Concentrations of credit risk

6 Months Ended

Apr. 30, 2019

Note 9 - 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 April 30, 2019, the Company had cash and cash equivalent balances in excess of federally insured limits in the amount of approximately $11.7 million.

Two customers, a distributor and an equipment manufacturer, accounted for approximately 32% and 10%, respectively, of the Company’s net sales for the six-month period ended April 30, 2019. These two customers’ accounts receivable balances accounted for 18% and 10% of the total net accounts receivable balance at April 30, 2019. For the three-month period ended April 30, 2019, the same distributor and a different equipment manufacturer accounted for approximately 28% and 14%, respectively, of the Company’s net sales. At April 30, 2019, this equipment manufacturer’s accounts receivable balance accounted for approximately 21% of the total net accounts receivable balance, with one other distributor customer’s accounts receivable balance accounting for approximately 15% of the total net accounts receivable balance.

For the six-month period ended April 30, 2018, one customer who is a distributor, accounted for approximately 68% of the Company’s net sales. This same customer accounted for approximately 76% of the Company’s net sales for the three-month period ended April 30, 2018. At April 30, 2018, this customer’s accounts receivable balance accounted for approximately 80% of the total net accounts receivable balance.

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.