Note 10. Commitments and Contingencies 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. In June 2018, the Company initiated a declaratory judgment action in the Superior Court of the State of Arizona. A former customer had raised allegations of breach of contract and breach of warranty and the Company sought relief and clarification from the Superior Court regarding the allegations and the Companys obligations under the contract with the former customer. In May 2019, the Company entered into settlement agreement of $76,250. The agreement does not constitute an admission of any unlawful conduct or wrongdoing. The Company had established a probable and estimated loss contingency of $40,000 as of December 31, 2018 and had accrued the full loss contingency of $76,250 as of March 31, 2019. The full amount of the settlement has been paid at September 30, 2019. The Company evaluated the collection history on its trade note receivable (see Note 2) and determined the note was in default. Based on collection history, interest accrual was suspended as of the last payment received in February 2019. In accordance with the terms of the note, accelerated payment was demanded. The Company filed a verified complaint in the Superior Court of Arizona for the outstanding principal balance plus accrued interest, late fees and reasonable attorneys fees. On September 20, 2019, the Superior Court of Arizona awarded in favor of VirTra, a Form of Judgement totaling $396,575, with interest accruing at the rate of 6.25% from date of judgment until such amount has been paid in full. At September 30, 2019, the Company has recorded an allowance against the total note receivable balance in the amount of $369,286. Employment Agreements On April 2, 2012, the Company entered into three-year Employment Agreements with its Chief Executive Officer and Chief Operating Officer that call for base annual salaries of $195,000 and $175,000, respectively, subject to cost of living adjustments, and contain automatic one-year extension provisions. These contracts have been renewed annually and have been adjusted based on the same percentage increase approved for Company-wide cost-of-living adjustments. Profit Sharing VirTra provides a discretionary profit-sharing program that pays out a percentage of Company profits each year as a cash bonus to eligible employees. The cash payment is typically split into two equal payments and distributed pro-rata in April and October of the following year to active employees only. For the three months ended September 30, 2019 and 2018, the amount credited to operations was $(27,061) and $(14,562), respectively, resulting from forfeited awards. For the nine months ended September 30, 2019, the amount credited to operations was $(27,061) and for the nine months ended September 30, 2018, the amount charged to operations was $433,259. The 2019 profit-sharing estimate is revised quarterly and will be finalized after year-end financial audit.