XNAS:ADEP Adept Technology Inc Annual Report 10-K Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2012
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             .
Commission file number: 0-27122
ADEPT TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
94-2900635
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
 
5960 Inglewood Drive, Pleasanton, CA
 
94588
(Address of principal executive office)
 
(Zip Code)
Registrant’s telephone number, including area code: (925) 245-3400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, $0.001 par value
 
NASDAQ Global Market
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ¨  Yes    ý  No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    ¨  Yes    ý  No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ý  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 
 ý  Yes    ¨  No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ¨
  
Accelerated filer  ¨
  
Non-accelerated filer ¨
  
Smaller reporting company  ý
 
  
 
  
(Do not check if a smaller reporting company)
  
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    ý  No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the price at which the common equity was last sold on the Nasdaq Global Market as of the last business day of the registrant’s most recently completed second fiscal quarter (December 31, 2011) was $17,467,824. Shares of common stock held by each officer and director and by each person who beneficially owns 10% or more of common equity of the registrant may be deemed to be affiliates of the registrant.
As of September 19, 2012, approximately 10,558,841 shares of the registrant’s common stock, $0.001 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for the 2012 Annual Meeting of Stockholders to be held on November 9, 2012, referred to as the Proxy Statement, are incorporated by reference into Parts 1 and III hereof.
 
 
 
 
 
*



ADEPT TECHNOLOGY, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
 
 
 
Page
 
PART I
 
 
 
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
 
PART II
 
 
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B
 
PART III
 
 
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
 
 
PART IV
 
 
 
 
Item 15.
 
 


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PART I
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements principally but not exclusively in the sections entitled “Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Controls and Procedures.” In some cases, you can identify forward-looking statements by terms such as “may,” “intend,” “might,” “will,” “should,” “could,” “would,” “expect,” “believe,” “estimate,” “predict,” “potential,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on these statements. We discuss many of these risks and uncertainties in this Annual Report on Form 10-K in greater detail under the heading “Risk Factors.” Also, these statements represent our estimates and assumptions only as of the date of the filing of this Annual Report on Form 10-K with the SEC, and we undertake no obligation to publicly update or revise these forward-looking statements.
In this report, unless the context indicates otherwise, the terms “Adept,” “we,” “us,” and “our” refer to Adept Technology, Inc., a Delaware corporation, and its subsidiaries.
This report contains trademarks and trade names of Adept and other companies. Adept has 203 trademarks of which 21 are registered trademarks, some of which include the Adept Technology logo. Our trademarks include (among others): AIM®, HexSight®, Adept Cobra™, Adept Python™, Adept SmartServo™, AdeptOne™, AdeptSix™, AdeptViper™, AdeptVision™, AdeptQuattro™, Adept Anyfeeder™, Adept ACE™, Motivity by MobileRobots™, PatrolBot™, Adept PAC™ and  SoftPic™.

ITEM 1.
BUSINESS
We are a global, leading provider of intelligent robots and autonomous mobile solutions and services that enable customers to achieve precision, speed, quality and productivity in their assembly, handling, packaging, testing and logistical processes in both fixed repetitive and unstructured environments.
Adept helped pioneer the robotics industry, and with more than 25 years of operating expertise, we continue to lead in the development of innovative robotics solutions to meet the changing needs of automation. Our robotics solutions are targeted at automated applications and processes that require precision, flexibility and high productivity. Through sales to systems integrators, distributors, original equipment manufacturer (“OEM”) partners and end-user companies, we provide specialized, cost-effective robotics systems, software and services to emerging automation markets, including packaging, logistics, medical and solar; as well as to the disk drive/electronics market and traditional industrial markets, including industrial automation and automotive electronics.
Our product range includes application software, integrated real-time vision and multi-axis motion controls, machine vision systems and software, autonomous navigation software and controls, industrial robots and grippers, autonomous service robots, intelligent automated guided vehicles (referred to as AGVs), and advanced vision-based flexible parts feeders. Our core offering combines our motion controls systems with application software, which we generally sell together with our own vision-guidance technology and/or our robot mechanisms. A key differentiator for us is our vision guidance technology, which is tightly integrated with our motion controls technology.
Our headquarters are in Pleasanton, California and we also maintain facilities in New Hampshire, France, Germany, Singapore and Shanghai for business operations, sales and customer support. We were founded and incorporated in California in 1983 and reincorporated in Delaware in 2005. Our common stock is traded on the NASDAQ Global Market under the symbol “ADEP.”

We operate in two segments: Robotics and Services and Support. Revenue from our Robotics segment accounted for approximately 83% of our total revenues in fiscal 2012 and approximately 78% of revenues in fiscal 2011. Revenue from our Services and Support segment accounted for approximately 17% of our total revenues in fiscal 2012 and approximately 22% of revenues in fiscal 2011. Additional information about our results for the last two years for these segments is provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.
The Need for Automation
Key benefits of automation include improved control, efficiency and productivity, higher and more consistent quality, and improved record-keeping. For decades, industries such as automotive assembly and electronics have used robotic systems in

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their manufacturing operations to stay competitive, reduce costs and provide a safer environment for workers. Such industries are heavily dependent on automation to manufacture, assemble and package their products. In many other industries, the use of automation is only just beginning, spurred by changes in the regulatory and competitive environment, and always with a focus on achieving greater productivity at a lower cost.
Packaging
The use of packaging around commercial products continues to increase, as factors such as expediency, variety and safety have become more important to consumers. Additionally, packaging can deliver benefits such as convenience, branding or market differentiation. Increased use of packaging in various consumer products is fueling the need for automation to address the challenges that arise in the packaging process. These challenges include the need for flexibility, the need to maintain a clean or sterile environment, the ability to process high volumes and the ability to track products that are perishable or that may pose future unknown risks. Cost considerations are also an important catalyst for automated packaging, particularly in applications such as food, where products are often packaged locally for reasons including freshness, regional branding or specific regulatory requirements. Automation is often a more cost efficient alternative to maintaining a relatively larger number of employees as productivity can be achieved more quickly, in less space and with less risk of contamination.
Additionally, in packaging applications such as food or consumer goods, the need for flexibility is becoming more pronounced as manufacturers strive to provide more variety for their customers. This is causing the line to blur between packaging and related activities such as warehousing and distribution. For example, a snack food producer might want to pack cartons for a particular destination with a bundled product offering versus a single product offering.
Logistics
One of the largest sectors where logistics is of primary consideration is in warehousing and distribution. According to the U.S. Census Bureau, 10,448 warehouse and storage facilities were in operation within the United States in 2008 with employment of 577,851 workers who earned annual wages of nearly $21 billion. Managers of these processes are faced with multiple operational and environmental challenges while simultaneously facing ever increasing customer service requirements. Automation is more often a financially attractive alternative to manual processes for not only the labor cost savings, but also due to the potential improvements in productivity, order accuracy, reduced space requirements, increased volume capacity, and control of inventory. While this growth in automation is occurring, there is also a need for supply chains to become more agile to serve rapidly changing markets. To address these divergent requirements, automation is being required to offer heightened levels of flexibility. This is increasingly achieved through the use of mobile technologies such as autonomous indoor vehicles (referred to as AIV) and their associated control and software solutions. Modern AIV solutions not only offer the operational gains mentioned above, but represent significant savings for their users when deployment and total cost of ownership are compared to more traditional forms of automation.
Medical
In the United States healthcare spending is a significant component of the economy. Factors such as high healthcare costs, an aging population and legislation of the industry, including the legislation ensuring access to medical care and limiting procedure-based payments to providers, are driving the increased use of automation within the medical market to lower costs and increase efficiency. Automation is used in the medical market for a range of medical, pharmaceutical and healthcare related applications, including the manufacture of medical devices; the automation of repetitive operations in diagnostic and pharmaceutical labs; automated processing of mail-order pharmaceutical sales; automated transportation tasks in hospital environments; and computer assisted robot-based surgical procedures. Automation provides many advantages, including minimizing opportunities for contamination; ensuring consistency and precision of processes; documentation of all process steps for subsequent tracking or review; enhancing efficiency by freeing highly skilled workers for other tasks; and reducing overall costs.
Solar
The growing desire of consumers and governments for reduced dependence on oil, natural gas and coal and global concerns about fossil fuel pollution and climate change are spurring the commercial development of solar panels to provide clean, renewable energy. However, the equipment infrastructure and the expertise to manufacture solar energy devices are in an early phase of development. Today, government subsidies and technological expertise are fueling the first concentrated development of solar manufacturing in certain regions, such as Germany and the Silicon Valley of California. Additionally, manufacturers in Asia are ramping up their build capacity for solar cell production. While economic concerns are currently constricting the pace of this development, over the next several years, solar energy production is expected to increase in almost every area of the world. Similar to the semiconductor industry, the solar market is expected to be cyclical, with periods of investment in capacity followed by periods of capacity absorption.

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Automation brings benefits at many stages of the delicate and exacting process of solar cell and panel manufacturing. For example, automation allows manufacturers to produce higher volumes in less space, ensures that product specifications can be precisely replicated to ensure consistent product quality, and reduces breakage to enable higher yields. Based on similarities in processes and products, the solar industry is expected to develop along similar lines as the heavily automated semiconductor industry over the longer term. Consequently, automation will likely continue to be an important tool for manufacturers as solar cell and panel production technology evolves. Improvements to the technology such as smaller wafer dimensions, larger die size and a larger number of pins will create additional challenges in terms of consistency, quality and yield.
Disk Drive/Electronics
The combination of high volumes and continual price erosion in the disk drive/electronics market has long demanded the use of automation to ensure the highest yields at the lowest cost. Automation solutions are used to help manufacture and assemble a host of electronic products such as computer disk drives, cell phones and printer cartridges and components. This market is very cyclical in terms of its investment in automation technology, with periods of significant investment in adding capacity or enhancing existing systems typically followed by periods of relatively low investment.
Automotive and Industrial
Automation enables important benefits in the automotive and industrial markets, including higher yields, better and more consistent quality and lower cost. In automotive applications, automation can provide the speed and precision required to handle small, high volume components such as sensors and electronic components. In industrial manufacturing applications, the automation of machine tools and other industrial equipment provides a more productive and safer alternative to human labor. Additionally, automation plays an important role in containing costs in high labor cost regions such as Europe, where governmental policies have encouraged automotive and industrial manufacturing to remain local.
Adept’s Automation Solutions
Our business is focused on delivering intelligent, flexible automation products, solutions, components and services for assembly, packaging, warehousing and logistics, automated transportation, material handling inspection and lab automation applications under two operating segments: Robotics and Services and Support. Financial information regarding our two segments is included under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 11 of our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
Our Robotics segment provides intelligent motion controls systems, vision inspection and guidance systems, autonomous navigation software and controls, production automation software and both industrial and service robot mechanisms to customers. With motion controls at the core, any of the other product components we offer can be combined to offer our customers a tailored solution to address specific application requirements.
Our Services and Support segment provides support services to customers, including spare parts for and/or remanufacture of robot mechanisms, information regarding the use of Adept’s automation equipment, ongoing support for installed systems, consulting services for applications, and training courses ranging from system operation and maintenance to advanced programming for manufacturing engineers who design and implement automation lines.
We market and sell our products worldwide through more than 200 systems integrators, distributors and OEMs as well as our direct sales force. Systems integrators and OEMs may add their own application-specific hardware and software to our products, resulting in solutions that are sold to Global 1000 companies across a range of industries.
Robotics Segment
We are a pioneer and market innovator in developing intelligent robotics and advanced control systems. Our systems are designed for easy integration, deployment and use. We offer a unique industrial robotic control system that combines tightly integrated vision, motion control and geometric object recognition. This tight integration helps to reduce development costs, risks associated with precision applications and the total cost of implementation, and is a key differentiator for us. We believe our vision-guided robotics systems remain the most robust and proven solutions in the market today.

