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Organization and Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2019
Accounting Policies [Abstract] |
Organization and Significant Accounting Policies | Note 1. Organization and Significant Accounting Policies Organization and Business Operations VirTra, Inc. (the “Company,” “VirTra,” “we,” “us” or “our”), located in Tempe, Arizona, is a global provider of judgmental use of force training simulators, firearms training simulators and driving simulators for the law enforcement, military, educational and commercial markets. The Company’s patented technologies, software, and scenarios provide intense training for de-escalation, judgmental use-of-force, marksmanship and related training that mimics real-world situations. VirTra’s mission is to save and improve lives worldwide through practical and highly-effective virtual reality and simulator technology. The Company sells its 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, Inc., a Nevada corporation. Effective March 2, 2018, the Company effected a 1-for-2 reverse stock split of its issued and outstanding common stock, par value $0.0001 per share (the “Reverse Stock Split”). 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 Split. Basis of Presentation The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). 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 as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Significant accounting estimates in these financial statements include valuation assumptions for share-based payments, allowance for doubtful accounts and notes receivable, inventory reserves, accrual for warranty reserves, the carrying value of long-lived assets and intangible assets, income tax valuation allowances, the carrying value of cost basis investments, and the allocation of the transaction price to the performance obligations in our contracts with customers. Reclassifications Certain reclassifications have been made to the 2018 financial statements to conform to the 2019 financial statement presentation. These reclassifications had no effect on net income or cash flows as previously reported. Revenue Recognition The Company adopted Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customer (Topic 606) (“ASC 606”) on January 1, 2018 and the Company elected to use the modified retrospective transition method which requires application of ASC 606 to uncompleted contracts at the date of adoption. The adoption of ASC 606 did not have a material impact on the financial statements. 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. Significant judgment is necessary when making these determinations. The Company’s primary sources of revenue are derived from simulator and accessories sales, training and installation, the sale of customizable software, the sale of customized content scenarios, and the sale of extended service-type warranties. Sales discounts are presented in the financial statements as reductions in determining net revenues. Credit sales are recorded as current assets (accounts receivable and unbilled revenue). Prepaid deposits received at the time of sale and extended warranties purchased are recorded as current and long-term liabilities (deferred revenue) until earned. The following briefly summarizes the nature of our performance obligations and method of revenue recognition:
F-6
Performance Obligation |  | Method of Recognition
Simulator and accessories |  | Upon transfer of control
Installation and training |  | Upon completion or over the period of services being rendered
Extended service-type warranty |  | Deferred and recognized over the life of the extended warranty
Customized software and content |  | Upon transfer of control or over the period services are performed depending on the terms of the contract
Customized content scenario |  | As performance obligation is transferred over time (input method using time and materials expended)
Sales-based royalty exchanged for license of intellectual property |  | Recognized as the performance obligation is satisfied over time – which is as the sales occur
The Company recognizes revenue upon transfer of control or upon completion of the services for the simulator and accessories; for the installation and training and customized software performance obligations as the customer has the right and ability to direct the use of these products and services and the customer obtains substantially all of the remaining benefit from these products and services at that time. Revenue from certain customized content contracts may be recognized over the period the services are performed based on the terms of the contract. For the sales-based royalty exchanged for license of intellectual property, the Company recognized revenue as the sales occur over time. The Company recognizes revenue on a straight-line basis over the period of services being rendered for the extended service-type warranties as these warranties represent a performance obligation to “stand ready to perform” over the duration of the warranties. As such, the warranty service is performed continuously over the warranty period. Each contract states the transaction price. The contracts do not include variable consideration, significant financing components or noncash consideration. The Company has elected to exclude sales and similar taxes from the measurement of the transaction price. The contract’s transaction price is allocated to the performance obligations based upon their stand-alone selling prices. Discounts to the stand-alone selling prices, if any, are allocated proportionately to each performance obligation. 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 recognized and the following table illustrates the disaggregation disclosure by customer’s location and performance obligation.
