Other potential obligations could arise from promises to indemnify, defend and
hold harmless each of our executive officers, non-employee directors and certain
key employees from and against losses, damages and costs incurred by each such
individual in administrative, legal or investigative proceedings arising from
alleged wrongdoing by the individual while acting in good faith within the scope
of his or her job duties on our behalf. Historically, minimal costs have been
incurred relating to such indemnifications and, as such, no amount has been
accrued for these types of potential obligations.
We account for stock-based compensation in accordance with ASC 718-10, which requires that the cost resulting from all share-based payment transactions be recognized in the financial statements and requires application of a fair-value-based measurement method in accounting for share-based payment transactions with employees. Assumptions used to estimate compensation expense from issuance of share-based compensation are based, to some extent, on historical experience and expectation of future conditions. To the extent we issue additional share-based compensation, or assumptions regarding previously issued share-based compensation change, our future share-based compensation expense may be positively or negatively impacted.
Defined Benefit Pension Plan
We maintain a defined benefit pension plan (the "Pension Plan") for certain current and a number of former employees of our German subsidiary. The Pension Plan provides benefits to be paid to all eligible employees at retirement based primarily on years of service with the Company and compensation rates in effect near retirement. Our German defined benefit plans have been closed to new employees since 1998 and no employees have been added to the plan since this time. Our policy is to fund benefits attributed to employees' services to date as well as service expected to be earned in the future. The determination of our Pension Plan benefit obligation and expense is dependent on our selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions include, among others, the weighted average discount rate, the weighted average expected rate of return on plan assets and the weighted average rate of compensation increase. To the extent that these assumptions change, our future benefit obligation and net periodic pension expense may be positively or negatively impacted. 30 -------------------------------------------------------------------------------- Table of Contents Selected Operating Data as a Percentage of Net Sales The following table sets forth our consolidated historical operating information, as a percentage of total revenues, unless otherwise noted, for the periods indicated: Year Ended June 30, 2013 2012 Revenue (% of total sales): Product 60.5 % 58.0 % Service 39.5 42.0 Total revenue 100.0 100.0 Cost of sales (% of respective sales category): Product 42.6 39.2 Service 40.9 46.8 Total cost of sales 41.9 42.4 Gross margin 58.1 57.6 Operating expenses: Sales and marketing 22.6 27.0 Research and development 18.3 21.8 General and administrative 13.0 12.2 Gain on sale of intellectual property, net (3.8 ) - Total operating expenses 50.1 61.0 Operating income (loss) 8.0 (3.4 ) Interest (expense) income, net (0.1 ) 0.1 Other expense, net (0.6 ) (0.4 ) Income (loss) before income taxes 7.3 (3.7 ) Provision for income taxes 0.6 1.1 Net income (loss) 6.7 (4.8 )