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6. Customer and Vendor Concentrations
3 Months Ended
Mar. 31, 2020
Risks and Uncertainties [Abstract]  
Customer and Vendor Concentrations

The Company sells its products primarily through high-volume retailers and distributors, Internet service providers, value-added resellers, system integrators, and original equipment manufacturers ("OEMs"). The Company supports its major accounts in their efforts to offer a well-chosen selection of attractive products and to maintain appropriate inventory levels.

 

Relatively few companies account for a substantial portion of the Company’s revenues. In the first quarter of 2020, two companies accounted for 10% or greater individually and 86% in the aggregate of the Company’s total net sales. At March 31, 2020, two companies with an accounts receivable balance of 10% or greater individually accounted for a combined 73% of the Company’s accounts receivable. In the first quarter of 2019, two companies accounted for 10% or greater individually and 81% in the aggregate of the Company’s total net sales. At March 31, 2019, three companies with an accounts receivable balance of 10% or greater individually accounted for a combined 67% of the Company’s accounts receivable.

 

The Company’s customers generally do not enter into long-term agreements obligating them to purchase products. The Company may not continue to receive significant revenues from any of these or from other large customers. A reduction or delay in orders from any of the Company’s significant customers, or a delay or default in payment by any significant customer could materially harm the Company’s business and prospects. Because of the Company’s significant customer concentration, its net sales and operating income could fluctuate significantly due to changes in political or economic conditions, or the loss, reduction of business, or less favorable terms for any of the Company's significant customers.

 

The Company participates in the PC peripherals industry, which is characterized by aggressive pricing practices, continually changing customer demand patterns and rapid technological developments. The Company's operating results could be adversely affected should the Company be unable to successfully anticipate customer demand accurately; manage its product transitions, inventory levels and manufacturing process efficiently; distribute its products quickly in response to customer demand; differentiate its products from those of its competitors or compete successfully in the markets for its new products.

 

The Company depends on many third-party suppliers for key components contained in its product offerings. For some of these components, the Company may only use a single source supplier, in part due to the lack of alternative sources of supply. During the first quarter of 2020, the Company had two suppliers that provided 99% of the Company's purchased inventory. During the first quarter of 2019, the Company had one supplier that provided 99% of the Company's purchased inventory.