Note 4 - Accounts Receivable and Concentration of Credit Risk



The components of accounts receivable consist of the following at March 31, 2018 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 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, and we currently expect it to make the payment during the third quarter of fiscal 2018. 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 was 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 six months ended March 31, 2018.



At March 31, 2018 and September 30, 2017, Semina’s accounts receivable balance represented 9 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 those dates. At March 31, 2018, 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 March 31, 2018 and 2017, there was one customer who exceeded 10 percent of net revenues.  For the six months ended March 31, 2018 and 2017, there were two customers who each exceeded 10 percent of net revenues.



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 summarizes the change in the allowance for doubtful accounts for the six months ended March 31, 2018 and 2017:









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.