Gross Margin The following table sets forth our gross margin and year-to-year change in gross margin for the fiscal years ended
Table of Contents Fiscal % Change Fiscal 2013 2012 to 2013 2012 Revenues
$ 46,816 $ 66,219Gross margin $ 19,120(32 )% $ 28,000Gross margin % 40.8 % 42.3 % Gross margin as a percentage of revenues was 40.8% in fiscal 2013, compared to 42.3% in fiscal 2012. Gross margin in fiscal 2013 was unfavorably affected by an $875,000charge for an increase in excess and obsolete inventory reserves related to our packaging products in the second fiscal quarter due to lower demand and product obsolescence. We may experience significant fluctuations in our gross margin percentage from period to period due to changes in volume, changes in availability of components, changes in product configuration, increased price-based competition, changes in our sales mix and/or changes in operating costs. In particular, we expect that sales into the disk drive market will continue to have a negative impact on gross margin, while packaging and mobile sales will have a positive effect. In addition, we expect that changes in currency valuations will continue to impact gross margin, as a significant portion of our revenues are in Euro and a portion of our components are paid for in Japanese yen. Operating Expenses Research, Development and Engineering The following table sets forth our research, development and engineering expenses and the year-to-year change in these expenses for the fiscal years ended June 30, 2013and 2012 (in thousands, except for percentages): Fiscal % Change Fiscal 2013 2012 to 2013 2012 Expenses $ 7,634(12 )% $ 8,714Percentage of revenue 16 % 13 % Research, development and engineering ("R&D") costs are expensed as incurred, with the exception of software development costs incurred subsequent to establishing technological feasibility and up to the general release of the software products that are capitalized. Technological feasibility is demonstrated by the completion of a working model or a detailed program design. Capitalized costs are amortized on a straight-line basis over either two or three years, based on the estimated life of the product. R&D expenses in fiscal 2013 were $7.6 million, or 16% of revenues, a decrease of 12% from $8.7 million, or 13% of revenues, in fiscal 2012. Lower R&D expenses in fiscal 2013 compared with the prior year primarily resulted from the consolidation of the InMoTx operations in Denmarkinto the Company's Pleasanton, Californiaoperations and cost-cutting measures undertaken during the second quarter of fiscal 2013. We do not expect R&D expenses in fiscal 2014 to increase significantly from fiscal 2013 levels. Adept did not capitalize any software costs in fiscal 2013, compared to $647,000capitalized in fiscal 2012. We do not expect to capitalize any software costs in fiscal 2014.