Note 13 - Significant Risk Concentrations

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

9. Significant Risk Concentrations

Significant Customers

No customers accounted for 10% or more of total revenue for each of the three months ended March 31, 2022 and 2021.

Continental Resources, Inc. had accounts receivable balances of $757,000, or approximately 16% of total accounts receivable at March 31, 2022. Honeywell International, Inc. and affiliated entities (“Honeywell”) had accounts receivable balances of $563,000 or approximately 10% of total accounts receivable at  March 31, 2021.

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 March 31,
	2022		2021
Reductions to cost of revenue	$	136	$	106
Reductions to marketing expense		105		57