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Our robotic offerings are organized under 3 categories:
Core
The widely employed 4-axis Cobra family of robots, which are SCARA (Selective Compliance Assembly Robot Arm) robot mechanisms designed for assembly and material handling tasks;
Adept Quattro™ parallel robots for high-speed packaging, assembly and loading/unloading applications;
Adept Viper 6™-axis articulated robots for high-speed precision assembly;
Modular Adept Python™ single axis robot mechanisms that are highly configurable by the user;
MobileRobots
Adept Courier™, a small autonomous vehicle that simplifies the everyday task of moving goods, materials, samples, or parts around an office or production environment;
Adept MT400™, an intelligent mobile robotic platform that combines the high payload capable mobile base with an on-board motivity controller and software for automatic map generation and guidance.
Packaging Solutions
Adept PAC™ and SoftPIC™, a machine platform and grippers for loading and packaging jobs in the food industry.
To address the needs of our customers, we continue to expand our robot product lines and to develop advanced software and sensing technologies that enable robots to perform a wider range of functions.
We utilize our portfolio of high-performance motion controllers, application development software, vision-guidance technology, autonomous platform design, AGV fleet management technology and high-reliability robot mechanisms to deliver automation solutions that meet our customers’ increasingly complex manufacturing and automation requirements. We offer our customers comprehensive and tailored automation systems that reduce the time and cost to design, engineer and launch products into high-volume production, autonomously transport materials within an unstructured environment or perform repetitive tasks requiring a high degree of precision. The benefits of Adept automation products include increased manufacturing flexibility for future product generations, less customized engineering and reduced dependence on production engineers.
Advanced Controls and Software
Industrial Robotic Control System
Our proprietary industrial robotic control system, consisting of controls and software, is characterized by unique features, including tightly integrated vision, motion control and geometric object recognition; a compact design; scalability; and flexibility. These features combine to offer a powerful controls platform that enables our customers to reduce the cost and optimize the performance of their automation environment. Tight integration of vision and motion controls enables exceptional performance of robot mechanisms, for example, enabling increased dexterity, faster cycle times and better precision. Our controls are the most compact in the automation industry, reducing the footprint of space needed and thus reducing costs for our customers. A scalable design allows our control platform to handle applications ranging from simple to very complex. Additionally, our control system is designed to work with both our own robots and third party robot mechanisms. We also enable manufacturers to coordinate multiple Adept robots with one controls system, using our proprietary digital servo network distributed controls architecture based on the industry standard, high-speed IEEE-1394 FireWire network.
Controls
The Adept SmartController CX is an ultra-compact, high-performance robot and vision controller based on our proprietary SmartServo distributed architecture. The Adept SmartServo distributed servo control network seamlessly integrates motion control for up to 24 axes, vision guidance and inspection, and real-time networking and communications functions. Benefits of Adept SmartController include reduced costs, the smallest form factor in the industry, and simplified installation, wiring, and support while maintaining compliance with domestic and international safety specifications.
Adept MotionBlox technology offers convenient and economical scalability to add one or more axes to any of our robots or our controller system. These self-contained multiple and single channel power amplifiers, with an on-board microprocessor, are mounted directly on (or in) the robot mechanism. Adept MotionBloxServo kits are plug compatible with Adept’s SmartServo distributed servo network. Additionally, our motion controls can be used with third-party robot mechanisms, feeders, servo-controlled conveyors, or other servo and process-control axes.


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Adept controllers are unique in that they are able to operate both with our own robots and with third-party European and Japanese robotic systems and to enable higher performance from all these robots. With more than 35 kinematic models, or configurations of controls and robot mechanisms, we are able to control and integrate multiple vendor products and systems.
Vision
Integrated vision is a key differentiator for Adept robotic solutions. Our AdeptVision™ family offers highly integrated machine vision products that are used for robot guidance and inspection applications. Utilizing proprietary geometric object recognition, the integration of our controller and vision systems software enables high speed vision applications such as vision servoing and on-the-fly vision refinement. For inspection applications such as gauging and dimensioning, the AdeptVision™ product is sold as an integrated inspection vision system comprised of a SmartController CX with an embedded vision board and software.
AdeptSight integrates PC-based vision with our robotic and motion control product and is designed to work seamlessly with our overall product line of robots, making the development and use of vision location, guidance and inspection applications simpler, faster, and more powerful. Based on our unique object locating technology, AdeptSight is a complete package that includes the application toolset, the vision software, vision and vision-to-robot calibration wizards, the camera and lens and the accessories to provide a complete out-of-the-box solution.
Software
Adept Automation Control Environment (ACE) ™ is a real-time application software environment designed to make it easier to program, integrate and deploy one or more robots. Targeted at packing, handling and assembly applications in the packaging, solar and medical markets, ACE™ integrates the functionality of sophisticated robot applications such as robot motion, robot location, vision, conveyor tracking, and communications in a comprehensive, easy to use graphical application software interface. ACE™ is built on the Microsoft®.NET platform, making it easy to install on any PC and compatible with the Microsoft Windows® application environment. Adept developed the first modern programming language for robots, and our V+ real-time programming language allows software developers to create automation software systems and is the key enabling technology for our intelligent automation approach. This comprehensive programming environment provides a high-level language coupled with a multitasking operating system and built-in capability for integrating robots, machine vision, sensors, workcell control and general communications. These capabilities enable the development of sophisticated application software that can adaptively control mechanical systems based upon real-time sensory input while simultaneously maintaining communication with other factory equipment.
Enhanced application development and configuration capabilities for packaging applications are also available through our ACE PackXpert™ software, which is specifically designed to speed deployment of packaging applications in automated environments. PackXpert™ builds upon Adept ACE™ for the packaging product line. Targeted at natural food packaging, PackXpert™ contains an operator interface built on Adept ACE™ that leverages the functionality of Adept ACE™ for packaging applications. PackXpert™ provides recipe management and statistics on the operation of Adept PAC™ packaging cells. Designed for the touch screen and targeted for machine operators, the software provides an easy to use interface for operating Adept PAC™ equipment.
Adept ePLC Connect is a PLC interface enabling the entire Adept product line of robots to be programmed using Rockwell & Siemens PLC-based robot programming language. The Adept ePLC Connect provides a network for robots using Ethernet/IP connectivity. By eliminating the need to learn a new programming language, the ePLC Connect simplifies the installation and support of the robots, and maximizes the existing automation investment.
Mobile Robots
To support our autonomous service robots and intelligent AGVs, we offer Motivity™ controls and software. The Motivity Core controls drive-motors, handles autonomous navigation, avoids obstacles, docks AGVs for charging, provides communications to a base station or Fleet Appliance and can control onboard accessories. As an extension of Motivity, the Fleet Appliance helps with the setup and management of large fleets of robots, allowing all robots to operate identically to each other with minimal set up time required. Map and configuration updates can be made to the Fleet Appliance, and the changes are automatically pushed out to each robot in the fleet. The Fleet Appliance also helps reduce load on the wireless Ethernet infrastructure, by acting as a proxy for all of the robot data, such as location, battery state, and task status. This allows multiple robots, clients, and other interface applications to communicate with each robot without increasing the bandwidth requirements, thereby leaving valuable Wi-Fi space for handheld scanners and other mobile devices.
Motivity software enables users to easily configure our mobile robot systems using drag and drop commands. Motivity MobileEyes provides a means to set up, implement and monitor robots and also can be used as a monitoring station or command and control station for users. MobilePlanner enables quick and easy customization of robots for the job at hand,

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allowing application designers to create missions, tasks, behaviors and personalities appropriate for their specific workplace, whether an industrial plant or a hospital patient’s room.
Adept Robot Mechanisms
Core Robots
We provide a broad range of robot mechanisms to address different markets and application needs. Each of these robot mechanisms offers unique features and capabilities, but all share a common software and hardware control platform (as described above in “Advanced Controls and Software”), which provides a more integrated, high performance and cost effective environment for our customers. Our broad product line allows systems integrators and end users to develop automation solutions for many industries and applications.
Our most widely deployed robots are the Cobra family, which are 4-axis SCARA (Selective Compliance Assembly Robot Arm) robot mechanisms, designed for assembly and material handling tasks such as cell phone assembly, disk drive and printer head assembly and cosmetic kitting. SCARA robots utilize a combination of rotary and linear joints for high speed, high precision material handling, assembly and packaging. Our Cobra series robots are considered light-duty SCARA mechanisms that can be table or ceiling mounted and offer an efficient range of motions in limited space. Our Cobra robots can also be connected to our SmartController for integrated motion and vision or multi-mechanism configurations. Our Cobra robots include the Adept Cobra™ s600, Adept Cobra™ s800, Adept Cobra™ s350 and Adept Cobra™ Clean Room/ESD s350. We also offer an embedded controller version of the Cobra line with the iCobra family, consisting of the Adept Cobra™ i600 and Adept Cobra™ i800 and an inverted (ceiling mounted) SCARA robot, the Cobra s800 Inverted IP65.
Adept Quattro™ is a unique, proprietary four-parallel arm robot specifically designed for high-speed packaging and material handling. Introduced in February 2007, our Quattro has achieved the fastest growth of any Adept robot product. The Adept Quattro™ currently offers the highest performance and most compact footprint in the automation industry. It is further differentiated by simplicity of integration and programming, which minimizes the use of engineering resources. Adept Quattro™ is targeted at applications such as loading/unloading, inspection, categorization and solar panel assembly in the solar industry and kitting, carton and case packing applications in the food, consumer goods, cosmetics and pharmaceutical industries.
The AdeptViper™ robot family consists of 6-axis articulated robots that combine speed and precision with a higher degree of flexibility and dexterity than traditional SCARA mechanisms. AdeptViper™ robots are targeted at precision assembly applications that require complex or fine manipulation of materials or products, for example, specialty assembly of components following curvatures or edges such as specialized electronic components, or surgical assist procedures. The AdeptViper™ s650 and AdeptViper™ s850 are designed for either table mounting or ceiling mounting and have a 5 kilogram maximum payload capacity. The AdeptViper™ s1300, Adept Viper™ s1700, Adept Viper™ s1700D, and Adept Viper™ s2000 six-axis robots are extended-reach and higher-payload versions of the s650 and s850 robots models. These larger robots are well suited to handling heavier payloads such as solar panels.
Adept Python™ Linear Modules are single axis devices, similar in function to our Cobra robots, but sold as modular units that can be configured by the user to form application specific custom robot mechanisms ranging from two to four axes. Target markets for Adept Python™ products include disk drive/electronics and automotive electronics. Each Adept Python™ Module is powered by Adept MotionBlox, an integrated single axis motion controller and power amplifier, which reduces the amount of software programming and cabling required in a workcell or robotic system that performs a specific automation function. Additionally, Adept offers Clean Room Class 1 ESD versions of the Adept Python™ robot for precision assembly and handling applications in the solar, disk drive/electronics and medical markets.
Mobile Robots
Our mobile robots include autonomous service robots and intelligent AGVs. Our mobile robots are available for both indoor and outdoor environments and come in a variety of platform designs. All platforms have easily accessible I/O ports, which allow partners or users to add proprietary accessories, functionality and interfaces to the component base with Motivity Developer Modules. Each platform provides space for mounting utility storage, actuators or custom shells for application development and branding. For indoor applications, a more sophisticated platform is available that includes an embedded PC for partner software to reside and control. This is designed to facilitate development of robot assistants, security robots, tour guides, robotic kiosks, and other applications requiring interaction with people.
Packaging Solutions
Our Adept PAC™ is a machine platform for loading and packaging jobs in the food industry. The Adept PAC™ product line includes a highly flexible platform for handling and loading different types of irregular, non-uniform products and the SoftPic™ which contains the patented gripping technology, utilizing food grade silicone materials to enable the module to

