Note 4 – Accounts Receivable and Income Tax Refunds Receivable

Accounts receivables at March 31, 2021 (unaudited) and December 31, 2020 consisted of the following:

The allowance for contractual obligations reflected in the table above decreased as a percentage of accounts receivable to 62% at March 31, 2021 compared to 78% at December 31, 2020. The allowance is based on historical contractual allowance rates. The decrease in the percentage of contractual obligations to accounts receivable was due to rate changes.

For the three months ended March 31, 2021 and 2020, estimated implicit price concessions deducted from revenues were $3.0 million and $1.4 million, respectively. The allowance for implicit price concessions was $4.2 million at March 31, 2021 compared to $1.5 million at December 31, 2020, an increase of $2.7 million. The increase was due to updates to estimated collection rates. The Company’s policy is to write off accounts receivable balances against the allowance for implicit price concessions 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, 2020, the Company entered into six accounts receivable sales agreements under which the Company sold $3.3 million of accounts receivable on a non-recourse basis for a purchase price paid to the Company of $2.2 million, less $0.1million of origination fees. Accordingly, the Company recorded a loss on the sales of $1.2 million during the year ended December 31, 2020. As of March 31, 2021 and December 31, 2020, $1.6 million and $1.7 million, respectively, was outstanding and owed under the accounts receivable sales agreements, of which $0.9 million was recorded as a reduction of accounts receivable and $0.7 million was recorded in accrued expenses. The $0.7 million that was recorded in accrued expenses (see Note 5) represents the portion sold in excess of the balance of accounts receivable recorded by the Company as due at March 31, 2021.

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 entered into during 2019. The Installment Note is more fully discussed in Note 6.

Income Tax Refunds Receivable

As of March 31, 2021 and December 31, 2020, the Company had $1.1 million and $1.4 million, respectively, of income tax refunds receivable. During 2020, the U.S. Congress approved the CARES Act, which allowed a five-year carryback privilege for federal net operating tax losses that arose in a tax year beginning in 2018 and through 2020. As a result, during the year ended December 31, 2020, the Company recorded approximately $1.1 million in refunds from the carryback of certain of its federal net operating losses. In addition, during the year ended December 31, 2020, the Company recorded $0.3 million in refunds related to other net operating loss carryback adjustments. During the three months ended March 31, 2021, the Company received income tax refunds of $0.3 million, which represented income tax refunds associated with the CARES Act. No refunds were received during the three months ended March 31, 2020. The Company used the $0.3 million of refunds that it received in the three months ended March 31, 2021 to repay a portion of the amount that it owes for federal income tax liabilities that arose from an audit of the Company’s 2015 Federal tax return as more fully discussed in Note 13. The Company’s income taxes are more fully discussed in Note 15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.