Significant Risk Concentrations

12 Months Ended

Dec. 31, 2015

11.	Significant Risk Concentrations

Significant Customer

One customer, Honeywell International Inc., accounted for 16% of total revenue in 2015. One customer, Future Electronics, Inc., accounted for 12% of total revenue in 2014. No other customers accounted for 10% or more of total revenue in either 2015 or 2014.

Honeywell International, Inc. and affiliated entities had total accounts receivable balances of $6.1 million, or 32% of total accounts receivable, as of December 31, 2015. No other customer accounted for 10% or more of total accounts receivable at December 31, 2015 or 2014.

Significant Supplier

We have two ODAs with Microsoft which enable us to sell Microsoft Windows Embedded operating systems to our customers in the United States, Canada, Argentina, Brazil, Chile, Columbia, Mexico, Peru, Puerto Rico, the Caribbean, the European Union, the European Free Trade Association, Turkey and Africa, which expire on June 30, 2016. We also have four ODAs with Microsoft which allow us to sell Microsoft Windows Mobile operating systems in the Americas (excluding Cuba), Japan, Taiwan, Europe, the Middle East, and Africa, which also expire on June 30, 2016.

Software sales under these agreements constitute a significant portion of our software revenue and total revenue. These agreements are typically renewed annually or semi-annually; however, there is no automatic renewal provision in any of these agreements. Further, 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. Prior to the third quarter of 2013, the earned rebate amount was treated as a reduction in software cost of sales in the quarter earned. Beginning in the third quarter of 2013, as a result of program modifications, we began treating a portion of the rebate as marketing development funds which are accounted for as a reduction in marketing expense if and when qualified program expenditures are made.

Under this rebate program, we recognized $326,000 and $298,000 of rebate credits in 2015 and 2014, respectively, which were accounted for as reductions in cost of sales. We received $888,000 and $195,000 in rebates during 2015 and 2014, respectively, which were accounted for as reductions in marketing expenses. There was a balance of $641,000 in outstanding rebate credits we qualified for as of December 31, 2015, which will be accounted for as reductions in marketing expense if and when qualified program expenditures are made.

Microsoft is in the process of implementing significant pricing changes for its embedded products, including ending its design registration pricing discounts, terminating its OVRP and changing the aggregate volume price structure and product royalties for existing embedded Windows products effective January 1, 2016. In December 2015, Microsoft granted extensions for certain of the OVRPs through 2016.