Quarterly report pursuant to Section 13 or 15(d)

Accounts Receivable and Income Tax Refunds Receivable

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Accounts Receivable and Income Tax Refunds Receivable
9 Months Ended
Sep. 30, 2020
Receivables [Abstract]  
Accounts Receivable and Income Tax Refunds Receivable

Note 4 – Accounts Receivable and Income Tax Refunds Receivable

 

Accounts receivable at September 30, 2020 (unaudited) and December 31, 2019 consisted of the following:

 

    September 30,     December 31,  
    2020     2019  
             
Accounts receivable   $ 21,920,386     $ 26,687,028  
Less:                
Allowance for discounts     (14,190,812 )     (16,801,910 )
Allowance for bad debts     (4,331,671 )     (5,245,817 )
Accounts receivable owed under sales agreements     (966,188 )     (1,073,854 )
Accounts receivable, net   $ 2,431,715     $ 3,565,447  

 

The allowance for discounts reflected in the table above increased as a percentage of accounts receivable to 64.7% at September 30, 2020 compared to 63.0% at December 31, 2019. The allowance for discounts varies based on changes in historical contractual allowance rates.

 

For the three months ended September 30, 2020 and 2019, bad debt expense was $2.2 million and $0.9 million, respectively. For the nine months ended September 30, 2020 and 2019, bad debt expense was $6.2 million and $4.8 million, respectively. The allowance for bad debts decreased by $0.9 million at September 30, 2020 compared to the balance at December 31, 2019. The Company’s policy is to write off accounts receivable balances against the allowance for bad debts once an accounts receivable ages past a specified number of days.

 

Accounts Receivable Sales Agreements and Installment Promissory Note

 

During the year ended December 31, 2019, the Company entered into five accounts receivable sales agreements. The aggregate amount of accounts receivable sold on a non-recourse basis during the year ended December 31, 2019 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 31, 2019, $1.1 million was outstanding and owed under these accounts receivable sales agreements. 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 under accounts receivable sales agreements. The Installment Note is more fully discussed in Note 7.

 

During the nine months ended September 30, 2020, the Company entered into three accounts receivable sales agreements under which the Company sold $1.9 million of accounts receivable on a non-recourse basis for a purchase price paid to the Company of $1.3 million, less origination fees. Accordingly, the Company recorded a loss on the sale of $0.3 million and $0.6 million during the three and nine months ended September 30, 2020, respectively. As of September 30, 2020, $1.0 million was outstanding and owed under the accounts receivable sales agreements.

 

Income Tax Refunds Receivable

 

As of September 30, 2020, the Company had $1.2 million of income tax refunds receivable. During the three and nine months ended September 30, 2020, the Company received $0.6 million of income tax refunds. During the first quarter of 2020, the U.S. Congress approved the CARES Act, which 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 nine months ended September 30, 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.