Customer Concentrations and Accounts Receivable
|3 Months Ended|
Jun. 30, 2018
|Customer Concentrations and Accounts Receivable|
|Customer Concentrations and Accounts Receivable||
4. Customer Concentrations and Accounts Receivable
Sales to Warren CAT, a direct sale to a domestic end-use customer, Supernova Energy Services SAS (“Supernova”), one of the Company’s Latin American distributors and E-Finity Distributed Generation, LLC (“E-Finity), one of the Company’s domestic distributors, accounted for 18%, 12% and 10%, respectively, of revenue for the first quarter of Fiscal 2019. Sales to Horizon Power Systems (“Horizon”), one of the Company’s domestic distributors, and E-Finity, accounted for 21% and 15%, respectively, of revenue for the first quarter of Fiscal 2018.
Additionally, Serba Dinamik Sdn Bhd (“Serba”), one of the Company’s Malaysian distributors, Supernova, Reliable Secure Power Systems, one of the Company’s domestic distributors (“RSP”) and E-Finity accounted for 15%, 12%, 10% and 10%, respectively, of net accounts receivable as of June 30, 2018. Serba, E-Finity, and Supernova accounted for 20%, 18% and 10%, respectively, of net accounts receivable as of March 31, 2018.
On October 13, 2017, the Company entered into an Accounts Receivable Assignment Agreement (the “Assignment Agreement”) and Promissory Note (the “Note”) with Turbine International, LLC (“TI”).
Pursuant to the terms of the Assignment Agreement, the Company agreed to assign to TI the right, title and interest to receivables owed to the Company from BPC Engineering, its former Russian distributor (“BPC”), upon TI’s payment to the Company of $2.5 million in three payments by February 1, 2018. The Company received payments from TI of approximately $1.0 million under the Assignment Agreement during Fiscal 2018, which was recorded as bad debt recovery. The receivables owed to the Company from BPC had a balance of $5.3 million as of June 30, 2018, and this balance was fully reserved. As of June 30, 2018, the right, title and interest to the receivables owed to the Company from BPC had not been assigned to TI, as TI had not yet made all payments as required under the Assignment Agreement by February 1, 2018.
On October 13, 2017, the Company and Hispania Petroleum, S.A. (the “Guarantor”) entered into a Guaranty Agreement (the “Guaranty Agreement”) whereby the Guarantor guarantees TI’s obligations under the Agreement and Note. However, due to the Company’s limited business relationship with TI and the missed payments on the Assignment Agreement, the Company deferred recognition of the Assignment Agreement and Note until collectability is reasonably assured.
In connection with the terms of the Note, the Company granted TI the sole distribution rights for its products and services in the Russian oil and gas sector. As a result of this appointment, TI agreed to pay the Company $3.8 million over a three-year period in 35 equal monthly installments starting in August 2018.
On June 5, 2018, the Company entered into an amendment to the Assignment Agreement (the “Amended Assignment Agreement”) and the Note (the “Amended Note”) with TI. Pursuant to the terms of the Amended Assignment Agreement, the right, title and interest to receivables owed to the Company from BPC will be contingent upon TI’s payment to the Company of the remaining approximately $1.5 million in five payments by September 20, 2019. During the first quarter of Fiscal 2019 no payment was due under these agreements. Under the terms of the Amended Note, TI agreed to pay the Company $3.8 million over a three-year period in 13 equal quarterly installments starting in December 20, 2019.
The Company recorded bad debt recoveries of approximately $2,800 and $13,000 during the three months ended June 30, 2018 and 2017, respectively. As of March 31, 2015, the Company had an amount owed of approximately $8.1 million by BPC. As of June 30, 2018, the Company collected cumulatively approximately $1.8 million from BPC on their accounts receivable which has been previously reserved. Additionally, the Company collected approximately $1.0 million from TI, under the terms of the Assignment Agreement. The remaining balance of the fully reserved accounts receivable is $5.3 million as of June 30, 2018.
The entire disclosure for any concentrations existing at the date of the financial statements that make an entity vulnerable to a reasonably possible, near-term, severe impact. This disclosure informs financial statement users about the general nature of the risk associated with the concentration, and may indicate the percentage of concentration risk as of the balance sheet date.
Reference 1: http://www.xbrl.org/2003/role/presentationRef