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conform to the various shapes and textures of fresh and frozen products.
Service and Support Segment
Adept Service and Support is dedicated to assuring the productivity of every Adept product installed at a customer location. We offer on-going training, service and applications support to our customers, and maintain a program of spare parts supply, field upgrades, and factory repair and remanufacturing capabilities. In some industries, ongoing support is a critical component of our overall solutions offering, and we work closely with our customers to configure the automation system that will best address their specific requirements.
We provide “evergreen” product paths that support our customers with service and upgrades for all products, including those no longer in production, to ensure that an investment in flexible automation from Adept will continue to be productive for the duration of a project or production requirement.
Our service and support organization includes a staff located at our headquarters and field personnel who are based in the United States, Europe and Asia to support customers worldwide.
Our product training personnel develop and deliver training courses on subjects ranging from basic system maintenance to advanced programming, which are offered through Adept offices and customer sites throughout the world.
Our field service organization maintains and repairs our products on location at the end user’s facilities. Personnel based at our service centers provide advice to customers on spare parts, product upgrades and preventative maintenance. We also operate toll-free telephone support lines to provide advice on issues such as product usage, software programming structure, layout problems and system installation.
In addition, our California manufacturing facility provides factory repair and remanufacture services which ensure that Adept products will continue to be productive over the extended time frames common for automated production lines.
Customers
We sell our products to systems integrators, distributors, Global 1000 companies and OEMs. Our robotics solutions are targeted at companies that require greater precision, flexibility and productivity in their assembly, handling, packaging and testing processes. Through direct sales to companies, OEMs and via our systems integrators, Adept provides a suite of cost-effective robotics systems and services to the packaging, solar, medical, disk drive/electronics, automotive electronics and industrial markets. In fiscal 2012, one disk drive customer accounted for 7% of the Company's revenues. In fiscal years 2012 and 2011, one primarily solar customer accounted for 6% and 8%, respectively, of our revenues, but our customers vary from year to year. The Company’s business segments and, thus long-term financial results, are not generally dependent upon any single customer. Therefore, the loss of a single customer in the future would not be expected to have a material adverse effect on the Company.
Financial information regarding revenue derived from domestic and international customers and long-lived assets based upon geographic area is included in Note 11 of our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
Sales and Distribution
We market our products through systems integrators, sales representatives and distributors, our direct sales force and OEMs.
Systems Integrators
We ship a substantial portion of our products through system integrators, and we view our relationships with these organizations as important to our success. We have established relationships with more than 200 system integrators worldwide that provide expertise and process knowledge for a wide range of specific applications. In the United States and Europe, these relationships are generally nonexclusive and not limited to specific geographical territories. In certain other international markets, our integrator relationships may include limited exclusive arrangements for a limited geographical territory in which the integrator markets and supports Adept functions directly. Generally, a systems integrator can purchase both standard and non-standard Adept solutions and components as opposed to OEM arrangements, where generally one standard component or solution is purchased in higher volumes.
Sales Representatives and Distributors
We utilize a network of sales representatives and distributors in many areas of the world to provide cost-effective sales coverage in smaller markets where it is prohibitively expensive for us to allocate direct sales resources. We use a combination

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of exclusive (Adept product only) and non-exclusive sales representatives and distributors who sell our robot and vision guidance products in their standard forms. We also provide service and support for customers who have purchased Adept products through one of our sales representatives or distributors.
Direct Sales Force
We employ a sales force of sales personnel and application engineers that currently is organized around our primary target markets and that sells to both end users and our indirect channel partners. With respect to end users, the sales force directs its efforts to communicate the capabilities of our products and support services and obtain up-to-date information regarding market requirements. Our sales force possesses expertise in automation solutions and advises end users on alternative production line designs, special application techniques, equipment sources and system integrator selection. Our sales force also works closely with systems integrators and OEMs to integrate our product line into their systems, provides sales leads to certain systems integrators and obtains intelligent automation system quotes from systems integrators for end users. As of June 30, 2012, we had 49 employees engaged in sales and marketing.
Some of our larger manufacturing end user customers, to whom we sell directly, have in-house engineering departments that are comparable to a captive systems integrator. These end user customers establish a corporate integrator relationship with us offering benefits similar to those provided to our integrator distribution channel; however, in some cases we may form strategic alliances for certain potentially high volume market opportunities with greater benefits to the customer than exist in system integrator arrangements, although the benefits may come with contractual restrictions.
OEMs
Our OEM customers typically purchase one standard product configuration, which the OEM integrates with additional hardware and software and sells under the OEM’s label to other resellers and end users. Unlike our systems integrator channel, OEMs are responsible for all marketing, sales and customer support and for maintaining the associated spare parts to service the end users of the integrated product.
Research and Development
We focus our research and development efforts on the development of an integrated product line, which furthers our factory automation approach and which reduces costs, enhances performance, and improves ease of use for our customers. Research and development activities are focused on the design of our motion and vision control hardware and the robotic mechanisms that utilize them along with advanced software for vision, motion control and applications.
In both our primary research and development facility in California and our development facility in France, we focus on the development of motion controls, robot mechanisms, vision software, real-time application software and the development of the Adept PAC™ and the next generation MT 400. We also have a development facility in New Hampshire, where we focus on mobile robot technology and platforms, autonomous navigation software and controls.
We have devoted, and intend to devote in the future, a significant portion of our resources to research and development programs. As of June 30, 2012, we had 49 employees engaged in research, development and engineering. Our research, development and engineering expenses were approximately $8.7 million in fiscal 2012, representing 13% of revenues, and $8.2 million in fiscal 2011, representing 14% of revenues.
Manufacturing
The majority of our robot mechanisms are sourced externally and our manufacturing operations, which are located in Pleasanton, California, and Dortmund, Germany, are focused on product assembly, integration and testing. We strategically outsource sub-components of our systems, including electronic assemblies and mechanical mechanisms. Our manufacturing engineering organization develops test processes and detailed instructions for all manufacturing and test operations. These instructions are established in writing, implemented through training of the manufacturing workforce, and monitored to assure compliance. In addition, our manufacturing organization works closely with our suppliers to develop instructions, test methods and to remedy technical or quality problems if they arise.
Certain components and sub-assemblies incorporated into our products are obtained from a single source or a limited group of suppliers. We routinely monitor single source supply parts, and we endeavor to ensure that adequate inventory is available to maintain manufacturing schedules should the supply of any part be interrupted.

Although we seek to reduce our dependence on sole or limited source suppliers, we have not qualified a second source for some of these products and the partial or complete loss of certain of these sources could have a materially negative impact on

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our results of operations and could damage customer relationships.
Backlog
Our product backlog at June 30, 2012 was approximately $7.9 million compared to approximately $12.3 million at June 30, 2011. The decrease in backlog at the end of fiscal 2012 compared to the end of fiscal 2011 is due to a slowdown seen in customer order patterns at the end of fiscal 2012, especially in Europe. Orders placed with delivery dates beyond twelve months from the end of the fiscal quarter are not included in backlog, and thus we expect substantially all backlog at June 30, 2012 to ship during fiscal 2013. Because orders constituting our current backlog are subject to changes in delivery schedules and in certain instances may be subject to cancellation without significant penalty to the customer, our backlog at any date may not be indicative of demand for our products or actual revenues for any period in the future.
Employees
At June 30, 2012, we had 183 employees worldwide. Of the total, 49 were engaged in research and development, 49 in sales and marketing, 23 in service and support, 36 in operations, and 26 in finance and administration.
See Part III of this Form 10-K regarding information about our Executive Officers.
Competition
The market for intelligent automation products is highly competitive. We compete with a number of robot companies, motion control companies, and machine vision companies. Many of these companies are larger or have more resources than Adept. Many of our competitors in the robot market are integrated manufacturers of products that produce robotics equipment internally for their own use and may also compete with our products for sales to other customers. The basis for competition typically centers on price and performance. We believe that we favorably compete on the basis of higher performance, additional capabilities, greater combination of speed, precision and flexibility, and better support of our product line.
Our principal competitors in the SCARA robot and linear modules markets (including our Adept Cobra™ and Adept Python™ robots) include subsidiaries of Japanese companies, including Epson Corporation, Yamaha Corporation, Denso Corporation and IAI America, Inc. We also compete with a small group of European companies, principally Stäubli Corporation. Adept robots are differentiated by integrating more sophisticated controls and vision technology along with embedded controls.
In the parallel robot market, the primary competition for our Adept Quattro™ robot comes from ABB Robotics division, FANUC Robotics and Kawasaki Heavy Industries. The Adept Quattro™ robot offers higher performance and a more compact control solution than its competing products.
In the 6-axis robot market where we sell our AdeptViper™ robots, we compete with the above companies, as well as manufacturers of 6-axis robots including ABB Robotics division, FANUC Robotics, Inc., and Yaskawa Electric Corporation. In the 6-Axis robot market, Adept offers strong performance and more sophisticated controls and software.
In the machine vision market, our primary competition is from Cognex Corporation. Cognex Corporation has a broader, more extensive product line than Adept, but is focused on machine vision only.
The mobile robot market is fragmented and application focused and consequently in the portion of the industry we serve, we do not have direct competitors. Other companies that participate in this market include Aethon, Inc., InTouch Health, IRobot Corporation, and Seegrid Corporation.
See a further discussion of our competitive position in the section entitled “Risk Factors” below.

