Concentrations of credit risk

6 Months Ended

Apr. 30, 2014

Note 6 - Concentrations of credit risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with high-credit quality financial institutions. At April 30, 2014, the Company had cash and cash equivalent balances in excess of Federally insured limits in the amount of approximately $12.3 million.

One customer accounted for approximately 33% and 52% of the Company’s net sales for the six month periods ended April 30, 2014 and 2013, respectively. This same customer accounted for approximately 30% and 50% of the Company’s net sales for the three months ended April 30, 2014 and 2013, respectively. At April 30, 2014 and October 31, 2013, this customer’s account receivable balance accounted for approximately 24% and 27%, respectively, of the Company’s total net accounts receivable balances. Although this customer has been an on-going major customer of the Company continuously during the past 15 years, the written agreements with this customer do not have any minimum purchase obligations and the customer could stop buying the Company’s products at any time and for any reason. A reduction, delay or cancellation of orders from this customer or the loss of this customer could significantly reduce the Company’s future revenues and profits.

Sales of one product line accounted for $399,000 or 7% of net sales and $1.5 million or 13% of net sales for the three and six months ended April 30, 2014, respectively. The Company has a standard written purchase order with this customer and, therefore, this customer does not have any minimum purchase obligations and could stop buying the product at any time. A reduction, delay or cancellation of orders for this product or the loss of this customer could significantly reduce the Company’s revenues and profits.

- Definition

The entire disclosure for any concentrations existing at the date of the financial statements that make an entity vulnerable to a reasonably possible, near-term, severe impact. This disclosure informs financial statement users about the general nature of the risk associated with the concentration, and may indicate the percentage of concentration risk as of the balance sheet date.

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