Accounts Receivable, Short-Term and Long-Term Notes Receivable

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Accounts Receivable, Short-Term and Long-Term Notes Receivable

Management reviews accounts receivable, short-term and long-term notes receivable on a monthly basis to determine if any receivables are potentially uncollectible. An allowance for doubtful accounts is determined based on a combination of historical experience, length of time outstanding, customer credit worthiness, and current economic trends. We recorded a bad debt expense of $26,526 during the three months ended March 31, 2016 and wrote off uncollectable accounts during the three months ended March 31, 2016 in the amount of $23,779. As of March 31, 2016, the Company has recorded an allowance for doubtful accounts of $1,392,630.

Notes receivable aged over 30 days past due are considered delinquent and notes receivable aged over 60 days past due with known collection issues are placed on non-accrual status. Interest revenue is not recognized on notes receivable while on non-accrual status. Cash payments received on non-accrual receivables are applied towards the principal. When notes receivable on non-accrual status are again less than 60 days past due, recognition of interest revenue for notes receivable is resumed.  The Company charges interest rates on notes receivable averaging 14%.  The Company recorded $14,319 in interest income for the three months ended March 31, 2016.

The allowance for doubtful accounts on long-term receivables is the Company's best estimate of the amount of probable credit losses related to the Company's existing note receivables.  The allowance for doubtful accounts is the Company's best estimate of probable credit losses related to trade receivables and notes receivable based upon the aging of the receivables, historical collection data, internal assessments of credit quality and the economic conditions in the business subprime industry, as well as in the economy as a whole. The Company charges off uncollectable amounts against the reserve in the period in which it determines they are uncollectable. Unearned income on notes receivable is amortized using the effective interest method.  The Company determines the allowance for doubtful accounts related to notes receivable based upon a reserve for known collection issues, as well as a reserve based upon aging, both of which are based upon history of such losses and current economic conditions. Based upon the Company's methodology, the notes receivable balances with reserves and the reserves associated with those balances are as follows:

	March 31, 2016
	Gross				Reserve				Net
	Current		Long-Term		Current		Long-Term		Current		Long-Term
Customer Notes Receivable	$	951,251	$	467,696	$	748,839	$	345,285	$	202,529	$	122,411
Accounts Receivable	$	584,762	$	-	$	298,506	$	-	$	286,256	$	-
	December 31, 2015
	Gross				Reserve				Net
	Current		Long-Term		Current		Long-Term		Current		Long-Term
Customer Notes Receivable	$	908,590	$	661,371	$	632,422	$	461,702	$	276,168	$	199,669
Accounts Receivable	$	437,589	$	-	$	295,759	$	-	$	141,830	$	-

The roll forward of the allowance for doubtful accounts related to notes receivable and accounts receivable is as follows:

	Notes Receivable					Accounts Receivable
	Current		Long-Term			Current			Long-Term
Balance at December 31, 2015		632,422		461,702			295,759			-
Incremental Provision		116,417		(116,497	)		26,526
Recoveries		-		-			-			-
Charge offs		-		-			(23,779	)		-
Balance at March 31, 2016		748,839		345,285			298,506			-

The allowance for doubtful accounts as a percentage of total receivables was approximately 70% as of March 31, 2016 and approximately 69% as of December 31, 2015.

The Company received a Secured Convertible Promissory Note (the “Note”) for a principal amount of $410,000 from a third party in September 2014. The Note bears interest at the rate of 5.25% per annum and matured in four months. For the three months ended March 31, 2015, the Company had recorded $4,751 of interest income from this Note.  $90,000 of the principal amount was paid during first quarter of 2015.  The Note was written off as of the year ended December 31, 2015.