Concentration of credit risk and sales to major customers

12 Months Ended

Oct. 31, 2012

Risks And Uncertainties [Abstract]

Concentration of credit risk and sales to major customers

Note 2 - Concentration of credit risk and sales to major customers

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 October 31, 2012, the Company had cash and cash equivalent balances in excess of Federally insured limits in the amount of approximately $750,000.

Accounts receivable are financial instruments that also expose the Company to concentration of credit risk. Such exposure is limited by the large number of customers comprising the Company's customer base and their dispersion across different geographic areas. In addition, the Company routinely assesses the financial strength of its customers and maintains an allowance for doubtful accounts that management believes will adequately provide for credit losses.

Sales to one customer represented 33% and 17% of total sales in 2012 and 2011, respectively, and 49% and 14% of total accounts receivable as of October 31, 2012 and 2011, respectively. The Company has a standard written distributor agreement with this customer and, therefore, this customer does not have any minimum purchase obligations and could stop buying the Company’s products at any time. A reduction, delay or cancellation of orders from this customer or the loss of this customer could significantly reduce the Company’s revenues and profits.

Sales of one product line, Optiflex, represented $5,569,070 or 18% of total sales to one customer in 2012. 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 Optiflex products at any time. A reduction, delay or cancellation of orders from this product or the loss of this customer could significantly reduce the Company’s revenues and profits.