4.  Customer Concentrations and Accounts Receivable

 

Sales to Optimal Group Australia Pty Ltd, one of the Company’s Australian distributors, accounted for 11% of revenue for the three months ended December 31, 2019. 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. For the nine months ended December 31, 2019 and 2018, E-Finity accounted for 12% of revenue.

Additionally, E-Finity accounted for 12% of net accounts receivable as of December 31, 2019. Reliable Secure Power Systems, (“RSP”), one of the Company’s domestic distributors and E-Finity, accounted for 14% and 10%, respectively, of net accounts receivable as of March 31, 2019.

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.

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 was be contingent upon TI’s payment to the Company of the remaining approximately $1.5 million in five payments by September 20, 2019. 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 on December 20, 2019. The payments of $0.4 million, $0.3 million, and $0.3 million, due March 20, 2019, June 20, 2019, and September 20, 2019, respectively, under the Amended Assignment Agreement, have not been received at the time of this filing. In September 2019, the Company sent TI a notice to cure default with a deadline of October 31, 2019. TI failed to cure the noticed default and the Company has since terminated TI’s distributor agreement. As a result, the BPC accounts receivable and related accounts receivable reserve of $4.8 million were written off.

The Company recorded a net bad debt recovery of $0.1 million during the nine months ended December 31, 2019. No bad debt recovery or expense was recorded in the three months ended December 31, 2019. 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.

As of March 31, 2015, the Company had an amount owed of approximately $8.1 million by BPC. As of September 30, 2019, the Company cumulatively collected 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 BPC accounts receivable and related accounts receivable reserve of $4.8 million were written off as of December 31, 2019.