NOTE 7 - FINANCING RECEIVABLES

Financing receivables include notes and sales-type lease receivables from the sale of the Company’s products and services. Financing receivables consist of the following:

	December 31,		September 30,
	2012		2013

Notes receivable	$	76,000	$	58,000
Sales-type lease receivable		13,881,000		14,765,000
Less: Allowance for credit losses		-		-
		13,957,000		14,823,000

Less: Current portion
Notes receivable		23,000		25,000
Sales-type lease receivable		3,120,000		3,991,000
		3,143,000		4,016,000

Financing receivables - less current portion	$	10,814,000	$	10,807,000

Notes receivable relate to product financing arrangements that exceed one year and bear interest at approximately 8% - 10%. The notes receivable are collateralized by the equipment being financed. Amounts collected on the notes receivable are included in net cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows. Unearned interest income is amortized to interest income over the life of the notes using the effective-interest method. There were no sales of notes receivable during the nine-month periods ended September 30, 2012 and 2013.

The present value of net investment in sales-type lease receivable is principally for three to five-year leases of the Company’s products and is reflected net of unearned income of $1,362,000 and $1,230,000 at December 31, 2012 and September 30, 2013, respectively, discounted at 2% - 26%.

The allowance for doubtful accounts is determined on an individual note and lease basis if it is probable that the Company will not collect all principal and interest contractually due. We consider our customers’ financial condition and historical payment patterns in determining the customers’ probability of default. The impairment is measured based on the present value of expected future cash flows discounted at the note’s effective interest rate. There were no impairment losses recognized for the three- and nine-month periods ended September 30, 2012 and 2013.

Scheduled maturities of sales-type lease minimum lease payments outstanding as of September 30, 2013 are as follows:

Year ending December 31:

October - December 2013	$	1,007,000
2014		3,940,000
2015		3,711,000
2016		3,482,000
2017		2,254,000
Thereafter		371,000

		14,765,000
Less: Current portion		3,991,000

Sales-type lease receivable - less current portion	$	10,774,000