|  | Year ended December 31, |
|  | 2019 |  |  | 2018 |
|  | Commercial |  |  | Government |  |  | International |  |  | Total |  |  | Commercial |  |  | Government |  |  | International |  |  | Total |
Simulators and accessories |  | $ | 530,742 |  |  | $ | 11,069,039 |  |  | $ | 1,992,819 |  |  | $ | 13,592,600 |  |  | $ | 528,696 |  |  | $ | 12,035,648 |  |  | $ | 2,018,827 |  |  | $ | 14,583,171 |
Extended service-type warranties |  |  | 35,148 |  |  |  | 2,132,864 |  |  | $ | 203,421 |  |  |  | 2,371,433 |  |  |  | 34,125 |  |  |  | 1,685,222 |  |  |  | 176,730 |  |  |  | 1,896,077 |
Customized software and customized content scenarios |  |  | 103,424 |  |  |  | 1,457,424 |  |  | $ | 68,702 |  |  |  | 1,629,550 |  |  |  | 5,218 |  |  |  | 478,910 |  |  |  | 11,940 |  |  |  | 496,068 |
Installation and training |  |  | 46,630 |  |  |  | 678,211 |  |  | $ | 240,317 |  |  |  | 965,158 |  |  |  | 15,046 |  |  |  | 385,790 |  |  |  | 146,761 |  |  |  | 547,597 |
Licensing and royalties |  |  | 153,182 |  |  |  | - |  |  |  | - |  |  |  | 153,182 |  |  |  | 557,213 |  |  |  | - |  |  |  | - |  |  |  | 557,213 |
Total Revenue |  | $ | 869,126 |  |  | $ | 15,337,538 |  |  | $ | 2,505,259 |  |  | $ | 18,711,923 |  |  | $ | 1,140,298 |  |  | $ | 14,585,570 |  |  | $ | 2,354,258 |  |  | $ | 18,080,126 |
For the year ended December 31, 2019, governmental customers comprised $15,337,538, or 82% of total net sales, commercial customers comprised $869,126 or 5% of total net sales and international customers comprised $2,505,259, or 13% of total net sales. By comparison, for the year ended December 31, 2018, governmental customers comprised $14,585,570, or 81% of total net sales, commercial customer comprised $1,140,298 or 6% of total net sales and international customers comprised $2,354,258, or 13% of total net sales. Customer Deposits Customer deposits consist of prepaid deposits received for equipment purchase orders and for STEP operating agreements that expire annually. Customer deposits are considered a deferred liability until the completion of the customer’s contract performance obligation. When revenue is recognized, the deposit is applied to customer’s receivable balance. Customer deposits are recorded as a current liability under deferred revenue on the accompanying balance sheet and totaled $651,073 and $186,450 at December 31, 2019 and 2018, respectively. During the years ended December 31, 2019 and 2018, the Company recognized revenue of $180,041 and $687,695, respectively, related to customer deposits that were included in deferred revenue, long-term, at the beginning of each period. Changes in deferred revenue amounts related to customer deposits will fluctuate from year to year based upon the mix of customers required to prepay deposits under the Company’s credit policy. Warranty The Company warranties its products from manufacturing defects on a limited basis for a period of one year after purchase, but also sells separately priced extended service-type warranties for periods of up to four years after the expiration of the standard one-year warranty. During the term of the initial one-year warranty, if the device fails to operate properly from defects in materials and workmanship, the Company will fix or replace the defective product. Deferred revenue for separately priced extended warranties one year or less totaled $1,829,052 and $1,604,637 at December 31, 2019 and 2018, respectively. Deferred revenue for separately priced extended warranties longer than one year totaled $1,748,257 and $962,356 at December 31, 2019 and 2018, respectively. The accrual for the one-year manufacturer’s warranty liability totaled $257,000 and $200,505 at December 31, 2019 and 2018, respectively. During the years ended December 31, 2019 and 2018, the Company recognized revenue of $2,371,433 and $1,896,077, respectively, related to the extended service-type warranties that was amortized from the deferred revenue balance at the beginning of each period. Changes in deferred revenue amounts related to extended service-type warranties will fluctuate from year to year based upon the average remaining life of the warranties at the beginning of the period and new extended service-type warranties sold during the period. Customer Retainage Customer retainage is recorded as a current liability under deferred revenue on the accompanying balance sheets and totaled $10,720 and $133,220 at December 31, 2019 and 2018, respectively. During the years ended December 31, 2019 and 2018, the Company recognized revenue of $122,500 and $3,786, respectively, related to customer retainage that were included in the liability at the beginning of each period. Changes in deferred revenue amounts related to customer retainage will fluctuate from year to year based upon the customer’s contract completion date, allowing the Company to invoice and recover the retainage. Licensing and Royalties with Related Party As discussed further in Note 8. Collaboration Agreement with Related Party, the Company licenses intellectual property to Modern Round, LLC (“MR”), a wholly-owned subsidiary of That’s Eatertainment Corp. (“TEC”), f/k/a Modern Round Entertainment Corp. (“MREC”), a related party, in exchange for sales-based royalties. Revenues from this agreement are recognized in accordance with the terms of the contract as the sales occur. The Company receives additional immaterial sales-based royalties from strategic partners. STEP Revenue The Company’s STEP operations consist principally of renting its simulator products under operating agreements expiring in one year. At the commencement of a STEP agreement, any rental payments received are deferred and no income is recognized. Subsequently, payments are amortized and recognized as revenue on a straight-line basis over the term of the agreement. The agreements are generally