REVENUE AND VENDOR CONCENTRATIONS

Revenue Concentration

Revenue from customers of which revenues were in excess of 10% of total revenue were approximately $3,385,000 and $1,678,000, respectively, and totaled approximately 33% of total revenue for each of the fiscal years ended September 30, 2011 and 2010. The corresponding accounts receivable balances were approximately $840,000 and $580,000 at September 30, 2011 and 2010, respectively.

The Company's revenue is derived primarily from the sale by the Company to channel partners, including systems integrators and resellers, and end-users of licenses to sell products covered by the Company's patented technologies. These contractual arrangements do not obligate the Company's channel partners to order, purchase or distribute any fixed or minimum quantities of the Company's products. In most cases, the channel partners purchase the license from the Company after they receive an order from an end-user. The channel partners receive orders from various individual end-users, so the sale of a license to a channel partner may represent sales to multiple end-users. End-users can purchase the Company's products through more than one channel partner.

For the fiscal year ended September 30, 2011, the Company recorded 11% of its revenues from a direct customer and 22% from a channel partner. For the fiscal year ended September 30, 2010, the Company recorded 12%, 11% and 10% of its revenues from three different channel partners. Revenues can fluctuate based on the timing of license renewals by channel partners. When a channel partner purchases or renews a license, the Company receives a license fee in consideration for the grant of a license to sell the Company's products and there are no future payment obligations related to such agreement; therefore the license fee the Company receives with respect to a particular license renewal in one period does not have a correlation with revenue in future periods. During most quarterly periods in fiscal year 2011 and 2010, sales of licenses to one or two channel partners have comprised a significant part of our revenue. This is attributable to the timing of renewals or purchases of licenses and does not represent a dependence on any one channel partner. The Company believes that it is not dependent on any single channel partner, even those from which revenues were in excess of 10% of the Company's total revenue in a specific reporting period, and the loss or termination of the Company's relationship with any such channel partner would not have a material adverse effect on the Company's future operations.

International sales accounted for approximately 12% and 10% of the Company's total revenue for the fiscal years ended September 30, 2011 and 2010, respectively. The Company sells its products in U.S. currency only.

Vendor Concentration

The Company purchases its integrated software components from multiple third-party software providers at competitive prices. The Company had purchases from one vendor that comprised approximately 13% and 14% of total purchases for the years ended September 30, 2011 and 2010, respectively. The Company is under no obligation to purchase from any one vendor. The Company has entered into contractual relationships with some of its vendors; however, these agreements do not contain binding obligations on either party and either party may terminate the agreement at any time. The Company does not believe it is substantially dependent upon nor exposed to any significant concentration risk related to purchases from any of its vendors, given the availability of alternative sources for its necessary integrated software components.