Note 5 - Accounts Receivable and Concentration of Credit Risk



The components of accounts receivable consist of the following at December 31, 2017 and September 30, 2017:









On December 27, 2017, we entered into a settlement agreement with Semina, our distributor in Brazil, pursuant to which Semina has made a payment of $2.25 million and is 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. The amounts owed to us relate to outstanding accounts receivable for sales to Semina for the 2014 Brazil Tender totaling $8.9 million, $7.8 million of which was classified as a long term trade receivable and $1.1 million as a current account receivable on the accompanying condensed consolidated balance sheet as of September 30, 2017. These receivables were net of payables owed to Semina by us totaling $1.4 million, $1.2 million of which was classified as a long term liability and $0.2 million classified as a current liability on the accompanying condensed consolidated balance sheet as of September 30, 2017. The settlement was not related to our belief in the ultimate collectability of the receivables or in the creditworthiness of Semina. The result of the settlement was a net loss of approximately $3.76 million, which is presented as a separate line item in the accompanying unaudited condensed consolidated statement of operations for the three months ended December 31, 2017.



At December 31, 2017 and September 30, 2017, Semina’s accounts receivable balance represented 15 percent and 11 percent of current assets, respectively. No other single customer’s accounts receivable balance accounted for more than 10 percent of current assets at the end of those periods. At December 31, 2017,  Semina’s accounts receivable balance represented 50 percent of the Company’s accounts receivable balance. At September 30, 2017, Semina’s accounts receivable and long-term other receivables balance represented 78 percent of the Company’s accounts receivable and long-term other receivables balance. For the three months ended December 31, 2017 and 2016, there were four and three customers who each exceeded 10 percent of net revenues, respectively.



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 written-off when deemed uncollectible.  The table below sets forth the components of the allowance for doubtful accounts at December 31, 2017 and 2016:









Recoveries of accounts receivable previously written-off are recorded when received.  The Company’s customers are primarily large global agencies, non-government organizations, ministries of health and other governmental agencies which purchase and distribute the female condom for use in HIV/AIDS prevention and family planning programs.