Intellectual Property
Because our success and competitiveness depends to an extent on the technical expertise, creativity, and knowledge of our personnel, we utilize patent, trademark, copyright, and trade secret protection to safeguard our competitive position. At June 30, 2012, we had 32 patents issued and current on various innovations in the field of robotics, motion control, and machine vision technology. In addition, we use non-disclosure agreements with customers, suppliers, employees, and consultants. We attempt to protect our intellectual property by restricting access to proprietary information through a combination of technical and internal security measures. There can be no assurance, however, that any of the above measures will be adequate to protect the proprietary technology of Adept. Further, effective patent, trademark, copyright, and trade secret protection may be unavailable in certain foreign countries.
Seasonality

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Historically, orders have been lower in the first half of our fiscal year and higher in the second half of our fiscal year, with a decline during the first quarter of each fiscal year due, in part, to the concentration of sales into the European market, which typically experiences a pronounced summer holiday season. Revenues in each quarter will vary based on European market seasonality and on the particular timing of major programs to key customers.
Foreign Operations
We operate globally, with corporate headquarters in Pleasanton, California and European headquarters in Dortmund, Germany. Our principal executive offices are located at 5960 Inglewood Drive, Pleasanton, California 94588 and our telephone number at that address is (925) 245-3400. Additionally, we lease sales and operations facilities in New Hampshire, France, Singapore and Shanghai. See "Properties" for a further discussion of our offices and facilities.
Availability of SEC Filings
We make available through our website our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports free of charge as soon as reasonably practicable after we electronically file such material with the Securities and Exchange Commission. Our Internet address is www.adept.com. Our Form 10-K and proxy statement are made available on our website promptly after filing with the SEC and many of our corporate governance documents, including our Code of Business Conduct, are also available on our corporate website. The content on our website is not, nor should be deemed to be, incorporated by reference into this Annual Report on Form 10-K. Additionally, documents filed by us with the SEC may be read and copied at the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Our filings with the SEC are also available to the public through the SEC’s website at www.sec.gov.

ITEM 1A.
RISK FACTORS
Our operating results fluctuate due to factors that are difficult to forecast, are often out of our control, and can be volatile.
Our past operating results may not be accurate indicators of future performance, and you should not rely on such results to predict our future performance. Our operating results have fluctuated significantly in the past, and could fluctuate in the future. Factors that may contribute to fluctuations include:
changes in aggregate capital spending, cyclicality and other economic conditions, or domestic and international demand in the industries we serve;
our ability to effectively manage our working capital;
changes in our products’ market acceptance or demand;
new products or changes in pricing, by us, our distribution channels, or our competitors;
pricing and availability of components and raw materials;
changes in our product mix from quarter to quarter affecting our gross margins;
our failure to manufacture a sufficient volume of products in a timely and cost-effective manner;
our inability to adjust certain fixed costs and expenses for changes in demand;
impact of our restructuring activities on our operations;
currency exchange rate fluctuations;
shifts in geographic concentration of our sales or supply;
seasonal fluctuations in demand and our revenue;
our ability to expand our product offerings; and
extraordinary events such as litigation, claims or mergers and acquisitions.
We generally recognize revenues upon shipment, or in certain cases upon receipt by customers. As a result, our net revenues and results of operations are affected by the timing of orders received and shipped. A significant percentage of our shipments occur in the last month of each quarter. This can make it difficult to reliably forecast the demand level for our products for a particular quarter. Further, an order cancellation, reduction or delay in shipments near the end of a fiscal period may cause sales to fall below expectations and harm our operating results for that period. We have and may also enter into agreements requiring

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us to accept certain orders meeting agreed criteria and to hold specified levels of inventory available. To address these difficulties, we periodically stock inventory levels of completed robots, machine controllers and certain strategic components. As a result, our operating results vary, our stock price is volatile, and we may not be able to achieve or sustain our profitability on a quarterly or annual basis.
We have experienced operating losses and negative cash flow in the past, and have limited liquidity resources, which could impair our ability to invest in growth and adversely affect our operations.
We have experienced operating losses and negative cash flow, and if our projected revenue fails to increase or our expenses exceed current expectations, we may not be able to take advantage of market opportunities, adequately respond to competitive pressures or fully execute our business plan. In June 2012, we raised approximately $3.1 million in connection with our public offering of common stock, and in September 2012, we raised approximately $7.6 million of net proceeds, after estimated expenses, in connection with our preferred stock financing. While these financings have increased our cash resources, we had approximately $5.5 million of debt outstanding at June 30, 2012, and though we are under no restrictions at this time regarding transferring cash from our foreign operations to our U.S. operations, regulatory restrictions impeding our ability to transfer foreign cash reserves may occur in the future, and we may have limited access to a portion of those existing cash balances. We depend on the cash raised from our recent financings, our credit facility and funds generated from operating activities to meet our operating requirements and execute our growth plan. Our preferred stock entitles the holders thereof to quarterly dividends at a fluctuating rate of up to 4%, provides for certain elective installment payments in cash or stock subject to certain equity conditions, and is redeemable in 2016 and upon certain trigger events. We do not anticipate paying any dividends on our common stock. Additionally, our credit facility includes interest based upon our outstanding amounts and subjects us to certain financial and operating covenants, the failure of which would prevent us from borrowing. If we are unable to obtain and maintain sufficient capital on favorable terms, it could undermine our flexibility to pursue additional expansion opportunities and could limit the working capital available to our business, harming our operating results
We depend on outsourced manufacturing and information technology capabilities and single source suppliers, and if we experience disruptions in this supply or prices increase, our business may suffer.
We outsource most of our manufacturing functions, and obtain many key components, materials and mechanical sub-systems from sole or single source suppliers. We have limited contracts or guaranteed supply arrangements with these suppliers, and the lack of alternate sources and lengthy qualification process for replacement suppliers involves significant risks. These risks include whether or not new suppliers will provide adequate quantities with sufficient quality on a timely basis, and the risk that supplier pricing may be higher than anticipated. If we are unable to obtain necessary items on a timely basis, at acceptable prices, and of sufficient quality, we could lose current or future business. In the past, we have experienced quality control or specification problems with certain components provided by sole source suppliers, and have had to design around the particular flawed items. Any quality issues could result in customer dissatisfaction, lost sales, or increased warranty costs, and could harm our results of operations.
Any significant price increase or disruption of our supply sources could interrupt our product shipments, require reengineering, and damage customer relationships. If our suppliers cease manufacturing components that we require, we may need to purchase a significant amount of inventory that could lead to an increased risk of inventory obsolescence. Finally, if we incorrectly forecast product mix for a particular period and we are unable to obtain sufficient supplies of any components or mechanical sub-systems on a timely and cost-effective basis due to long procurement lead times, our business could be substantially impaired.
Global economic conditions currently affecting our customers and suppliers may also negatively affect our financial results by decreasing our revenues and increasing our risk of credit-related losses.
The global economic downturn over the last five years and the following European debt crisis has created a widespread slowdown in capital investment, manufacturing, and demand for consumer products particularly in our disk-drive and solar markets. In response, our suppliers have or may increase their prices or reduce their output. Some of our customers (including systems integrators) have, and may continue to defer, reduce or cease to place orders for our products, or may delay or default on their payment obligations, reducing our revenues or margins or increasing our credit losses, which would negatively affect our results of operations.
Our inability to accurately forecast, or react quickly and adequately to increases or decreases in demand for our products could harm our business and results of operations.
Intelligent automation systems using our products can range in price from $25,000 to $500,000. Accordingly, our success directly depends upon the capital expenditure budgets of our customers, which tend to be cyclical. The economic downturn resulted in cutbacks in capital spending in some of our major markets, and our business has been, and may continue to be, directly and negatively impacted. Industry downturns have been characterized by reduced demand for devices and equipment, production over-capacity, and accelerated declines in average selling prices. During periods of declining demand, we have

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implemented several worldwide restructuring programs to realign our business and lower our expenses accordingly. However, our ability to reduce expenses is limited by our need to retain and motivate key employees, and by our need for continued investment in product engineering, research and development. We also have extensive ongoing customer service and support requirements and must maintain a certain level of inventory to satisfy potential customer commitments, as well as administrative costs that cannot easily be reduced. Further, our failure to effectively manage product transitions or accurately forecast customer demand, in terms of both volume and configuration, may lead to an increased risk of excess or obsolete inventory.
We also must be able to maintain the ability to quickly increase our manufacturing capacity upon an increase in orders or general upturn in any of our markets. Typically, upturns in markets such as disk drive or electronics have been characterized by abrupt demand increases, and production under-capacity. We must be able to ramp up in times of increased demand and hire sufficiently to service our customers, and our inability to do so could cause current or future customers to place orders with our competitors instead.
Our international operations and reliance on foreign suppliers subject us to risks outside of our control that may harm our operating results.
We have significant and expanding operations outside the United States, including a growing Asian presence. Additionally, a substantial majority of our revenue is derived from non-U.S. sales: international sales represented 72% and 71% of revenues for fiscal 2012 and fiscal 2011, respectively. We expect that revenue from our international sales and operations will continue to account for a significant portion of our total revenue. We also purchase some critical components from, and increasingly rely upon, foreign suppliers. As a result, our operating results are subject to the risks inherent in international sales, purchases, and operations which include:
difficulties coordinating operations subject to differing regulatory regimes;
unexpected changes in regulatory requirements;
political, military, and economic instability or turmoil and extraordinary disruptions;
restrictive governmental actions, such as tariff regulations and other trade barriers;
transportation costs and delays;
stringent local jurisdictional requirements favoring local business and organized labor considerations;
longer payment cycles and greater difficulty collecting accounts receivables from foreign jurisdictions;
potentially adverse tax rates, tax treatment of our intercompany transactions and consequences; and
difficulty in obtaining appropriate personnel.
We face exposure to fluctuations in foreign currency exchange rates, as a significant portion of our revenues, expenses, assets, and liabilities are denominated in foreign currencies. Additionally, we make foreign currency-denominated purchases from some foreign suppliers, and thus remain subject to the transaction exposures that arise from foreign exchange movements between the date that the transactions are recorded and the date cash is paid. Continued fluctuations in foreign currencies could negatively impact our business.
As we are subject to the regulatory regimes of numerous governments, we must ensure that our operations comply with all applicable geographic requirements, including changing requirements affecting our business, and business and tax audits, by foreign authorities, the results of which cannot be assessed as to the amount of financial or operational exposure at this time.
In early 2011, we opened a facility in Shanghai, China to capitalize on significant opportunities presented by the Asian markets. We face all the risks inherent in operating in a foreign emerging market where we have not previously operated a facility. Our China-based activities are subject to greater political, regulatory, legal and economic risks than those faced by other operations. There can be no assurance that we will be successful in our expansion in China.
The long sales cycle, customer evaluation and implementation processes of our products may increase the costs of securing sales and reduce the predictability of our earnings.
Our products are technologically complex, and prospective customers generally must commit significant resources to test and evaluate performance, and to install and integrate our products into larger systems. As a result, our sales process is often subject to the evaluation and approval delays that are typically associated with large capital expenditures. The sales cycles for our products often last for many months or even years, and orders expected in one quarter may shift to another or be canceled entirely because of customers’ budgetary constraints or internal acceptance reviews. Longer sales cycles require us to invest

