Note 10 - Significant Risk Concentrations

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

10.

Significant Risk Concentrations

Significant Customers

No

customers accounted for

10%

or more of total revenue for each of the

three

and

nine

months ended

September 30, 2020

and

2019

.

Kodak Alaris had accounts receivable balances of

$645

thousand or approximately

12%

of total accounts receivable at

September 30, 2020. 

H

oneywell International, Inc. and affiliated entities (“Honeywell”) had accounts receivable balances of 

$552

thousand or approximately

10%

of total accounts receivable at

September 30, 2020

and

$1.2

million or approximately

13%

of total accounts receivable at

December 31, 2019

.

No

other customer accounted for

10%

or more of total accounts receivable at

September 30, 2020

or

December 31, 2019

.

Significant Supplier

Effective

March 1, 2019,

pursuant to a Global Partnership Agreement with Microsoft, we are authorized to sell Windows Embedded operating systems in Canada, the United States, Argentina, Brazil, Chile, Mexico, Peru, Venezuela, Puerto Rico, Columbia, and several Caribbean countries. Of our total revenue,

79%

in

2019

resulted from the sale of Windows IoT operating systems. We have also entered into OEM distributor agreements (“ODAs”) with Microsoft pursuant to which we are licensed to sell Microsoft Windows Mobile operating systems to customers in North America, South America, Central America (excluding Cuba), Japan, Taiwan, Europe, the Middle East, and Africa. The ODAs to sell Windows Mobile operating systems are effective through

April 30, 2022.

Software sales under these agreements constitute a significant portion of our Partner Solutions revenue and total revenue. There is

no

automatic renewal provision in any of these agreements, and these agreements can be terminated unilaterally by Microsoft at any time.

Microsoft currently offers a rebate program to sell Microsoft Windows Embedded operating systems pursuant to which we earn money for achieving certain predefined objectives. In accordance with Microsoft rebate program rules:

•    For the

three

months ended

September 30, 2020, 

we allocated

50%

of rebates to reduce cost of sales, with the remaining

50%

potentially available to offset qualified marketing expenses related to Microsoft Azure products in the period that expenditures are claimed and approved.

•    For the

six

months ended

June 30, 2020,

we allocated 

20%

of rebates to reduce cost of sales, with the remaining

80%

potentially available to offset qualified marketing expenses related to Microsoft Azure products in the period that expenditures are claimed and approved.

•    For the

three

and

nine

months ended

September 30, 2019,

respectively, we allocated

20%

of rebates to reduce cost of sales, with the remaining

80%

potentially available to offset qualified marketing expenses related to Microsoft Azure products in the period that expenditures are claimed and approved.

Under this rebate program, we recorded rebate credits as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Reductions to cost of revenue	$	500	$	87	$	654	$	240
Reductions to marketing expense	$	123	$	597	$	1,026	$	1,027

There was a balance of approximately

$122,000

in qualified outstanding rebate credits at

September 30, 2020

, which will be accounted for as a reduction in marketing expense in the period in which qualified program expenditures are claimed and approved.