for a period of 12 months and can be renewed for additional 12-month periods. Agreements may be terminated by either party upon written notice of termination at lease sixty days prior to the end of the 12-month period. The payments are generally fixed for the first year of the agreement, with increases in payments in subsequent years to be mutually agreed upon. The agreements do not include variable lease payments or free rent periods. In addition, the agreements do not provide for the underlying assets to be purchased at its fair market values at interim periods or at maturity. Each STEP agreement comes with full customer support and stand-ready advance replacement parts to maintain each system for the duration of the lease. The amount that the Company expects to derive from the STEP equipment following the end of the agreement term is dependent upon the number of agreement terms renewed. The agreements do not include a residual value guarantee. Adoption of New Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ASU 2016-02, “Leases (Topic 842)” and subsequent amendments to the initial guidance: ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, “Topic 842”). Topic 842 requires an entity to recognize a right-of-use asset (“ROU”) and lease liability for all leases and provide enhanced disclosures. Recognition, measurement, and presentation of expenses depends on classification as a finance lease or an operating lease. On January 1, 2019, the Company adopted Topic 842 using the modified retrospective approach. Results for reporting periods after January 1, 2019 are presented under Topic 842, while prior periods have not been adjusted. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. Refer to Note 6 - Leases. 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 of ASU No. 2017-11 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. Early adoption is permitted. The adoption of ASU No. 2017-11 on January 1, 2019 did not have a material impact on the Company’s 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, 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 adoption of ASU No. 2018-07 on January 1, 2019 did not have a material impact on the Company’s financial statements. Fair Value Measurements ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also specifies a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value as follows: Level 1: Quoted prices in active markets for identical assets or liabilities; Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3: Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimate of assumptions that market participants would use in pricing the asset or liability. Fair Value of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, certificates of deposit, accounts receivable, notes and interest receivables, accounts payable, and accrued liabilities. The fair value of financial instruments, except for long-term notes receivable, approximates their carrying values, using level 3 inputs, at December 31, 2019 and 2018 due to their short maturities. The fair value of the notes receivable approximates its carrying value, using level 3 inputs, at December 31, 2019 and 2018. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of 90 days or less at the time of purchase to be cash equivalents. Certificates of Deposit and Mutual Funds The Company invests its excess cash in certificates of deposit and money market mutual funds issued by financial institutions with high credit ratings. The certificates of deposit generally have average maturities of approximately six months and are subject to penalties for early withdrawal. The money market mutual funds are open ended and can be withdrawn at any time without penalty. Accounts and Notes Receivable and Allowance for Doubtful Accounts The Company recognizes an allowance for losses on accounts receivable based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. Accounts receivable do not bear interest and are charged off after all reasonable collection efforts have been taken. The Company maintained an allowance for doubtful accounts of $34,177 and $23,044 at December 31, 2019 and 2018, respectively. Notes receivable are carried at their estimated collectible amounts. Interest income on notes receivable is recognized using the effective interest method. Notes receivable are periodically evaluated for collectability based on the credit history, the current financial condition of the counter party, and the known and inherent risks in the notes. Notes receivable are placed on nonaccrual status when they become 90 days past due and the customer has not made a payment in over 60 days. Upon suspension of the accrual of interest, interest income is subsequently recognized to the extent cash payments are received. Accrual of interest is resumed when notes are removed from non-accrual status. Notes receivable are charged against the allowance for credit losses when they are deemed to be uncollectible. During 2019, the Company realized a full credit loss against a note receivable totaling $369,286. The allowance for uncollectible notes receivable was $108,174 and $266,813 at December 31, 2019 and 2018, respectively. Inventory Inventory is stated at the lower of cost or net realizable value with cost being determined on the average cost method. Work in progress and finished goods inventory includes an allocation for capitalized labor and overhead. The Company routinely evaluates the carrying value of inventory for slow moving and potentially obsolete inventory and, when appropriate, will record an adjustment to reduce inventory to its estimated net realizable value. Inventory reserves were $120,652 and $105,031 at December 31, 2019 and 2018, respectively. Investments in Other Companies The Company accounts for investments in other companies that do not have a readily determinable fair value 