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significant resources in attempting to secure sales that may not be realized in the short term, and therefore may delay or prevent revenue generation. The time required for our customers to incorporate our product into their system can also vary significantly, which further complicates our planning processes and reduces the predictability of our operating results.
Our failure to keep up with rapid technological change and new product development would harm our ability to compete.
The intelligent automation industry is characterized by rapid technological change and new product introductions and enhancements. We must anticipate trends in our customers’ industries and develop products before our customers’ products are commercialized, because many of our products are used by our customers to develop, manufacture, and test their own products. If we do not accurately predict our customers’ needs, we may invest substantial development resources in products that may not achieve broad market acceptance. Further, if we are unable to develop new and enhanced products meeting customers’ changing technical specifications on a timely and cost-effective basis, our products may become uncompetitive or obsolete. We also must make decisions about whether or not to develop and offer products to a given market, and if our judgment of that market is incorrect, our business could be harmed.
The market for intelligent automation products is intensely competitive, which may make it difficult to grow our business or to maintain or enhance our profitability.
Our competitors include robot, motion control, machine vision, and simulation software and packaging companies, many of which have substantially greater resources than we do. Our competitors in the robot market also include integrated manufacturers that produce robotics equipment for internal use, and also compete with our products for sales to other customers. Because they can generate substantial unit volumes to satisfy internal demand, these competitors may have greater pricing flexibility. During the recent economic downturn, we have experienced aggressive price reductions and other accommodations by our competitors, in addition to increased price sensitivity by our customers. We believe that the principal competitive factors affecting the market for our products are:
product features, functionality, and ease of use;
price;
brand quality perception;
customer service; and
timeliness, predictability, and reliability of delivery.
Increased competitive pressure and declining barriers to market entry could result in a loss of sales or market share or force us to lower prices. Failure to enhance our brand would impair our ability to increase or maintain our customer base, and we may not be able to compete successfully in the future.
The growth of our business depends upon the development and successful commercial acceptance of our new products.
Our failure to develop, manufacture, and sell new products in quantities sufficient to offset a decline in revenue from existing products or to successfully manage product and related inventory transitions could harm our business. We depend upon a variety of factors to ensure that our new and enhanced products are successfully commercialized, including timely and efficient completion of design and development, implementation of manufacturing processes, and effective sales, marketing, and customer service. Because of the complexity of our products, significant delays may occur in introducing new products, or between a product’s initial introduction and volume production.
The development and commercialization of new products involve many difficulties, including:
identification of new product opportunities;
retention and hiring of appropriate research and development personnel;
determination of the product’s technical specifications;
successful completion of the development process;
successful marketing of the new product and achieving customer acceptance;
managing inventory levels; and
additional customer service and warranty costs associated with supporting new product introductions and/or effecting subsequent potential field upgrades.
We must expend significant financial and management resources to develop new products. We cannot assure that we will receive meaningful revenue from these investments. If we are unable to continue to successfully develop new products in

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response to customer requirements or technological changes, or our new products are not commercially successful, our business may be harmed.
Our acquisitions of MobileRobots and InMoTx have expanded our business with new technologies and solutions for additional markets, including our Adept PAC™ solutions for complex food processing and packaging applications, and mobile robotic systems, control and software for autonomous robot and AGV applications. We had little or no experience in these markets prior to the completion of these acquisitions and are unable to accurately forecast the future commercial acceptance of these additional product lines.
We generally have no long-term customer contracts and our backlog cannot be relied upon as a future indicator of sales.
We generally do not have long-term contracts with our customers, and existing contracts and purchase commitments may be canceled under certain circumstances. As a result, we are exposed to competitive price pressures on every order, and our agreements with customers do not provide assurance of future sales. Our customers are not required to make minimum purchases and may cease purchasing our products at any time without penalty. Our backlog should not be relied on as a measure of anticipated demand or future revenue, because the orders constituting our backlog are subject to changes in delivery schedules and may be subject to cancellation without significant penalty to the customer. Any reductions, cancellations or deferrals in customer orders would negatively impact us.
We market and sell our products primarily through an indirect channel comprised of third-party resellers not under our control.
We believe that our ability to sell products to systems integrators and OEMs will continue to be important to our success. However, our relationships with these partners are generally not exclusive, and we cannot control the timing or amount of their procurement or marketing of our products. Some systems integrators and OEMs who sell our products also sell products of our competitors. If they choose to promote competing products or simply fail to market our products successfully, our revenue could decrease.
As we enter new geographic and applications markets, we must locate and establish relationships with systems integrators and OEMs to assist us in building sales in those markets. Because of product integration expenses and the large amount of training required, significant time and resources may be required to establish a profitable relationship with a systems integrator or OEM. We may not be successful in establishing or maintaining an effective relationship with new systems integrators or OEMs, which would adversely affect our business.
Our acquisitions of MobileRobots and InMoTx and any future acquisitions may disrupt our business and harm our operating results.
In fiscal 2010 and 2011, respectively, we acquired MobileRobots and InMoTx, and we may acquire other businesses and technologies to further our strategic objectives. We had no prior experience with the autonomous robot and automated guided vehicle technologies market of MobileRobots and our gripping technology of the SoftPic™ products provide a new focus to our food packaging business. We are unable to predict the market acceptance of these additions.
Our acquisitions present risks, including:
Significant expenditures of cash and dilutive stock issuances;
difficulties in integrating the product offerings, operations, or workforce;
difficulties in establishing and maintaining effective uniform standards, controls, procedures and policies;
the loss of key personnel or customers from either our current business or the acquired company’s business;
adverse effects on existing relationships with suppliers;
disruptions of our on-going businesses and diversion of our existing resources;
difficulties in realizing our financial and strategic objectives of the acquired business;
negative impact on results of operations due to goodwill impairment write-offs, amortization of intangible assets other than goodwill, or assumption of anticipated liabilities;
risks of entering new markets in which we have limited or no previous experience;
entering geographic areas or distribution channels with no prior experience;
assumption of unanticipated liabilities, such as problems with the quality of the acquired company’s product; and

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diversion of management attention.
The risks above could significantly harm our business. The failure to successfully evaluate and execute acquisitions or adequately address these risks could materially harm our financial results.
Our products could have unknown defects which may give rise to claims against us, increase our expenses, or harm our reputation.
Our products are complex and despite testing, our products or enhancements may contain defects, errors or performance problems. Any defects or errors could result in expensive and time-consuming design modifications or warranty charges, harmed customer relationships, and loss of market share. Newly released products which have not seen as much use and testing in the marketplace as older product lines can be more susceptible to undetected defects. As we aim to generate increasing amounts of revenue from sales of recently released products, the negative impact on our business resulting from defects in such products could be significant.
The existence of any defects, errors, or failures in our products could also lead to product liability claims against us, our channel partners, or against our customers. Although we maintain product liability insurance, the coverage limits of these policies may not be adequate to cover future claims. Any claim could result in significant legal defense costs, divert resources, harm our reputation, and negatively impact us.
Our failure to protect our intellectual property and proprietary technology may impair our competitive advantage.
Our success depends in part upon protecting our proprietary technology and trade secrets. We primarily rely on a combination of patents, trademarks, copyrights, trade secret protection, licenses, and nondisclosure agreements to protect our proprietary rights, but have not always sought patent, registration, or similar protection on our technology where it may have been available. The steps we have taken may not be sufficient to prevent the misappropriation of our intellectual property or to provide us with any commercial advantage. The process of obtaining patent protection can be time consuming and costly, and our ability to enforce our intellectual property rights is subject to uncertainty and litigation risks.
We may face costly intellectual property infringement claims.
Allegations of intellectual property infringement by our products may arise and could include claims against us, our manufacturers, our suppliers, or even our customers. Because there are numerous patents in the automation industry, it is not always practicable to determine in advance whether a product or any of its components infringes intellectual property rights. As a result, we may be forced to respond to intellectual property infringement claims to protect our rights. Regardless of merit, these claims could consume management time, result in costly litigation, or cause product shipment delays. In settling these claims, we may be required to cease selling products or services, pay damages, redesign the challenged technology, or enter into unfavorable royalty or licensing agreements. Any of these could seriously harm our business.
Our investments in certain new markets subject us to increased regulation and potential product liability, and there is no guarantee that we will be successful in these markets or that risks related to these industries will not have an adverse effect on our business.
Our systems and controls are sold in a variety of industries, including solar, packaging and medical, among others. Our penetration of the packaging market for food and certain other regulated items where we see potential revenue growth also requires additional costs to fulfill necessary certification and compliance processes. We have increased our strategic focus on sales for certain applications that are highly regulated, including the automation of repetitive operations in diagnostic and pharmaceutical labs. As we start to engage in certain activities in the medical industry, we must ensure that our products and systems comply with various regulatory requirements relevant to medical applications. This will increase costs necessary to operate our business, and our failure to comply with these requirements could have an adverse effect on our ability to sell our products or subject us to regulatory actions or fines.
Our failure to comply with environmental laws and regulations could harm our business.
We are subject to a variety of environmental regulations relating to the use, storage, handling, and disposal of hazardous substances used in the manufacturing and assembly of our products. We believe that we are in compliance with material environmental regulations and have all necessary environmental permits. However, our failure to comply with present or future regulations could result in penalties or liabilities, and could curtail our operations.
Our success depends on our continuing ability to attract, retain and motivate highly-qualified personnel.
Our inability to attract, train, motivate, and retain qualified management, sales, and technical personnel could adversely affect our ability to design, manufacture, market, sell our support and our products, and to meet our requirements as a public company. Many companies with which we compete for qualified personnel have greater resources than we do. In addition, in making employment decisions in the technology industry, job candidates often consider the value of the equity they receive in connection with their employment. Therefore, volatility in the price of our stock may adversely affect our ability to attract or

