Note 4 – Accounts Receivable and Concentration of Credit Risk



The components of accounts receivable consist of the following at September 30, 2018 and 2017:









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 amounts owed to us related 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 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 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. 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, 2018, USAID’s accounts receivable balance represented 15% of current assets.  At September 30, 2017, Semina’s current accounts receivable balance represented 11% of current assets.  No other single customer’s accounts receivable balance accounted for more than 10% of current assets at those dates. 



At September 30, 2018, three customers had an accounts receivable balance greater than 10% of accounts receivable, representing 74% of accounts receivable in the aggregate. At September 30, 2017, Semina’s accounts receivable and long-term other trade receivables balance represented 79% of the Company’s total accounts receivable and long-term other trade receivables.



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; the net revenues for UNFPA,  USAID and Barrs Medical (PTY) Ltd were $4.1 million,  $3.0 million and $2.9 million, respectively. For the year ended September 30, 2017, there were two customers whose individual net revenue to the Company exceeded 10% of the Company’s net revenues; the net revenues for UNFPA and USAID were $3.3 million and $5.8 million, 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 charged-off when deemed uncollectible.  The table below summarizes the change in the allowance for doubtful accounts for the years ended September 30, 2018 and 2017, excluding the effects of the amounts that were due from Semina discussed above.



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.