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10. Commitments and Contingencies
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
NOTE 10 - Commitments and Contingencies

Legal Proceedings

 

From time to time the Company may be involved in various claims and legal actions arising in the ordinary course of its business. On March 28, 2017, The Sales Group, Inc. (“TSG”) purported to file a lawsuit in the U.S. District Court for the Central District of California against the Company. TSG was a sales representative of the Company that the Company terminated in March 2017. TSG has asserted claims against the Company for alleged breach of oral contract, violation of the California and Arizona sales representative statutes, and an accounting of alleged unpaid sales commissions. TSG’s complaint seeks damages in the amount of $6,090 for alleged unpaid past and future sales commissions. On April 3, 2017, counsel for TSG sent the Company a letter outlining additional alleged grounds for recovery against the Company and offering to settle the litigation in exchange for the continued payment of sales commissions to TSG for a negotiated period, a buyout of TSG’s alleged rights for a negotiated sum, or reinstatement of TSG for a period of at least 2.5 years with commission rates equal to those in effect at the time of TSG’s termination. The Company believes that TSG’s claim has no merit, that the Company had the right to terminate TSG without the payment of any further sales commissions and intends to defend against this litigation vigorously. The Company filed a motion to dismiss, or in the alternative, stay the case pending arbitration of the dispute. A hearing on the motion was held on July 24, 2017. The Company took the position in briefing and at the hearing that the dispute should be arbitrated. The Court indicated at the hearing that it will consider whether arbitration is appropriate after some discovery is conducted. The outcome of this matter cannot presently be determined; accordingly, no related provision has been made in the Condensed Consolidated Financial Statements.

 

Purchase Commitments

 

As of June 30, 2017, the Company had purchase orders to suppliers for inventory of approximately $7,128.

 

Significant Customers

 

Sales to the United States government agencies represented approximately $3,018 (28.0%) and $5,935 (32.7%) of the Company’s total sales for the three and six months ended June 30, 2017, respectively, compared with approximately $10,055 (60.3%) and $16,785 (58.4%), respectively, for the same periods last year. Accounts receivable from agencies of the United States government were $924 as of June 30, 2017, compared with approximately $2,765 at the same date last year.