Annual report pursuant to section 13 and 15(d)

4. Sale Of Accounts Receivable

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4. Sale Of Accounts Receivable
12 Months Ended
Dec. 31, 2013
Notes to Financial Statements  
4. Sale Of Accounts Receivable

On September 12, 2011 the Company entered into a purchase and sale agreement with Prestige Capital Corporation (“Prestige”), whereby the Company sells certain of its accounts receivable to Prestige at a discount in order to improve the Company’s liquidity and cash flow. Under the terms of the purchase and sale agreement, Prestige pays the Company a percentage of the face amount of the receivables at the time of sale with the remainder, net of the discount, paid to the Company within two business days after Prestige receives payment on the receivables, which generally have 30 day terms. Outstanding accounts receivable sold to Prestige at December 31, 2013 and 2012 amounted to approximately $0.9 million and $2.4 million, respectively, and the Company recognized a loss on the sale of accounts receivable for the years ended December 31, 2013 and 2012 of approximately $226,000 and $335,000 respectively, in connection with the sale of accounts receivable. The transfer of accounts receivable to Prestige under this agreement meets the criteria for a sale of financial assets. As a result, such receivables have been derecognized from the Company’s consolidated balance sheet as of December 31, 2013 and 2012.

 

From time to time the Company has also received short term advances from Prestige (see note 11) which are secured by a priority lien on the Company’s accounts receivable; however such advances are not attributable to a transfer of specific accounts receivable and are therefore reflected as notes payable to non-related parties in the accompanying consolidated balance sheets. Prestige and the Company’s Senior Lenders are parties to an Intercreditor Agreement that, as amended, allocates security interests in the Company’s assets among Prestige and the Senior Lenders (see Note 11).