4.  Customer Concentrations and Accounts Receivable

 

Sales to E-Finity Distributed Generation, LLC (“E-Finity”) and Cal Microturbine (“CAL”), two of the Company’s domestic distributors and DTC Soluciones Inmobiliarias S.A. de C.V., one of the Company’s Mexican distributors (“DTC”), accounted for 14%, 13% and 13%, respectively, of revenue for the three months ended December 31, 2018. Sales to E-Finity and CAL accounted for 29% and 14%, respectively, of revenue for the three months ended December 31, 2017. For the nine months ended December 31, 2018, E-Finity accounted for 12% of revenue. For the nine months ended December 31, 2017, E-Finity and Horizon Power Systems (“Horizon”), one of the Company’s domestic distributors, accounted for 19% and 10% of revenue, respectively.

Additionally, E-Finity, DTC and CAL accounted for 14%,  11% and 11%, respectively, of net accounts receivable as of December 31, 2018. Serba Dinamik Sdn Bhd (“Serba”), one of the Company’s Malaysian distributors, E-Finity, and Supernova Energy Services SAS (“Supernova”),  one of the Company’s Columbian distributors, 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 $4.8 million as of December 31, 2018, and this balance was fully reserved.

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. The Company collected approximately $0.4 million and $0.5 million from TI during the three and nine months ended December 31, 2018, under the terms of the Amended Assignment Agreement. 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. As of December 31, 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.

The Company recorded a net bad debt recovery of approximately $0.4 million and $0.3 million during the three and nine months ended December 31, 2018, respectively. The Company recorded a net bad debt recovery of approximately $0.7 million and $0.8 million during the three and nine months ended December 31, 2017, respectively. As of March 31, 2015, the Company had an amount owed of approximately $8.1 million by BPC. As of December 31, 2018, the Company collected cumulatively approximately $1.8 million from BPC on their accounts receivable, which has been previously reserved. The Company cumulatively collected approximately $1.5 million from TI, under the terms of the Assignment Agreement and the Amended Assignment Agreement. The remaining balance of the fully reserved accounts receivable was $4.8 million as of December 31, 2018.