current liabilities $ 653,272 $ 243,573 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Schedule of Stock Option Activity | The following table summarizes all compensation plan stock options for the three and nine months ended September 30: Three Months Ended September 30, 2018 2017 Number of Weighted Number of Weighted Stock Options Exercise Price Stock Options Exercise Price Options outstanding, beginning of period 496,667 $ 1.82 560,417 $ 1.68 Granted - - 13,750 3.76 Redeemed - - (30,000 ) 1.20 Exercised - - - - Expired / terminated - - - - Options outstanding, end of period 496,667 $ 1.82 544,167 $ 1.76 Options exercisable, end of period 496,009 $ 1.81 534,167 $ 1.78 Nine Months Ended September 30, 2018 2017 Number of Weighted Number of Weighted Stock Options Exercise Price Stock Options Exercise Price Options outstanding, beginning of period 531,667 $ 1.80 557,917 $ 1.60 Granted - - 41,250 4.42 Redeemed (22,500 ) 1.70 (55,000 ) 1.22 Exercised (7,500 ) 1.40 - - Expired / terminated (5,000 ) 1.40 - - Options outstanding, end of period 496,667 $ 1.81 544,167 $ 1.85 Options exercisable, end of period 496,009 $ 1.81 534,167 $ 1.87 |
CEO, COO and Members of Board of Directors[Member] | |
Schedule of Stock Options Granted | During the three and nine months ended September 30, 2018 and 2017, respectively, the Company issued the following options to purchase shares of the Company’s common stock to the Company’s CEO, COO, members of the Board of Directors and senior staff. All options expire within seven years of grant date. Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Number of stock options granted - 13,750 - 41,250 Weighted average purchase price $ - $ 3.76 $ - $ 4.42 |
CEO, COO and Executive Vice President [Member] | |
Schedule of Additional Compensation Expense | During the three and nine months ended September 30, 2018 and 2017, respectively, the Company redeemed stock options from the CEO, COO and an Executive Vice President that had previously been awarded. As a result, the Company recorded additional compensation expense as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Number of stock options redeemed - 30,000 22,500 55,000 Redemption value $ - $ 97,300 $ 76,900 $ 182,550 Amount previously expensed (2011) - (32,000 ) (32,000) (67,000 ) Additional compensation expense $ - $ 65,300 $ 44,900 $ 115,550 |
CEO Exercised Stock Options [Member] | |
Schedule of Stock Option Activity | During the three and nine months ended September 30, 2018 and 2017, respectively, the CEO exercised stock options that had previously been awarded. As a result, the Company recorded additional equity as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Number of stock options exercised - - 7,500 - Exercise price per share - - $ 1.40 - Exercise value $ - $ - $ 10,500 $ - |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Lease Payments Under Non-cancelable Operating Leases | Future minimum lease payments as of September 30, 2018 under non-cancelable operating leases are as follows: Building Lease Schedule 2018 $ 84,967 2019 345,331 2020 362,703 2021 373,525 2022 384,776 2023 295,091 Total $ 1,846,393 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Schedule of Estimates of Weighted Average Fair Value | The assumptions used in the Black-Scholes-Merton model for the periods ended September 30, 2018 and 2017, and the resulting estimates of weighted-average fair value per share of options granted during those periods, are as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Volatility - 96% to 98% - 96% to 101% Risk-free interest rate - 1-2% - 1-2% Expected term - 7 years - 7 years |
