Financing Receivables

6 Months Ended

Jun. 30, 2016

Receivables [Abstract]

Financing Receivables

NOTE 6 - 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, 2015		June 30, 2016
			(Unaudited)
Notes receivable	$	1,000	$	-
Present value of sales-type lease receivable		5,027,000		4,956,000
		5,028,000		4,956,000
Less: Current portion
Notes receivable		1,000		-
Present value of sales-type lease receivable		1,949,000		2,021,000
		1,950,000		2,021,000
Financing receivables - less current portion	$	3,078,000	$	2,935,000

Notes receivable relate to product financing arrangements that exceed one year and bear interest at approximately 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 three- and six-month periods ended June 30, 2015 and 2016.

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 $442,000 and $411,000 at December 31, 2015 and June 30, 2016, respectively, discounted at 1% - 26%.

Scheduled maturities of sales-type lease minimum lease payments outstanding as of June 30, 2016 are as follows:

Year ending December 31:
July - December 2016	$	1,087,000
2017		1,745,000
2018		1,169,000
2019		607,000
2020		297,000
Thereafter		51,000
		4,956,000
Less: Current portion		2,021,000
Sales-type lease receivable - less current portion	$	2,935,000

The allowance for doubtful accounts represents the Company’s best estimate of the amount of credit losses in the Company’s existing notes and sales-type lease receivable. 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. The Company considers its 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 six-month-periods ended June 30, 2015 and 2016. The Company does not accrue interest when a note or lease is considered impaired. When the ultimate collectability of the principal balance of the impaired note or lease is in doubt, all cash receipts on impaired notes or leases are applied to reduce the principal amount of such notes or leases until the principal has been recovered and are recognized as interest income thereafter. Impairment losses are charged against the allowance and increases in the allowance are charged to bad debt expense. Notes and leases are written off against the allowance when all possible means of collection have been exhausted and the potential for recovery is considered remote. The Company resumes accrual of interest when it is probable that the Company will collect the remaining principal and interest of an impaired note or lease. Notes and leases become past due based on how recently payments have been received.