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retain technical personnel, which could harm our business.
If we fail to maintain adequate internal controls over financial reporting, our business could be materially and adversely affected.
Under the Sarbanes-Oxley Act, our management must establish, maintain and make certain assessments and certifications regarding our disclosure controls and internal controls over financial reporting. We have dedicated significant resources to our efforts to comply with these requirements, including significant actions to develop, evaluate, and test our internal controls but cannot provide absolute assurances. A failure to maintain adequate internal controls could result in inaccurate or late reporting of our financial results, an investigation by regulatory authorities, a loss of investor confidence, a decrease in the trading price of our common stock and could expose us to costly litigation or regulatory proceedings.
Our restructuring efforts may not be effective, might have unintended consequences, and could negatively impact our business.
From time to time, we have restructured our operations in response to changes in the economic environment, our industry and demand. To lower our operating costs during fiscal 2011, we implemented organizational improvements designed to reduce our ongoing costs, which included office consolidation, reorganization and streamlining of our North American operations, and incurred related restructuring expenses. During fiscal 2012, we consolidated our Denmark operations from our InMoTx acquisition into our existing facilities and operations, for which we have incurred restructuring expenses in fiscal 2012. Despite our efforts to structure the company and business to operate in a cost-effective manner while adequately facing competitive pressures and fulfilling customer needs, some cost-cutting measures could have unexpected negative consequences. While our restructuring efforts reduced our costs, we cannot be certain that all restructuring efforts will be successful, or that we will not be required to implement additional restructuring activities in the future. If we are unable to structure our operations effectively or if we face costly termination claims, our operations and prospects could be harmed.
Our preferred stock and the concentration of our equity ownership among few stockholders could adversely affect the liquidity and market price of our securities, and may permit a few stockholders to influence the results of stockholder decisions.
We have approximately 10,558,841 shares of common stock and 8,000 shares of convertible preferred stock outstanding as of September 19, 2012. A small number of holders beneficially own the substantial majority of our outstanding equity. These securities are generally freely tradable or subject to registration statements, or in the case of our preferred stock, registration obligations of the Company to be completed in fiscal 2013, permitting their sale with little or no restriction. The potential sale of these securities creates meaningful overhang on the market for our securities and sales by any of these large holders would increase the current volatility of our common stock, the market price of which is affected by our low trading volume. This may affect the trading market for our stock, and could control the results of matters requiring stockholder approval, which may delay or prevent a change of control or negatively affect our stock price. As further discussed below, our recently issued preferred stock is convertible into common stock at any time by the holder and provides other rights of the holders to approve certain matters, including additional indebtedness, liens, dilutive or senior securities issuance or extraordinary transactions. These approval rights could delay or prevent a change of control or other corporate actions and negatively affect our stock price.
Stockholders may experience dilution of their ownership interests and the market price of our common stock may be depressed by future issuances of additional shares of our equity securities.
We issued 920,000 shares of our common stock in a public offering in June 2012 and issued 8,000 shares of preferred stock convertible into common stock at a $4.60 conversion rate in September 2012. From time to time, we may issue additional common or preferred stock or other equity securities for various reasons, including to finance our operations, to fund acquisitions or to hire or retain employees. Any issuances of our equity securities, or the perception that such issuances may occur, could dilute the interests of our stockholders and have a material negative effect on the trading price of our common stock. See “Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources” below. The rights and preferences of the preferred stock may decrease the perceived value, and thus the trading price, of our common stock. Furthermore, the preferred stock is convertible at the option of the holder at any time upon the occurrence of certain events or satisfaction of certain conditions, and the issuance of common stock upon such conversion could require us to issue a significant number of shares of our common stock and result in significant dilution to existing stockholders.
At June 30, 2012, options to purchase approximately 1,473,000 shares of our common stock were outstanding under our equity compensation plans, and approximately an additional 888,000 shares of common stock were reserved for future grant and issuance under such plans. We can also issue shares under our employee stock purchase plan, which had approximately 422,000 shares available for issuance at June 30, 2012. Shares of common stock issued under these plans are generally freely tradable in the public market, subject to certain limitations applicable to our affiliates. Option exercises and employee stock purchase plan

16


purchases could increase the number of common shares outstanding and could adversely affect the prevailing market price of our common stock, due to our low trading volume. Prior to fiscal 2013, we have also issued more than 1.0 million shares of common stock of which 200,000 were forfeitured by the holders thereof in connection with our acquisitions of MobileRobots and InMoTx. Our use of equity to raise additional financing or as consideration in connection with a future acquisition or other transaction could also result in the dilution of our stockholders’ equity interest.
Our stock price may fluctuate widely, making resale of our common stock difficult.
The market price of our common stock has fluctuated substantially. Our stock price may continue to fluctuate significantly in response to factors including:
fluctuations in operating results;
our liquidity needs and constraints;
the effectiveness of cost control measures;
changes in our business focus and operational organization;
our restructuring activities and changes in management and other personnel;
our limited public float and the limited trading volume of our common stock on NASDAQ;
the business environment, including the operating results and stock prices of companies in the industries we serve;
general conditions in the intelligent automation and packaging industries;
the introduction of new products or changes in product pricing by us or our competitors;
litigation or claims relating to the volatility of our common stock, internal controls, proprietary rights or other matters;
developments in the financial markets; and
perceived dilution from stock issuances in financing or acquisition transactions.



ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.
 
ITEM 2.
PROPERTIES
Our headquarters and our U.S. research and development and manufacturing operations are located in two leased buildings of approximately 56,891 square feet in Pleasanton, California, covered by two lease agreements. The first lease agreement, which is related to our principal executive offices, is for premises of 33,864 square feet, expiring on December 31, 2015.  This agreement also includes a right of first offer on 11,059 additional square feet. The second lease agreement is for premises of 23,027 square feet located near our executive offices, which we use for our manufacturing operations. This lease expires in January 2014, with an option to extend for an additional five-year period, and includes a right of first offer on 12,000 additional square feet. Financial terms for these leases are included in Note 7 of our Notes to Consolidated Financial Statements.
Other leased Adept facilities include Amherst, New Hampshire; Dortmund, Germany; Wissous and Annecy, France; Shanghai, China and Singapore. All of our facilities are used by both of our two reportable business segments and are sufficient for our business needs in fiscal 2013.



ITEM 3.
LEGAL PROCEEDINGS
From time to time, Adept is party to various legal proceedings or claims, either asserted or unasserted, which arise in the ordinary course of our business. We have reviewed pending legal matters and believe that the resolution of these matters will

17


not have a material effect on our business, financial condition or results of operations.
Adept has in the past received communications from third parties asserting that we have infringed certain patents and other intellectual property rights of others, or seeking indemnification against alleged infringement. Adept received such a letter in June 2012 from a third party alleging unauthorized use of proprietary information disclosed pursuant to a nondisclosure agreement with such third party in connection with a product offering by Adept to semiconductor customers and requesting that Adept cease and desist the alleged use of such intellectual property and proprietary information and explain its activities in connection with such products to determine if such activities infringe on certain of the party's patents. While it is not feasible to predict or determine the likelihood or outcome of any actual or potential actions from such assertions against us for this or other matters, Adept has assessed this matter and based upon its assessment, believes the claim are without merit.

 
ITEM 4.
Mine Safety Disclosure

 Not applicable


18


PART II

ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for Registrant’s Common Stock and Related Stockholder Matters
Our common stock is traded on the NASDAQ Global Market under the symbol ADEP.
The following table reflects the range of high and low sales prices for Adept common stock for each full quarterly period within the two most recent fiscal years as reported for trading on the NASDAQ Global Market.
 
 
Three Months Ended
 
Jun 30, 2012

 
Mar 31, 2012
 
Dec 31, 2011

 
Oct 1, 2011
 
Jun 30, 2011

 
Mar 26, 2011
 
Dec 25, 2010
 
Sep 25, 2010
High
$
6.49

 
$
5.28

 
$
3.55

 
$
4.21

 
$
4.76

 
$
5.17

 
$
6.89

 
$
5.75

Low
$
4.00

 
$
2.30

 
$
2.08

 
$
2.99

 
$
3.48

 
$
3.68

 
$
4.05

 
$
4.28

At September 19, 2012, there were approximately 173 stockholders of record of our common stock.
Our preferred stock provides for quarterly payment of dividends in cash or stock subject to certain conditions. To date, we have neither declared nor paid cash dividends on shares of our common stock. In addition, our line of credit and Certificate of Designations for our preferred stock restrict our ability to pay dividends. Accordingly, our shareholders may not realize a return on their investment unless the trading price of our common stock appreciates.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
In connection with our fiscal 2010 and 2012 Performance Plans, shares were forfeited by employees to pay the applicable withholding taxes related to the stock compensation upon vesting of their restricted shares. These shares were returned to the 2005 Equity Incentive Plan in the amount of 32,000 and 36,000 shares, respectively.
Securities Authorized for Issuance Under Equity Compensation Plans
The information required by this item is incorporated by reference from our Proxy Statement.


19


PERFORMANCE GRAPH
The following graph compares the five-year cumulative total stockholder return of Adept Technology, Inc. relative to the cumulative total returns of the NASDAQ Composite Index, and an Industry Index/Peer Group index including eight other companies. The graph assumes an investment of $100.00 in our common stock and each index (including reinvestment of dividends) on June 30, 2007 and shown through June 30, 2012.

 
 
6/07
 
6/08
 
6/09
 
6/10
 
6/11
 
6/12
Adept Technology, Inc.
 
$
100.00

 
$
152.29

 
$
39.65

 
$
79.62

 
$
64.07

 
$
68.72

NASDAQ Composite
 
$
100.00

 
$
84.54

 
$
73.03

 
$
82.88

 
$
110.33

 
$
115.30

Peer Group
 
$
100.00

 
$
83.98

 
$
50.60

 
$
65.42

 
$
107.25

 
$
113.38

This peer group is comprised of the following companies: Brooks Automation Inc., Cognex Corporation, Cyberoptics Corporation, Esterline Technologies Corporation, Integralvision Inc., KLA Tencor Corporation, Nordson Corporation, and Perceptron Inc. The total return for each member of this peer group has been weighted according to each member’s stock market capitalization.
This Section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Adept under the Securities Act or the Securities Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

ITEM 6.
SELECTED FINANCIAL DATA
Not applicable to Adept as a smaller reporting company.

20


ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We provide intelligent robotics systems, the core of which are our motion controls systems, integrated vision-guidance technology and application software, which are sold in combination with our own proprietary robot mechanisms. Our vision-guidance technology is tightly integrated with our motion controls technology, and this is a key differentiator for Adept. Our two most recent acquisitions have provided autonomous robot and fleet management capabilities that enhance our offerings for target markets, as well as unique gripping technology that expands our reach into the global food processing market.
In addition, we provide a full complement of robotics services and support for our customers. Through sales to systems integrators, OEM partners and end-user companies, we sell our robotics systems and services into a few broad industries where we believe we can provide the best solutions for particular applications. We operate in two segments: Robotics and Services and Support.
Acquisitions
On January 10, 2011, we acquired InMoTx, Inc. (“InMoTx”), a Danish privately-held provider of robotic platform solutions and gripping technology for the global food processing market. Pursuant to a merger agreement dated January 4, 2011, we paid $1.5 million in cash, and issued 199,979 shares of our common stock to InMoTx shareholders. All of these shares were made subject to a holdback arrangement to secure the InMoTx shareholder indemnity obligations for an eighteen month period.  We also issued 100,000 shares of our common stock to the InMoTx chief technology officer, to vest on the third anniversary of the merger, contingent upon his continued employment by Adept or a subsidiary, subject to certain exceptions for disability, termination without cause or termination for good reason or a change of control. On September 20, 2011, the InMoTx chief technology officer entered into a separation agreement with the Company to terminate employment on January 31, 2012. Of the 100,000 share grant issued upon the merger, 80,500 shares were forfeited as of September 20, 2011, and the remaining 19,500 shares vested on June 30, 2012. In the third quarter of fiscal 2012, we agreed upon indemnification amounts of $508,000 due from the former shareholders of InMoTx relating to customer claims for matters arising prior to the acquisition by Adept. Of the 199,979 shares issued on the merger date for the acquisition of InMoTx, 119,145 shares were forfeited by the holders and returned to Adept in the fourth quarter of fiscal 2012.
We also agreed to make certain contingent annual payments in cash to the former InMoTx shareholders and to the chief technology officer in an amount equal to ten percent (10%) and two percent (2%), respectively, of the revenues InMoTx achieves in excess of specified thresholds during the three annual periods following the merger date, the fair value of which at June 30, 2012 was $0. The results of InMoTx’s operations have been included in our consolidated financial statements since January 11, 2011.
In October 2011, we announced the decision to consolidate the InMoTx operations in Denmark into our Pleasanton, California operations. Consolidation activities began during the second quarter of fiscal 2012, and were completed by June 30, 2012. See Note 4 to the Consolidated Financial Statements for further information regarding the acquisition of InMoTx.
On June 25, 2010, we acquired MobileRobots Inc. (“MobileRobots”), a privately-held provider of autonomous robot and automated guided vehicle technologies based in New Hampshire, pursuant to a merger agreement dated June 13, 2010, under which we paid approximately $1.0 million in cash and issued 763,359 shares of our common stock. We also agreed to pay bonus amounts in cash up to an aggregate $320,000 to employees of MobileRobots after fiscal 2011 if certain MobileRobots product revenue targets were met for fiscal 2011. MobileRobots fiscal 2011 revenues met the minimum revenue threshold defined in the merger agreement, and a bonus of $100,000 was paid in the first quarter of fiscal 2012.
The results of MobileRobots’ operations have been included in our consolidated financial statements since June 25, 2010. See Note 4 to the Consolidated Financial Statements for further information regarding the acquisition of MobileRobots.
Strategy
Our strategy focuses on a few specific industries where the use of automation is currently fast-growing or is expected to grow over the long term and where we can provide significant product differentiation. This strategy reflects our belief that new opportunities exist in the expansion of application level solutions in vertical markets, where automation has been largely nonexistent or extremely inflexible. The industries we have targeted are: medical, logistics, clean-tech markets and packaging. Currently, we are focusing the majority of our investments on our MobileRobots technology and packaging solutions applications. We are investing significantly in the MobileRobots technology to take advantage of emerging opportunities in the clean tech, logistics, and healthcare markets as it pertains to the lean movement of goods. For example, in the medical industry we have formed a partnership to be the exclusive provider of autonomous mobile robots to SwissLog Healthcare Solutions for use in hospitals, labs and clinics to transport specimens, lab samples and pharmaceuticals, and in February 2012, we launched the new Adept Courier™, a small autonomous vehicle that simplifies the everyday task of moving goods, materials, samples, or

