Note 4 – Accounts Receivable and Income Tax Refunds Receivable

Accounts receivables at March 31, 2020 (unaudited) and December 31, 2019 consisted of the following:

The allowance for discounts reflected in the table above increased as a percentage of accounts receivable to 74.3% at March 31, 2020 compared to 63.0% at December 31, 2019. The allowance for discounts varies based on changes in historical contractual allowance rates.

For March 31, 2020 and 2019, bad debt expense was $1.4 million and $1.6 million, respectively.

Accounts Receivable Factoring Arrangements and Installment Promissory Note

During the year ended December 31, 2019, the Company entered into five accounts receivable factoring arrangements. The aggregate amount of accounts receivable sold on a non-recourse basis, was $3.9 million. The aggregate purchase price paid to the Company was $2.7 million, less $0.1 million of origination fees. As of December 30, 2019, $1.1 million was outstanding and owed to two of the factors under two of these arrangements. On January 29, 2020, the Company entered into a Secured Installment Promissory Note (the “Installment Note”) in the principal amount of $1.2 million, less $0.1 million in origination fees, the proceeds of which were used to satisfy in full the amounts due to the factors. The Installment Note is more fully discussed in Note 7.

Income Tax Refunds Receivable

At March 31, 2020, the Company had $1.8 million of income tax refunds receivable of which $0.6 million is more fully discussed in Note 15. During the three months ended March 31, 2020, the U.S. Congress approved the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

The CARES Act allows a five-year carryback privilege for federal net operating tax losses that arose in a tax year beginning in 2018 and through the current tax year, that is, 2020. As a result, during the three months ended March 31, 2020, the Company recorded approximately $1.1 million in refunds from the carryback of certain of its federal net operating losses. The Company’s federal net operating losses are more fully discussed in Note 15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.