NOTE D – FINANCING RECEIVABLES

We lease certain hardware devices to a small number of hardware distributors under sales-type leases expiring in various years through 2017. These receivables typically have terms from two to four years and bear interest at various rates. The devices are not functional without an active service agreement with us. Since we can de-activate devices for non-payment, we have established a history of successfully collecting amounts due under the original payment terms without making any concessions to customers. As a result, we satisfy the requirement of revenue recognition. In addition, our long-standing relationship with these customers supports our assertion that revenues are fixed and determinable and probable of collection.

The components of these lease receivables were as follows:


Total minimum lease payments receivable	$	1,923		$	697
Unearned income		(82	)		(34	)
Present value of future minimum lease payments receivable		1,841			663
Less current portion		(512	)		(165	)
Amounts due after one year	$	1,329		$	498

Future minimum lease payments to be received subsequent to December 31, 2012 are as follows (in thousands):


2013	$	547
2014		553
2015		481
2016		342
Net lease receivable	$	1,923

Our financing receivables are comprised of a single portfolio segment because of the small number of customers and the similar nature of the sales-type leasing arrangements. We evaluate the credit quality of financing receivables based on a combination of factors, including, but not limited to, customer collection experience, economic conditions, the customer's financial condition, and known risk characteristics impacting the respective customer base of our customers. In addition to specific account identification, we utilize historical collection experience from our population of similar customers to establish any allowance for credit losses. Financing receivables are placed in non-accrual status after 60 days of nonpayment and written off only after we have exhausted all collection efforts. We have been successful collecting financing receivables and consider the credit quality of such arrangements to be good, especially as the underlying service is required for functionality and can be deactivated for non-payment. We have not experienced any credit losses for any period in the three years ended December 31, 2012.

Customer payments are considered past due if a scheduled payment is not received within contractually agreed upon terms. As of December 31, 2012, there were no financing receivables past due.