CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

6 Months Ended

Jun. 30, 2013

CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

NOTE 2. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable.  With regard to cash, we maintain our excess cash balances in checking accounts at two high-credit quality financial institutions.  These accounts may at times exceed federally insured limits.  We grant credit to customers in the normal course of business and do not require collateral on our accounts receivable.

Our largest customer has two divisions which accounted for 10% or more of our net sales for the three and six months ended June 30, 2013 and 2012.  The first division accounted for 19% of net sales for the three and six months ended June 30, 2013 and 16% of net sales for the three and six months ended June 30, 2012.  The second division accounted for 4% of net sales for the three and six months ended June 30, 2013 and 10% and 7% for the three and six months ended June 30, 2012, respectively.  Together the divisions accounted for 23% of net sales for the three and six months ended June 30, 2013 and 26% and 23% for the three and six months ended June 30, 2013 and 2012, respectively.

Combined accounts receivable from both divisions represented 18% and 15% of total accounts receivable at June 30, 2013 and December 31, 2012, respectively.

Export sales represented 12% of net sales for the three and six months ended June 30, 2013.  Export sales represented 6% and 7% of net sales for the three and six months ended June 30, 2012, respectively.  The increase in export sales relates to increased sales volume to existing customers.