Note 10 - Significant Risk Concentrations

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

10. Significant Risk Concentrations

Significant Customers

GES Manufacturing Services (M) Sdn. Bhd. accounted for $1.1 million or approximately 11% of our total revenue for the three months ended September 30, 2021. No other customers accounted for 10% or more of total revenue for the three months ended September 30, 2020 or the nine months ended September 30, 2021 and 2020. 

GES Manufacturing Services (M) Sdn. Bhd. had accounts receivable balances of $958,000 or approximately 16% of our total accounts receivable at September 30, 2021. Honeywell International, Inc. and affiliated entities ("Honeywell") had accounts receivable balances of $680,000 or approximately 12% of our total accounts receivable at December 31, 2020. Kodak Alaris had accounts receivable balances of $866,000 or approximately 15% of our total accounts receivable at December 31, 2020.

Significant Supplier

We are authorized to sell Windows IoT operating systems in Canada, the United States, Argentina, Brazil, Chile, Mexico, Peru, Venezuela, Puerto Rico, Columbia, and several Caribbean countries. Our distribution agreement for sales of Windows IoT operating systems in the European Union (“E.U.”), the European Free Trade Association, Turkey and Africa, expired on June 30, 2019 and was not renewed thereafter. 

We have also entered into Original Equipment Manufacturer Distribution 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.

There is no automatic renewal provision in any of these agreements, and these agreements can be terminated unilaterally by Microsoft at any time.

The majority of our revenue continues to be derived from reselling Microsoft Windows Embedded and IoT operating system software to device makers. The sale of Microsoft operating systems has historically accounted for substantially all of our Partner Solutions revenue.

Microsoft currently offers a distributor incentives program through which we earn rebates pursuant to predefined objectives related to sales of Microsoft Windows IoT operating systems. In accordance with program rules, we allocate a portion of the incentive earnings to reduce cost of revenue with the remaining portion utilized to offset qualified marketing expenses in the period the expenditures are claimed and approved. During the second quarter of 2020 the program allocation was changed by Microsoft to a 50/50 split between the two components.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Reductions to cost of revenue	$	26	$	500	$	236	$	654
Reductions to marketing expense		110		123		287		1,026