ACCOUNTS RECEIVABLE | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCOUNTS RECEIVABLE |
4. ACCOUNTS RECEIVABLE
In July 2010, the Company entered into a $1.0 million accounts
receivable factoring facility with a purchaser to sell its
qualified accounts receivable in exchange for advance of funds
equivalent to 80% of the value of receivables. The
facility may be terminated by either party at any time and there
are no obligations to sell or purchase any quantities of the
Company’s accounts receivable by any party. While
the facility calls for the sale, assignment, transfer and
conveyance of all rights, title and interests in the selected
accounts receivable, the purchaser may put and charge-back any
receivable not paid to the purchaser within 60 days of purchase or
for which there is a dispute. As collateral for the
repayment of advances for receivables sold, the purchaser has a
priority security interest in substantially all present and future
assets and rights of the Company including accounts receivable,
inventory, property, equipment and intangible
assets. The purchaser has required that the Company
notify all customers that all payments must be made to a lock-box
controlled by the purchaser. The purchaser provides a
rebate ranging from 14.60% to 19.10% of the value of the gross
receivables sold based upon the timing of collection of the
receivable. The purchaser is also entitled to charge
various fees, expenses and interest.
For the nine months ended September 30, 2011, the Company had sold
$50,492 of its accounts receivable and received advances of
$40,393. For the nine months ended September 30, 2011,
the Company had received rebates of $22,451 for prompt payment of
receivables sold and had been charged fees, expenses and interest
aggregating $2,998 by the purchaser. As of September 30,
2011 and December 31, 2010, $0 and $45,939, respectively, of
accounts receivable had not been paid and were subject to
charge-back by the purchaser.
A summary of accounts receivable as of September 30, 2011 and
December 31, 2010, is as follows:
The provision for bad debts was $3,724 for the nine months ended
September 30, 2011. During the nine months ended
September 30, 2010, the Company adjusted its allowance for doubtful
accounts by $26,724 as such reserves were no longer deemed
necessary.
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