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. The Company has elected to utilize the cost minus impairment approach because the investment in TEC does not have a readily determinable fair value as of the reporting date. See Note 8. Collaboration Agreement with Related Party. Management regularly evaluates the recoverability of its investment based on the investee company’s performance and financial position. During the year ended December 31, 2019 and 2018, the Company recognized an impairment loss of $280,000 and $254,933, respectively. Management regularly assesses the classification of its investments. Property and Equipment Property and equipment are carried at cost, net of depreciation. Gains or losses related to retirements or disposition of fixed assets are recognized in operations in the period incurred. Costs of normal repairs and maintenance are charged to expense as incurred, while betterments or renewals are capitalized. Depreciation commences at the time the assets are placed in service or for STEP equipment under agreements, when the equipment is made available for use by the customer. Depreciation is provided using the straight-line method over the estimated economic lives of the assets or for leasehold improvements, over the shorter of the estimated useful life or the remaining lease term. For STEP equipment under agreements, depreciation is provided using the straight-line method over the sixty-month maximum useful life instead of the remaining agreement term. Estimated useful lives are summarized as follows:
Computer equipment |  |  | 3-5 years |
Furniture and office equipment |  |  | 5-7 years |
Machinery and equipment |  |  | 5-7 years |
STEP equipment |  |  | 5 years |
Leasehold improvements |  |  | 7 years |
Intangible Assets Intangible assets at December 31, 2019 are comprised of various patents. We compute amortization expense on the intangible assets using the straight-line method over the estimate remaining useful lives of 17 years. Cost of Products Sold Cost of products sold represents manufacturing costs, consisting of materials, labor and overhead related to finished goods and components. Cost of products sold includes depreciation of STEP contract fixed assets. Shipping costs incurred related to product delivery are included in cost of products sold. Advertising Costs Costs associated with advertising are expensed as incurred. Advertising expense was $828,692 and $762,658 for the years ended December 31, 2019 and 2018, respectively. These costs include domestic and international tradeshows, website, and sales promotional materials. Research and Development Costs Research and development costs are expensed as incurred. Research and development costs primarily include expenses, including labor, directly related to research and development support. Research and development expense was $1,345,513 and $1,357,982 for the years ended December 31, 2019 and 2018, respectively. Legal Costs Legal costs relating to loss contingencies are expensed as incurred. See Note 10. Commitments and Contingencies. Concentration of Credit Risk and Major Customers and Suppliers Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, certificates of deposit, accounts receivable and notes receivable. The Company’s cash, cash equivalents and certificates of deposit are maintained with financial institutions with high credit standings and are FDIC insured deposits. The FDIC insures deposits according to the ownership category in which the funds are insured and how the accounts are titled. The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. The Company had uninsured cash and cash equivalents of $1,069,887 and $2,014,987 at December 31, 2019 and 2018, respectively. Sales are typically made on credit and the Company generally does not require collateral. Management performs ongoing credit evaluations of its customers’ financial condition and maintains an allowance for estimated losses. Historically, the Company has experienced minimal charges relative to doubtful accounts. Management performs ongoing evaluations of the collectability of its notes receivable and maintains an allowance for estimated losses. The Company’s remaining note receivable is due from one related party and is unsecured but the note can be converted to equity at the Company’s discretions (See Note 2. Notes Receivable and Note 8. Collaboration Agreement with Related Party.) Historically, the Company primarily sells its products to United States federal and state agencies. For the year ended December 31, 2019, one agency comprised 18% and one agency comprised 12% of total net sales. By comparison, for the year ended December 31, 2018, one federal agency comprised 34% of total net sales. As of December 31, 2019, one federal agency comprised 30% and one international customer comprised 20% of total accounts receivable. By comparison, as of December 31, 2018, one federal agency comprised 26% and one state agency comprised 20% of total accounts receivables. Income Taxes Deferred tax assets and liabilities are recorded based on the difference between the financial statement and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company calculates a provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized by identifying the temporary differences arising from the different treatment of items for tax and accounting purposes. In determining the future tax consequences of events that have been recognized in the financial statements or tax returns, judgment and interpretation of statutes are required. In assessing realizable deferred tax assets, management assesses the likelihood that deferred tax assets will be recovered from future taxable income, and to the extent that recovery is not likely or there is insufficient operating history, a valuation allowance is established. The Company adjusts the valuation