Note 11 - Concentration of credit risk

The Company had a significant portion of its assets invested in G Farma entities, which assets have now been impaired. These investments included the notes receivable and the intended 3.843% equity in G Farma Equity Entities described in Note 8, and the finance leases receivable described in Note 9. After the bad debt reserve described in Note 9 and the asset impairments described in Notes 8, 9, and 10, these assets represent 0% and 5% of the consolidated total assets of the Company at March 31, 2020 and December 31, 2019, respectively.

The Company closely monitors each investment based on known and inherent risks in our investments which include financial results, satisfying scheduled payments and compliance with financial covenants, adverse situations that may affect the borrower’s ability to repay, estimated value of underlying collateral and current economic conditions.

The events described in Notes 1, 8, 9, and 10, led the Company to record a bad debt reserve against finance leases receivable of $793,649 and $786,680 at March 31, 2020 and December 31, 2019, respectively. Bad debt expense related to the finance leases receivable of $6,969 and $668,958, respectively, is included in selling, general and administrative expenses in the condensed consolidated income statements for the three months ended March 31, 2020 and 2019, respectively.

These same events, led the Company to fully impair G Farma notes receivable of $1,045,051, fully impair the $600,002 contractual interest in G Farma’s legal recovery, and fully impair the Company’s 3.843% equity interest in G Farma Equity Entities, formerly valued at $41,600 as of March 31, 2020 and December 31, 2019. On October 3, 2019, the Company rescinded the sale of an aggregate of 288,890 shares of its Common Stock to G Farma, due to complete failure of consideration, see Note 10. Impairments related to the G Farma investments of $0 and $1,639,558 are included in Gain (loss) in investments in the condensed consolidated income statements for the three month periods ended March 31, 2020 and 2019, respectively.

For G Farma notes receivable, we will continue to pursue collection from G Farma, its affiliates, and the guarantors of the various G Farma note purchase agreements, see Note 8. We will continue to pursue collection for lease payments remaining, after applying proceeds from the sale of recovered assets, from the G Farma Lease Entities and G Farma Lease Guarantors, see Note 9.