Schedule of Stock Options Activity | The following table summarizes all compensation plan stock options for the three and nine months ended September 30: Three Months Ended September 30, 2018 2017 Number of Weighted Number of Weighted Stock Options Exercise Price Stock Options Exercise Price Options outstanding, beginning of period 496,667 $ 1.82 560,417 $ 1.68 Granted - - 13,750 3.76 Redeemed - - (30,000 ) 1.20 Exercised - - - - Expired / terminated - - - - Options outstanding, end of period 496,667 $ 1.82 544,167 $ 1.76 Options exercisable, end of period 496,009 $ 1.81 534,167 $ 1.78 Nine Months Ended September 30, 2018 2017 Number of Weighted Number of Weighted Stock Options Exercise Price Stock Options Exercise Price Options outstanding, beginning of period 531,667 $ 1.80 557,917 $ 1.60 Granted - - 41,250 4.42 Redeemed (22,500 ) 1.70 (55,000 ) 1.22 Exercised (7,500 ) 1.40 - - Expired / terminated (5,000 ) 1.40 - - Options outstanding, end of period 496,667 $ 1.81 544,167 $ 1.85 Options exercisable, end of period 496,009 $ 1.81 534,167 $ 1.87 |
Organization, Business Operat_4
Organization, Business Operations and Significant Accounting Policies (Details Narrative) | Feb. 12, 2018 | Oct. 20, 2016 |
Accounting Policies [Abstract] | ||
Reverse stock split | 1 for 2 reverse stock split | 1 for 10 reverse stock split |
Organization, Business Operat_5
Organization, Business Operations and Significant Accounting Policies - Schedule of Disaggregation of Revenues (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Simulators and accessories | $ 2,850,727 | $ 3,781,330 | $ 12,656,737 | $ 11,623,184 |
Warranties | 495,323 | 541,059 | 1,518,544 | 1,368,800 |
Customized software | 55,000 | 405,513 | 468,613 | 667,873 |
Installation and training | 102,818 | (82,309) | 333,503 | 242,358 |
Licensing and royalties | 42,718 | 40,852 | 518,300 | 245,082 |
Total Revenue | 3,546,586 | 4,686,445 | 15,495,697 | 14,147,297 |
Domestic [Member] | ||||
Simulators and accessories | 2,836,375 | 2,363,067 | 10,697,520 | 9,240,301 |
Warranties | 462,182 | 1,189,378 | 1,370,318 | 1,189,378 |
Customized software | 55,000 | 313,113 | 456,673 | 467,713 |
Installation and training | 102,818 | (93,238) | 250,988 | 273,093 |
Licensing and royalties | 42,718 | 40,852 | 518,300 | 245,082 |
Total Revenue | 3,499,093 | 3,813,172 | 13,293,799 | 11,415,567 |
International [Member] | ||||
Simulators and accessories | 14,352 | 1,418,263 | 1,959,217 | 2,382,883 |
Warranties | 33,141 | (648,319) | 148,226 | 179,422 |
Customized software | 92,400 | 11,940 | 200,160 | |
Installation and training | 10,929 | 82,515 | (30,735) | |
Licensing and royalties | ||||
Total Revenue | $ 47,493 | $ 873,273 | $ 2,201,898 | $ 2,731,730 |
Notes Receivable (Details Narra
Notes Receivable (Details Narrative) - USD ($) | Mar. 23, 2018 | Sep. 30, 2018 | Sep. 30, 2017 |
Conversion of past due trade receivable | $ 400,906 | $ 693,044 | |
Interest rate | 10.00% | ||
Debt instrument principal and accrued interest | $ 20,000 | $ 384,237 | |
Debt instrument accrued interest | 212,522 | ||
Notes receivable noncurrent | $ 171,715 | ||
TEC [Member] | |||
Interest rate | 5.00% | ||
Debt instrument principal and accrued interest | $ 294,573 | ||
Convertible promissory notes | $ 292,138 | ||
Royalty payment, due date | May 31, 2018 | ||
Debt, description | The note bears interest at the rate of five percent (5%) per annum and contains a provision requiring remittance of not less than 20% of the net proceeds of any private or public offering of its securities in reduction of the Convertible Note. The note has a conversion right, at the sole discretion of the Company, to convert the outstanding balance of principal and accrued interest at any time for shares of common stock of TEC. Prior to the due date, the Company may elects to convert the Convertible Note for shares of common stock in TEC at a twenty-five percent (25%) discount to the price of shares sold to the public in a public offering in connection with a go-public transaction. The issuance of common stock upon conversion shall be made without charge to the Company. No fractional shares shall be issued upon conversion and in lieu of fractional shares, TEC will pay the Company the amount of any obligation that is not converted. | ||
