Electronic Manufacturing Services (EMS) Revenue includes high speed surface mount circuit card assemblies, electromechanical assemblies, system and integrated level solutions used in high-reliability defense, industrial, and commercial applications.
Secure Systems & Information Assurance (SSIA) Revenue includes revenues derived from the manufacturing of TEMPEST and Emanation products and services, ruggedized computers and peripherals, secure access and information assurance products. The principal market for these products are the government agencies of
the United States, Canadaand the United Kingdomand other NATOand European Unioncountries, Fortune 500 companies and telecommunication service providers. 30
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Cost of Revenue
We conduct all of our design and manufacturing efforts in
the United States, Canada, United Kingdom, Mexicoand China. Cost of goods sold primarily consists of costs that were incurred to design, manufacturer, test and ship the products. These costs include raw materials, including freight, direct labor, subcontractor services, tooling required to design and build the parts, and the cost of testing (labor and equipment) the products throughout the manufacturing process and final testing before the parts are shipped to the customer. Other costs include provision for obsolete and slow moving inventory, and restructuring charges related to the consolidation of operations.
Operating expenses consist of selling, general, administrative expenses, research and development, business acquisition and related charges and other income or expenses.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses include compensation and benefit costs for all employees, including sales and customer service, executive, finance and human resource personnel, as well as sales commissions. Also included in SG&A is compensation related to stock-based awards to employees and directors, professional services for accounting, legal and tax, information technology, rent and general corporate expenditures.
Research and Development Expenses
Research and development ("R&D") expenses represent the cost of our development efforts. R&D expenses include salaries of engineers, technicians and related overhead expenses, and the cost of materials utilized in research. R&D costs are expensed as incurred.
Business Acquisition and Related Charges
Business acquisition charges primarily represent costs of engaging outside legal, accounting, due diligence, business valuation consultants and accelerated stock option expenses related to business combinations. Related charges include costs incurred related to our efforts to consolidate operations of recently acquired and legacy businesses and expenses associated with divestitures.