Note 5 – Accounts Receivable and Concentration of Credit Risk



The Company’s standard credit terms vary from 30 to 120 days, depending on the class of trade and customary terms within a territory, so accounts receivable is affected by the mix of sales within the period. As is typical in the Company’s business, extended credit terms may occasionally be offered as a sales promotion or for certain sales. For sales to the Company’s distributor in Brazil, the Company has agreed to credit terms of up to 180 days subsequent to clearance of the product by the Ministry of Health in Brazil. As of September 30, 2019, the Company classified approximately $300,000 of trade receivables with its distributor in Brazil as long-term because payment is expected in greater than one year. As of September 30, 2018 the Company did not have any trade receivables classified as long-term. The long-term portion of trade receivables is included in other assets on the accompanying consolidated balance sheets.



The components of accounts receivable consist of the following at September 30, 2019 and 2018:







On December 27, 2017, we entered into a settlement agreement with Semina, our distributor in Brazil, pursuant to which Semina made a payment of $2.2 million and was obligated to make a second payment of $1.5 million by February 28, 2018, to settle net amounts due to us totaling $7.5 million. Semina did not make its second payment of $1.5 million by February 28, 2018. In July 2018, the Company agreed to accept $1.3 million as settlement of the second payment of $1.5 million that was owed. The settlement was not related to our belief in the ultimate collectability of the receivables or in the creditworthiness of Semina. We elected to settle these amounts due to the uncertainty regarding the timing of payment by the Brazilian Government and, ultimately to us, on the remaining amounts due. The result of the settlement was a net loss of approximately $4.0 million for the year ended September 30, 2018, which is presented as a separate line item in the accompanying consolidated statements of operations.



At September 30, 2019,  no customer had an accounts receivable balance that represented greater than 10% of current assets. At September 30, 2018,  one customer had an accounts receivable balance that represented 15% of current assets. 



At September 30, 2019,  two customers had an accounts receivable balance greater than 10% of net accounts receivable, representing 64% of net accounts receivable in the aggregate. At September 30, 2018,  three customers had an accounts receivable balance greater than 10% of net accounts receivable, representing 74% of the Company’s net accounts receivable in the aggregate.  



For the year ended September 30, 2019, there were three customers whose individual net revenue to the Company exceeded 10% of the Company’s net revenues,  representing 64% of the Company’s net revenues in the aggregate. For the year ended September 30, 2018, there were three customers whose individual net revenue to the Company exceeded 10% of the Company’s net revenues, representing 63% of the Company’s net revenues in the aggregate.



The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments on accounts receivable. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Management also periodically evaluates individual customer receivables and considers a customer’s financial condition, credit history, and the current economic conditions. Accounts receivable are charged-off when deemed uncollectible.



The table below summarizes the change in the allowance for doubtful accounts for the years ended September 30, 2019 and 2018:



Recoveries of accounts receivable previously charged-off are recorded when received. The Company’s customers are primarily health care distributors, large global agencies, non-government organizations, ministries of health and other governmental agencies which purchase and distribute FC2 for use in HIV/AIDS prevention and family planning programs and, in the U.S. prescription channel, telemedicine providers.