Debt intrument, maturity date | Aug. 1, 2019 |
Inventory - Schedule of Invento
Inventory - Schedule of Inventory (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 1,973,078 | $ 1,825,469 |
Reserve | (105,031) | (105,031) |
Inventory, net | $ 1,868,047 | $ 1,720,438 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 74,746 | $ 65,570 | $ 217,952 | $ 204,527 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment, Net (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Total property and equipment | $ 2,607,426 | $ 2,314,599 |
Less: Accumulated depreciation | (1,855,278) | (1,637,326) |
Property and equipment, net | 752,148 | 677,273 |
Computer Equipment [Member] | ||
Total property and equipment | 1,054,004 | 861,925 |
Furniture and Office Equipment [Member] | ||
Total property and equipment | 207,921 | 202,867 |
Machinery and Equipment [Member] | ||
Total property and equipment | 1,021,188 | 925,494 |
Leasehold Improvements [Member] | ||
Total property and equipment | $ 324,313 | $ 324,313 |
Accrued Expenses - Schedule of
Accrued Expenses - Schedule of Accrued Compensation and Related Costs (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Salaries and wages payable | $ 316,957 | $ 115,481 |
401(k) contributions payable | 13,520 | 30,532 |
Accrued paid time off (PTO) | 257,623 | 257,751 |
Profit sharing payable | 458,574 | 189,727 |
Total accrued compensation and related costs | $ 1,046,674 | $ 593,491 |
Accrued Expenses - Schedule o_2
Accrued Expenses - Schedule of Accrued Expenses and Other Current Liabilities (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Manufacturer’s warranties | $ 390,488 | $ 135,000 |
Loss contingencies | 40,000 | |
Taxes payable | 222,784 | 108,573 |
Total accrued expenses and other current liabilities | $ 653,272 | $ 243,573 |
Collaboration Agreement (Detail
Collaboration Agreement (Details Narrative) - USD ($) | Jun. 30, 2018 | Aug. 16, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 |
Royalties/licensing fees | $ 3,546,586 | $ 4,686,445 | $ 15,495,697 | $ 14,147,297 | |||
Amendment To Co-Venture Agreement [Member] | |||||||
Royalty percentage | 10.00% | ||||||
Percentage of revenue paid for cost of equipment | 14.00% | ||||||
Co-Venture Agreement [Member] | |||||||
Royalties/licensing fees | 41,038 | $ 40,852 | 512,545 | $ 245,082 | |||
Co-Venture Agreement [Member] | TEC [Member] | |||||||
Number of common stock held | $ 3,353,495 | 3,353,495 | |||||
Issued and outstanding percentage | 8.40% | ||||||
Impairment loss | $ 134,140 | 134,140 | |||||
Fair value, investment | $ 1,240,793 | $ 1,240,793 | $ 1,374,933 | ||||
Number of warrants to purchase shares of common stock | 153,459 | 153,459 | |||||
Warrant exercise price per share | $ .41 | $ .41 |
Related Party Transactions - Sc
Related Party Transactions - Schedule of Stock Options Granted (Details) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Number of stock options granted | 13,750 | 41,250 | ||
Weighted average purchase price | $ 3.76 | $ 4.42 | ||
CEO, COO and Members of Board of Directors[Member] | ||||
Number of stock options granted | 13,750 | 41,250 | ||
Weighted average purchase price | $ 3.76 | $ 4.42 |
Related Party Transactions - _2
Related Party Transactions - Schedule of Additional Compensation Expense (Details) - CEO, COO and Executive Vice President [Member] - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Number of stock options redeemed | 30,000 | 22,500 | 55,000 | |
Redemption value | $ 97,300 | $ 76,900 | $ 182,550 | |
Amount previously expensed (2011) | (32,000) | (32,000) | (67,000) | |