allowance in the period management determines it is more likely than not that net deferred tax assets will or will not be realized. After review of the deferred tax asset and valuation allowance in accordance with ASC 740, management determined that it is more likely than not that the Company will fully realize all of its deferred tax asset and no valuation allowance was recorded at December 31, 2019 and 2018. The Company did not recognize any assets or liabilities relative to uncertain tax positions at December 31, 2019 and 2018. Interest or penalties, if any, will be recognized in income tax expense. Since there are no significant unrecognized tax benefits as a result of tax positions taken, there are no accrued penalties or interest. Tax positions are positions taken in a previously filed tax return or positions expected to be taken in a future tax return that are reflected in measuring current or deferred income tax assets and liabilities reported in the financial statements. The Company reflects tax benefits, only if it is more likely than not that the Company will be able to sustain the tax return position, based on its technical merits. If a tax benefit meets this criterion, it is measured and recognized based on the largest amount of benefit that is cumulatively greater than 50% likely to be realized. Management does not believe that there are any uncertain tax positions at December 31, 2019 or 2018. The Company is potentially subject to tax audits for its United States federal and various state income and excise tax returns for tax years between 2014 and 2019; however, earlier years may be subject to audit under certain circumstances. Tax audits by their very nature are often complex and can require several years to complete. Impairment of Long-Lived Assets Long lived assets, such as equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the asset. At December 31, 2019 and 2018, the Company concluded that there has been no indication of impairment to the carrying value of its long-lived assets. As such, no impairment has been recorded. Stock Based Compensation The Company measures the cost of awards of equity instruments based on the grant date fair value of the awards. The Company calculates the fair value of stock-based awards using the Black-Scholes-Merton option pricing valuation model, which incorporates various assumptions including volatility, expected term and risk-free interest rates. There were no grants of stock-based awards during the years ended December 31, 2019 and 2018. The expected term of the options is the estimated period of time until exercise and was determined using an average of vesting and contractual terms, as we did not have sufficient historical experience of similar awards. The risk-free interest rate is based on the implied yield available on United States Treasury zero-coupon issues with an equivalent remaining term. The Company has not paid dividends in the past and does not plan to pay any dividends in the near future. The estimated fair value of stock-based compensation awards and other options is amortized to expense on a straight-line basis over the relevant vesting period. The Company has elected to recognize forfeitures as they occur rather than estimating them at the time of grant. Net (Loss) Income per Common Share The net income per common share is computed by dividing net income by the weighted average of common shares outstanding. Diluted net income per share reflects the potential dilution, using the treasury stock method, that would occur if outstanding stock options and warrants were exercised. Earnings per share computations are as follows:
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Net (loss) income |  | $ | (75,277 | ) |  | $ | 818,092 |
Weighted average common stock outstanding |  |  | 7,747,655 |  |  |  | 7,903,801 |
Incremental shares from stock options |  |  | - |  |  |  | 350,575 |
Weighted average common stock outstanding - diluted |  |  | 7,747,655 |  |  |  | 8,254,376 |
Net (loss) income per common share and common equivalent shares |  |  |  |  |  |  |  |
Basic |  | $ | (0.01 | ) |  | $ | 0.10 |
Diluted |  | $ | (0.01 | ) |  | $ | 0.10 |
The Company has potentially dilutive securities outstanding that are not included in the diluted earnings per share calculation for the years ended December 31, 2019 and 2018 because their effect would be anti-dilutive. These potentially dilutive securities, comprised entirely of the Company’s stock options, totaled 26,667 and 12,917 for the years ended December 31, 2019 and 2018, respectively. New Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), which together with subsequent amendments provides guidance on measuring credit losses on financial instruments. The amended guidance replaces current incurred loss impairment methodology of recognizing credit losses when a loss is probable with a methodology that reflects expected credit losses and requires a broader range of reasonable and supportable information to assess credit loss estimates. ASU 2016-13 and related amendments are effective for us on January 1, 2020, the adoption of 2016-13 will not have a material impact on the financial statements. In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, Topic 808 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. This guidance will be effective for the Company beginning January 1, 2020, the adoption will not have a material impact on the financial statements. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. ASU 2019-12 also simplifies aspects of accounting for franchise taxes and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for annual and interim financial statement periods beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of the adoption of ASU 2019-12 on its financial statements.

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