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Leases
3 Months Ended
Mar. 31, 2024
Leases  
Leases

Note 5. Leases

 

The Company leases approximately 37,729 rentable square feet of office and warehouse space from an unaffiliated third party for our former corporate office, manufacturing, assembly, warehouse, and shipping facility located at 7970 South Kyrene Road, Tempe, Arizona 85284. From 2016 through March 2019, the Company leased approximately 4,529 rentable square feet of office and industrial space from an unaffiliated third party for our machine shop at 2169 East 5th Street, Tempe, Arizona 85284. In April 2019, the Company relocated the machine shop from the 5th Street location to 7910 South Kyrene Road, located within the same business complex as our main office. The Company executed a lease amendment to add an additional 5,131 rentable square feet for the machine shop and extended its existing office lease through April 2024. On June 1, 2022, we entered a new lease of approximately 9,350 square feet located at 12301 Challenger Parkway, Orlando, Florida, from an unaffiliate third party through May 2027.

 

The Company’s lease agreements do not contain any residual value guarantees, restrictive covenants, or variable lease payments. The Company has not entered into any financing leases.

 

In addition to base rent, the Company’s lease provides for additional payments for other charges, such as rental tax. The lease includes fixed rent escalations. The Company’s lease does not include an option to renew.

 

The Company determines if an arrangement is a lease at inception. Operating leases are recorded in operating lease right of use assets, net, operating lease liability – short-term, and operating lease liability – long-term on its balance sheets.

 

Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate used at adoption was 4.5%. Significant judgement is required when determining the Company’s incremental borrowing rate. The Company uses the implicit rate when readily determinable. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

 

Effective June 1, 2022, the Company obtained a right-of-use asset in exchange for a new operating lease liability of $840,855. Effective January 1, 2019, the Company obtained a right-of-use asset in exchange for a new operating lease liability in the amount of $1,721,380 and derecognized $46,523 deferred rent for an adjusted operating lease right-of-use asset in the net amount of $1,674,857.

 

Balance Sheet Classification  March 31, 2024   December 31, 2023 
Assets          
Operating lease right-of-use assets, December 31, 2023  $716,687   $1,212,814 
Amortization for the three months ended March 31, 2024   (127,893)   (496,127)
Total operating lease right-of-use asset, March 31, 2024  $588,794   $716,687 
Liabilities          
Current          
Operating lease liability, short-term  $323,038   $317,840 
Non-current          
Operating lease liability, long-term   289,687    432,176 
Total lease liabilities  $612,725   $750,016 

 

 

VIRTRA, INC.

NOTE TO FINANCIAL STATEMENTS

(Unaudited)

 

Future minimum lease payments as of March 31, 2024, under non-cancelable operating leases are as follows:

 

      
2024  $190,045 
2025   191,478 
2026   196,311 
2027   99,381 
      
Total Lease Payments   677,215 
Less: imputed interest   (64,490)
Operating Lease Liability  $612,725 

 

Rent expenses for the three months ended March 31, 2024, and 2023, were $204,235 and $108,230, respectively.