21


parts around an office or production environment. Since most logistics problems require a fleet of robots combined with our new enterprise fleet manager to effectively solve, we believe our unique mobile robot technology has tremendous long term potential across a wide range of industries, and we believe this business will be characterized by larger average order sizes and better visibility than our traditional businesses.
The packaging market has continued to provide new applications even during the last few years of worldwide economic weakness and reflects the strength of our Quattro robot in this industry. We believe our acquisition of InMoTx in January 2011 further strengthens our offerings for the packaging market, as InMoTx brings differentiated technology for global food processing applications. We believe the natural foods market is a largely untapped automation market, and the packaging solutions technology we acquired from InMoTx is an enabler for these applications. The packaging solutions technology also brings changes to our standard business model, as order sizes of these packaging cells are typically larger than our normal component sales, revenues are received in installments over the project term and deferred until recognizable, and each cell includes high margin consumable grippers which must be replaced periodically over the life of the cell, generating a secondary revenue stream.
In the solar market, we have achieved new design wins with solar cell manufacturers that we believe will provide long-term opportunity for us as these manufacturers begin to equip their automation capabilities and ramp up their production operations. We hope to capitalize on the growing opportunities for automation in China as a rapidly developing market for industrial robots over the long-term with our new sales and service office in Shanghai, which opened near the end of fiscal 2011. This office will allow us more visible access and support to our growing customer base in the region. Additionally, we continue to address our sales efforts towards our traditional markets, such as the German automotive electronics and industrial markets, where our products are well positioned, demand is strengthening and we believe significant long-term opportunity exists.
Included in our growth strategy is an ongoing search for possible businesses, product lines or technologies for partnership or collaboration. Our focus is on pursuing partnerships that would broaden our solutions capabilities, further strengthen our position in key markets, increase our revenues and expand our operational scale. Our long-term strategy is to grow our new MobileRobots and Packaging Solutions initiatives to enable these businesses to achieve 50% of our total revenues, while improving our gross margin to exceed 45% and increase net margins over time in parallel with our growth efforts.

Trends in Our Business
During fiscal 2012, our revenues grew 15.2% compared with the previous year, driven primarily by stronger demand from some of our traditional markets, including the automotive and industrial markets in Germany, the consumer electronics market in Asia, and the consumer goods market in Europe. Revenues were also favorably impacted by growth in our commercial MobileRobots material handling applications and in the medical and pharmaceutical industries. We are encouraged by our performance in our target markets and by the signs of returning demand from our traditional industries in fiscal 2012. However, this recent encouragement is tempered by the current economic condition worldwide, and we are cautious as to the outlook in the next few fiscal quarters. Sales growth in fiscal 2012 was enhanced by marginal growth in the international disk drive market, as this industry showed signs of recovering from the cyclical downturn it entered into during the second quarter of fiscal 2011. While it is difficult to predict the timing of investment cycles within the disk drive industry, based on information from our customers, we believe this market will return to a minimal capital investment growth period in the near term.
We believe that our acquisition of InMoTx will help drive future growth in the packaging market over the long-term, as the gripping technology that InMoTx brings provides a unique advantage in certain markets, particularly hygienic packaging for the natural foods market. We believe the positive growth in packaging experienced during fiscal 2012 will continue to build primarily in the U.S. Over the long-term, packaging presents both a large opportunity and the potential to substantially effect our financial model, as the average order size and visibility is better than our traditional components business. These characteristics, along with the consumables and service revenues to the company, have potential to result in more consistent, sustainable revenues over the long-term.
On a geographic basis, our U.S. sales increased 9% in fiscal 2012 compared with the prior year and accounted for 28% of total revenue in fiscal 2012 compared to 29% in the previous year. This growth reflects increased sales of our commercial MobileRobots material handling applications, primarily in the medical and pharmaceutical industries, and increased sales in the packaging markets. These increases were partially offset by decreased demand in our domestic disk drive markets. We believe the MobileRobots and packaging solutions products will comprise an increasing portion of our U.S. business over time, as our new MobileRobots technology has enabled us to address new opportunities in material handling applications in the medical, semiconductor and industrial markets, and our new gripper technology acquired from InMoTx has enabled us to expand our opportunities in the packaging solutions markets.
In Asia, higher sales from the disk drive markets in fiscal 2012 were partially offset by lower packaging and solar sales,

22


resulting in a 21% revenue increase compared to the prior year and accounted for 19% of total revenues in fiscal 2012 compared to 18% in the previous year. Though the disk drive industry showed gains during the year which may continue, we remain cautious due to the cyclical nature of the industry and are actively pursuing opportunities in Asia outside of the disk drive markets. We believe that the clean-tech and logistics markets in Asia present us with significant long-term opportunities.
European sales grew 10% in fiscal 2012 compared with the previous year and accounted for 49% of total revenues for fiscal 2012 compared to 51% in the previous year. The European growth was primarily the result of higher sales to the traditional automotive and industrial markets, particularly in Germany, and higher sales to the consumer goods market. This growth was partially offset by lower sales to the packaging market, and lower demand for replacement parts. Much of the demand for our products in the last few years has come from Europe and we believe the region will continue to be an important long-term market for our products, both in traditional sectors such as automotive, electronics and industrial, and in our target growth markets, including packaging and solar.
Restructuring and Cost Reduction Actions
Operationally, from time to time we have undertaken restructuring and other cost reduction actions to support our financial model, which emphasizes cost efficiency balanced with investments in our products and revenue generating activities. We remain committed to managing our business to generate cash. In October 2011, we announced the decision to consolidate the InMoTx operations in Denmark into the Company's Pleasanton, California operations. Consolidation activities began during the second quarter of fiscal 2012, and were completed by June 30, 2012. During fiscal 2012, we incurred $1.3 million in restructuring charges, which includes $95,000 of stock-based compensation, related to the consolidation of the InMoTx operations. During the second half of fiscal 2011, we implemented organizational improvements designed to reduce our ongoing costs, which included office consolidation, reorganization within our sales infrastructure and a general streamlining of our business operations in the Americas region, and incurred $662,000 in related restructuring expenses, of which $498,000 was accelerated stock-based compensation expense.
Summary of the Fiscal 2012 Fourth Quarter
Revenues for the fourth quarter of fiscal 2012 were $17.0 million, up 1% from $16.8 million for the fourth quarter of fiscal 2011 as a result of higher disk drive revenues primarily in Malaysia. The increase in disk drive sales was partially offset by decreased revenues in our solar and semiconductor markets in Europe.
Gross margin was 41.5% of revenue in the fourth quarter of fiscal 2012, compared with 45.3% of revenue in the fourth quarter of fiscal 2011. Gross margin in the fiscal 2012 fourth quarter was unfavorably impacted by a lower margin product mix including higher disk drive sales and an unfavorable Euro exchange rate.
Operating expenses were $7.6 million in the fourth quarter of fiscal 2012, a decrease of 14% compared with $8.8 million in the fourth quarter of fiscal 2011. The decrease primarily resulted from lower expenses for InMoTx in the current quarter compared to the fourth quarter of fiscal 2011, as well as increased streamlining of our operating costs and efficiencies.
Operating loss for the fourth quarter of fiscal 2012 was $531,000, compared to an operating loss of $1.2 million for the fourth quarter of fiscal 2011. Net loss for the fiscal 2012 fourth quarter was $358,000, or $0.04 net loss per share, compared to a net loss of $686,000, or $0.08 net loss per share, for the fourth quarter of fiscal 2011.
Results of Operations
This discussion summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and cash flow during the two-year period ended June 30, 2012, each year therein referred to as fiscal 2012 and 2011, reflecting requirements applicable to Adept as a smaller reporting company. Unless otherwise indicated, references to any year in this Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to our fiscal year ended June 30. This discussion should be read with the consolidated financial statements and financial statement footnotes included in this Annual Report on Form 10-K.

Revenues
The following table sets forth our annual revenues and year-to-year change in revenues by business segment for the fiscal years ended June 30, 2012 and 2011 (in thousands, except for percentages):
 

23


 
Fiscal
2012

 
% Change
2011 to 2012
 
Fiscal
2011

Revenue by Segment
 
 
 
 
 
Robotics:
 
 
 
 
 
Revenues
$
54,815

 
21%
 
$
45,129

Percentage of total revenues
83
%
 
 
 
78
%
Services and Support:
 
 
 
 
 
Revenues
$
11,404

 
(8)%
 
$
12,376

Percentage of total revenues
17
%
 
 
 
22
%
Total revenues
$
66,219

 
15%
 
$
57,505

Revenues were $66.2 million in fiscal 2012, up 15% from $57.5 million in fiscal 2011. The increase in total revenues resulted from a 21% sales increase in our Robotics segment, partially offset by an 8% decrease in our Services and Support segment.
Robotics segment revenues were $54.8 million in fiscal 2012, up 21% from $45.1 million in fiscal 2011. Higher Robotics revenues in fiscal 2012 were primarily the result of higher demand from the automotive and industrial markets, primarily in Germany, which increased $3.8 million or 38% from 2011; increased sales of our commercial MobileRobots material handling applications, which increased $2.8 million from $159,000 in 2011, primarily in the United States, Canada, and Singapore; increased sales of consumer goods, primarily in Europe, which increased $1.8 million, or 236% from 2011; and increased sales to the medical and pharmaceutical markets, primarily in Germany, which increased $1.2 million, or 47% from 2011.
Revenues in our Services and Support segment were $11.4 million in fiscal 2012, down 8% from $12.4 million in fiscal 2011. The decrease during fiscal 2012 was primarily due to decreased demand for replacement parts worldwide, which decreased $1.6 million, or 21%, from 2011.

