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.

Collaboration Agreement

9 Months Ended

Sep. 30, 2018

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.