Additional compensation expense | $ 65,300 | $ 44,900 | $ 115,550 |
Related Party Transactions - _3
Related Party Transactions - Schedule of Stock Option Activity (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Number of stock options exercised | 7,500 | |||
CEO Exercised Stock Options [Member] | ||||
Number of stock options exercised | 7,500 | |||
Exercise price per share | $ 1.40 | |||
Exercise value | $ 10,500 |
Commitments and Contingencies_2
Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |||||
Deferred rent liability | $ 34,352 | $ 34,352 | $ 75,444 | ||
Rent expense | 120,655 | $ 117,068 | 356,513 | $ 352,899 | |
Estimated loss contingency | $ 40,000 | $ 40,000 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Future Minimum Lease Payments Under Non-cancelable Operating Leases (Details) | Sep. 30, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,018 | $ 84,967 |
2,019 | 345,331 |
2,020 | 362,703 |
2,021 | 373,525 |
2,022 | 384,776 |
2,023 | 295,091 |
Total | $ 1,846,393 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Jan. 02, 2018 | |
Stock compensation expense | $ 1,796 | $ 42,376 | $ 6,656 | $ 160,351 | |
Number of nonvested stock options issued | 658 | 658 | |||
Unrecognized stock-based compensation expense | $ 5,264 | $ 5,264 | |||
Options vesting period description | There are 658 non-vested stock options and unrecognized stock-based compensation expense of $5,264 as of September 30, 2018 that will be fully vested and expensed by October 2018. | ||||
2017 Equity Incentive Plan [Member] | |||||
Number of common stock capital shares reserved for future issuance | 1,187,500 | 1,187,500 | |||
Percentage of common stock shares issued and outstanding | 3.00% | 3.00% | |||
2017 Equity Incentive Plan [Member] | Maximum [Member] | |||||
Number of common stock capital shares reserved for future issuance | 1,424,630 |
Stockholders' Equity - Schedule
Stockholders' Equity - Schedule of Estimates of Weighted Average Fair Value (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Volatility rate minimum | 96.00% | 96.00% | ||
Volatility rate maximum | 98.00% | 101.00% | ||
Risk-free interest rate | ||||
Expected term | 0 years | 7 years | 0 years | 7 years |
Minimum [Member] | ||||
Risk-free interest rate | 1.00% | 1.00% | ||
Maximum [Member] | ||||
Risk-free interest rate | 2.00% | 2.00% |
Stockholders' Equity - Schedu_2
Stockholders' Equity - Schedule of Stock Options Activity (Details) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Equity [Abstract] | ||||
Number of Stock Options outstanding, beginning of year | 496,667 | 560,417 | 531,667 | 557,917 |
Number of options, Granted | 13,750 | 41,250 | ||
Number of options, Redeemed | (30,000) | (22,500) | (55,000) | |
Number of options, Exercised | (7,500) | |||
Number of options, Expired / terminated | (5,000) | |||
Number of options outstanding, end of year | 496,667 | 544,167 | 496,667 | 544,167 |
Number of options exercisable, end of year | 496,009 | 534,167 | 496,009 | 534,167 |
Weighted Exercise Price outstanding, beginning of year | $ 1.82 | $ 1.68 | $ 1.80 | $ 1.60 |
Weighted average exercise price, Granted | 3.76 | 4.42 | ||
Weighted average exercise price, Redeemed | 1.20 | 1.70 | 1.22 | |
Weighted average exercise price, Exercised | 1.40 | |||
Weighted average exercise price, Expired / terminated | 1.40 | |||
Weighted average exercise price outstanding, end of year | 1.82 | 1.85 | 1.82 | 1.85 |
Weighted average exercise price exercisable, end of year | $ 1.81 | $ 1.87 | $ 1.81 | $ 1.87 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] - Employee [Member] - Stock Option [Member] - USD ($) | Oct. 29, 2018 | Oct. 31, 2018 |
Number of stock redeemed | 10,000 | |
Number of stock redeemed, value | $ 29,500 | |
Stock expense | $ 14,000 | $ 15,500 |