Significant Risk Concentrations

12 Months Ended

Dec. 31, 2016

11.	Significant Risk Concentrations

Significant Customer

Honeywell International Inc. accounted for 14% of total revenue in 2016 and 16% in 2015. No other customers accounted for 10% or more of total revenue in either 2016 or 2015.

Honeywell International, Inc. and affiliated entities had total accounts receivable balances of $7.1 million, or 33% of total accounts receivable, and $6.1 million, or 32% of total accounts receivable, as of December 31, 2016 and 2015, respectively. No other customer accounted for 10% or more of total accounts receivable at December 31, 2016 or 2015.

Significant Supplier

We have two ODAs with Microsoft that 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 (excluding Cuba), the E.U., the European Free Trade Association and Africa, which expire on June 30, 2017 and are typically renewed annually or bi-annually. We also have four ODAs with Microsoft that 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 and are typically renewed annually or bi-annually.

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. In accordance with Microsoft rebate program rules, we allocate 30% of rebate values to reduce cost of sales, with the remaining 70% to offset qualified marketing expenses in the period the expenditures are incurred.

Under this rebate program, we recognized $345,000 and $326,000 of rebate credits in 2016 and 2015, respectively, which were accounted for as reductions in cost of sales. We received $1.1 million and $0.8 million in rebates during 2016 and 2015, respectively, which were accounted for as reductions in marketing expenses. There was a balance of approximately $469,000 in outstanding rebate credits for which we qualified as of December 31, 2016, which will be accounted for as reductions in marketing expense in the period in which qualified program expenditures are made.

Microsoft implemented 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.