Reliq Health Technologies Inc V.RHT.H

RE:Revenue Recognition

[qwerty22]

So theinvestor22, let's say 75% of patients become compliant (just a random number). How would they handle the revenue recognized from the 25% of patients that don't become compliant? It will never get collect, presumably they would need to subtract it at a later date. You would actually expect them to have a compliance rate in mind, even if it's a poorly constrained number. Maybe they have this already baked into the process and are just not talking about it?

theinvestor22 wrote: There seems to be some confusion here as to when revenue is recognized by Reliq.  Some folks still equate revenue recognition in the financial statements with collections from clients.  These are not the same thing.

Once Reliq has performed a service for which it expects payment under a contract, that's when the revenue is recognized.  It seems that Reliq doesn't expect payment until a patient is compliant with Medicare/Medicaid requirements , so there could be some period of time after onboarding where no revenue is being generated.  Having said that, once a billable service has been provided to a client who is expected to pay, that's the moment of revenue recognition.

Since Reliq's clients don't pay at the moment of revenue recognition, the unpaid amount owed by clients leads to accounts receivable.  When a payment is received from a client, no revenue is generated, but the accounts receivable balance is reduced.  Delays in receiving payments affect the company's cash flow, so a company can have a good quarter as far as revenue and income go, but it might be accompanied by poor cash flow.  Later on, when clients pay bills, that same company can have a decent revenue quarter with great cash flow.

In terms of cash burn (or negative cash flow), Reliq had numerous quarters where collections from clients were minimal.  For several of those quarters, Reliq stated that they gave generous payment terms to clients during covid.  Whether or not you agree with that, the auditor did accept that argument as a legitimate reason as to why the accounts receivable balance was growing and collections were lagging.  Lately, Reliq has begun collecting on those older accounts receivable and Reliq has stated that receivables older than one year have been collected.  One can imagine that Reliq's clients should be able to pay their bills at this time for numerous reasons that have been discussed here before, but can be rehashed if anyone is interested.  Regarless, accounts receivable and collections are something to be watched.

I hope this helps.