Concentrations of credit risk

9 Months Ended

Jul. 31, 2018

Note 8 - Concentrations of credit risk

Financial instruments that 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 July 31, 2018, the Company had cash and cash equivalent balances in excess of federally insured limits in the amount of approximately $10.5 million.

One customer who is a distributor, accounted for approximately 56% of the Company’s net sales for the nine-month period ended July 31, 2018. This same customer accounted for approximately 51% of the Company’s net sales for the three-month period ended July 31, 2018. At July 31, 2018, this customer’s accounts receivable balance accounted for approximately 53% of the total net accounts receivable balance. For the nine-month period ended July 31, 2017, two customers, a distributor and data center solutions provider accounted for approximately 18% and 13% of the Company’s net sales, respectively. These same two customers accounted for approximately 22% and 11% of the Company’s net sales, respectively, for the three months ended July 31, 2017. At July 31, 2017, these customers’ accounts receivable balances accounted for approximately 26% and 10% of the Company’s total net accounts receivable balance, respectively. Although these customers have been on-going major customers of the Company, the written agreements with these customers do not have any minimum purchase obligations and they could stop buying the Company’s products at any time and for any reason. A reduction, delay or cancellation of orders from these customers or the loss of these customers could significantly reduce the Company’s future revenues and profits.  