Receivables, Net

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

Premiums, Commissions and Notes Receivable, Net

NOTE 6 – RECEIVABLES, NET

Receivables, net, include premiums, commissions and notes receivable and are as follows:

	Year ended December 31
	2013			2012
Premiums and commission receivable	$	2,146,510		$	2,878,055
Premium finance notes receivable		3,948,245			3,872,475
Total premiums and notes receivable		6,094,755			6,750,530
Allowance for doubtful accounts		(938,038	)		(1,005,938	)
Net receivables	$	5,156,717		$	5,744,592

Premiums and notes receivable are substantially secured by unearned premiums and funds held as security for performance. Premium finance notes receivable represent the balance due to the Company's premium finance subsidiary from policyholders who elected to finance their premiums over a nine-month term. These notes are net of unearned finance charges and credit loss reserves.

One of the Company’s agents that was appointed in 2008 to assist the Company in implementing its Trucking Program, failed to pay the net premium and policy fees due Unifax, the exclusive general agent for Crusader. The agent was initially late in paying its February 2009 production that was due to Unifax on April 15, 2009. In May 2009, as a result of the agent’s failure to timely pay its balance due to Unifax, the Company terminated its agency agreement and assumed ownership and control of that agent’s policy expirations written with the Company. The Company subsequently commenced legal proceedings against the agent corporation, its three principals (who personally guaranteed the agent’s obligations), and another individual for the recovery of the balance due and any related recovery costs incurred. All related recovery costs have been expensed as incurred. The agent corporation and two of its principals filed bankruptcy. The corporation was adjudicated bankrupt. The Company obtained judgments, non-dischargeable in bankruptcy, for the full amount due from the two principals who filed bankruptcy. The other principal stipulated to a judgment of $1,200,000. The claim against the other individual was resolved.

The Company collected $137,750 and $101,204 during the years ended December 31, 2013, and 2012, respectively. As of December 31, 2013 and 2012, the agent’s balance due to Unifax was $1,256,272 and $1,394,022, respectively. As of December 31, 2013 and 2012, the Company’s bad debt reserve was $931,272 and $994,022 which represents approximately 74% and 71% of the balance due to Unifax, respectively. The Company’s bad debt reserve is subject to change as more information becomes available.

Bad debt expense for the years ended December 31, 2013 and 2012 was a benefit of $50,792 and $98,798, respectively and an expense of $11,465 for the year ended December 31, 2011.