Significant Risk Concentrations

3 Months Ended

Mar. 31, 2016

Risks And Uncertainties [Abstract]

Significant Risk Concentrations

9. Significant Risk Concentrations

Significant Customer

One customer, Honeywell International, Inc. and affiliated entities (“Honeywell”), accounted for $4.2 million, or 16%, of total revenue for the three months ended March 31, 2016. Another customer, Future Electronics, Inc., accounted for $4.4 million, or 17% of our total revenue for the three month period ended March 31, 2015. No other customers accounted for more than 10% of our revenue for any of the periods noted above.

Honeywell had total accounts receivable balances of $9.4 million, or approximately 48% of total accounts receivable at March 31, 2016 and $6.1 million, or 32% of total accounts receivable at December 31, 2015. No other customers had accounts receivable balances that were 10% or more of the total accounts receivable at March 31, 2016 or December 31, 2015.

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, 2017. 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, 2017.

Software sales under these agreements constitute a significant portion of our software revenue and total revenue. These agreements are typically renewed bi-annually, 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. Under this rebate program, we recognized $86,000 the three month period ended March 31, 2016 compared to $63,000 during the three month period ended March 31, 2015. These rebates were treated as reductions in cost of sales. Additionally, during the three month period ended March 31, 2016, we qualified for $201,000 in rebate credits compared to $147,000 for the three month period ended March 31, 2015. These are 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, its OEM Volume Royalty Program (OVRP) and changing the aggregate volume price structure and product royalties for existing embedded Windows products effective January 1, 2016.