The following table sets forth our annual revenues and year-to-year change in revenues by geographic region for the fiscal years ended June 30, 2012 and 2011 (in thousands, except for percentages):
 
 
Fiscal
2012

 
% Change
2011 to  2012

 
Fiscal
2011

Revenue by Geography:
 
 
 
 
 
United States:
 
 
 
 
 
Revenues
$
18,259

 
9
%
 
$
16,728

Percentage of total revenues
28
%
 
 
 
29
%
Europe:
 
 
 
 
 
Revenues
32,212

 
10
%
 
29,185

Percentage of total revenues
49
%
 
 
 
51
%
Asia:
 
 
 
 
 
Revenues
12,815

 
21
%
 
10,581

Percentage of total revenues
19
%
 
 
 
18
%
Other Countries:
 
 
 
 
 
Revenues
2,933

 
190
%
 
1,011

Percentage of total revenues
4
%
 
 
 
2
%
Total International revenues
$
47,960

 
18
%
 
$
40,777

Percentage of total revenues
72
%
 
 
 
71
%
Total revenues
$
66,219

 
15
%
 
$
57,505

Our domestic revenues were $18.3 million in fiscal 2012, up 9% from $16.7 million in fiscal 2011. This increase reflects increased sales of our commercial MobileRobots material handling applications, which increased $1.2 million from $35,000 in 2011, primarily in the medical and pharmaceutical industries, and increased sales in the packaging markets, which increased $1.7 million, or 55%, from 2011. These increases were partially offset by decreased demand in our domestic disk drive markets, which decreased $1.3 million, or 87%, from 2011.
Our international revenues were $48.0 million in fiscal 2012, up 18% from $40.8 million in fiscal 2011. This increase resulted from a 10% increase in sales in our European markets, a 21% increase in our Asian markets, and a 190% increase in sales to all other international countries.

24


European sales in fiscal 2012 increased 10% to $32.2 million, compared with $29.2 million in fiscal 2011. This increase was primarily a result of an increase in demand from the automotive and industrial markets, primarily in Germany, which increased $4.3 million, or 52%; and a $1.4 million, or 191%, increase in sales to the consumer goods industries, primarily in Spain and Germany. These increases were partially offset by a $1.6 million, or 28%, decrease in sales to the packaging markets, primarily in Germany; a $1.2 million, or 30%, decrease in sales to the replacement parts markets, primarily in France; and a $1.2 million, or 44%, decrease in sales to the other miscellaneous markets, primarily in France.
Revenues from Asia in fiscal 2012 increased 21% to $12.8 million compared with $10.6 million in fiscal 2011 as a result of an increase of $2.2 million, or 49%, in sales to the disk drive markets, primarily in Malaysia.
Revenues from other countries remained a relatively small percentage of our sales in fiscal 2012. However, compared to fiscal 2011, revenues from other countries have experienced significant growth. Revenues in fiscal 2012 increased 190% to $2.9 million, compared with $1.0 million in fiscal 2011. The increase was primarily the result of increased sales of our commercial MobileRobots material handling applications, which increased to $984,000 from zero in fiscal 2011; increased sales to the packaging markets, primarily in Canada, which increased $556,000, or 107%, from fiscal 2011; and increased sales to the medical and pharmaceutical industries, primarily in Canada, which increased $380,000, or 957%, from fiscal 2011.
Backlog. Our product backlog at June 30, 2012 was approximately $7.9 million compared to approximately $12.3 million at June 30, 2011. The decrease in backlog at the end of fiscal 2012 compared to the end of fiscal 2011 is due to a slowdown seen in customer order patterns at the end of fiscal 2012, especially in Europe. Orders with delivery dates beyond twelve months from the end of the fiscal quarter are not included in backlog, and thus we expect substantially all backlog at June 30, 2012 to ship during fiscal 2013. Because orders constituting our current backlog are subject to changes in delivery schedules and in certain instances may be subject to cancellation without significant penalty to the customer, our backlog at any date may not be indicative of demand for our products or actual revenues for any period in the future.

Gross Margin
The following table sets forth our gross margin and year-to-year change in gross margin for the fiscal years ended June 30, 2012 and 2011 (in thousands, except for percentages):
 
 
Fiscal
2012

 
% Change
2011 to 2012

 
Fiscal
2011

Revenues
$
66,219

 
 
 
$
57,505

Gross margin
$
28,000

 
12
%
 
$
24,901

Gross margin %
42.3
%
 
 
 
43.3
%
Gross margin as a percentage of revenues was 42.3% in fiscal 2012, compared to 43.3% in fiscal 2011.
Gross margin in fiscal 2012 was unfavorably affected by a more unfavorable mix of sales to lower margin Asian markets and due to the weakening of the euro to the U.S. dollar exchange rate. Gross margin in fiscal 2011 was favorably affected by a more favorable mix of sales to higher margin European markets and due to the strengthening of the euro to the U.S. dollar exchange rate.
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 sales mix of products 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 year-to-year change in these expenses for the fiscal years ended June 30, 2012 and 2011 (in thousands, except for percentages):
 

25


 
Fiscal
2012

 
% Change
2011 to 2012

 
Fiscal
2011

Expenses
$
8,714

 
6
%
 
$
8,209

Percentage of revenue
13
%
 
 
 
14
%
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, whichever term is the estimated life of the software product.
R&D expenses in fiscal 2012 were $8.7 million, or 13% of revenues, an increase of 6% from $8.2 million, or 14% of revenues, in fiscal 2011. Higher R&D expenses in fiscal 2012 compared with the prior year, primarily resulted from the increased investment in our commercial MobileRobots material handling applications and packaging solutions applications.
We expect that quarterly R&D expenses in fiscal 2013 will remain steady from fiscal 2012 fourth quarter levels of $2.0 million due to the closing of the Denmark entity and streamlining of expenses offset by investment in our new products. We have also implemented a temporary 10% salary reduction for our employees to reduce our operating expenses in the first fiscal quarter of 2013 to offset the slowdown seen in orders during this time. This reduction will be reevaluated in the second fiscal quarter of 2013 to determine if it is still necessary.
Adept capitalized $647,000 of software costs in fiscal 2012, compared to $366,000 in fiscal 2011. We expect our capitalized software costs to decrease substantially in fiscal 2013 due to a release of a software product during the first fiscal quarter of 2013.

Selling, General and Administrative Expenses.
The following table sets forth our selling, general and administrative expenses and year-to-year change in these expenses for the fiscal years ended June 30, 2012 and 2011 (in thousands, except for percentages):
 
 
Fiscal
2012

 
% Change
2011 to 2012

 
Fiscal
2011

Expenses
$
20,701

 
(7
)%
 
$
22,189

Percentage of revenue
31
%
 
 
 
39
%
Selling, general and administrative (“SG&A”) expenses consist primarily of employee compensation, professional fees arising from legal, auditing and other consulting services, as well as tradeshow participation and other marketing costs.
SG&A expenses were $20.7 million, or 31% of revenues, in fiscal 2012, down 7% from $22.2 million, or 39% of revenues, in fiscal 2011.
Lower SG&A expenses in fiscal 2012 compared with the prior year primarily resulted from lower stock-based compensation expense in fiscal 2012. Stock-based compensation expense was higher in fiscal 2011 due to the acquisitions of MobileRobots and InMoTx.
We expect that quarterly fixed SG&A expenses will decrease slightly during fiscal 2013 from the $5.4 million recorded in the fourth quarter of 2012, reflecting continued streamlining of our overhead costs and processes. We have also implemented a temporary 10% salary reduction for our employees to reduce our operating expenses in the first fiscal quarter to offset the slowdown seen in orders during this time. This reduction will be reevaluated in the second fiscal quarter of 2013 to determine if it is still necessary.
Amortization of Other Intangible Assets. Amortization expense totaled $466,000 during fiscal 2012 and $349,000 during fiscal 2011 for the amortization of intangible assets acquired as part of the MobileRobots acquisition in the fourth quarter of 2010 and the InMoTx acquisition in the beginning of the third quarter of fiscal 2011.
Stock-Based Compensation Expense. We recorded stock-based compensation expense of $1.3 million in fiscal 2012 and $3.1 million in fiscal 2011 for our stock option plans, employee stock purchase plan and restricted stock grants. Stock-based compensation expense in fiscal 2012 and 2011 includes $95,000 and $498,000, respectively, of accelerated stock-based compensation expense related to employee terminations that were part of our restructuring activities, and has been classified as restructuring expense. Excluding the restructuring related expense, the remaining decrease is primarily due to the restricted stock issued in connection with our acquisition of MobileRobots and InMoTx, and the fiscal 2011 grants and vesting of

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restricted stock based upon the level of performance for fiscal 2010 performance plan awards in fiscal 2011 which did not reoccur in fiscal 2012. We did not record an income-tax benefit for stock-based compensation expense in any of the periods presented because of the extent of our net operating loss carry-forwards.
In fiscal 2013, we expect stock-based compensation expense to increase slightly from fiscal 2012 levels due to grants and vesting of restricted stock granted under our fiscal 2012 performance plan awards offset by the near completion of vesting related to our acquisitions of MobileRobots and InMoTx.
See Note 2 of the Notes to the Consolidated Financial Statements for more information about our recognition of stock-based compensation expense.
Restructuring Charges. During fiscal 2012, we recorded restructuring charges of $1.3 million related to the consolidation of the InMoTx operations in Denmark into the Company's Pleasanton, California operations. During fiscal 2011, we recorded restructuring charges of $662,000 related to office consolidation, sales reorganization and business streamlining measures implemented during the second half of the fiscal year, which included $498,000 in accelerated stock-based compensation expense due to vesting and release of restricted stock in connection with employee terminations.
Operating Loss. We recorded an operating loss of $3.1 million in fiscal 2012, compared with an operating loss of $6.5 million in fiscal 2011. Lower operating losses recorded in the fiscal 2012 periods were primarily the result of lower stock-based compensation expenses and cost-cutting measures employed company-wide.
Interest Income (Expense), Net. Interest expense, net of interest income, was $250,000 in fiscal 2012, compared with $124,000 in fiscal 2011. The increase in interest expense during fiscal 2012 primarily resulted from a higher line of credit balance through fiscal 2012, which included borrowings throughout fiscal 2012 to fund operations, as well as borrowings in the third quarter of fiscal 2011 to finance our acquisition of InMoTx.
Foreign Currency Exchange Gain (Loss). Our foreign subsidiaries’ balance sheet accounts are translated at current period ending exchange rates and statements of operations accounts are translated at the average rate for the period. Translation gains and losses are recorded as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity. Foreign currency transaction losses were $732,000 in fiscal 2012 and $188,000 in fiscal 2011.
The foreign currency transaction losses recorded in fiscal 2012 were primarily generated from realized losses related to the payments of intercompany payables in U.S. Dollars by the European entities. As the Euro decreased against the U.S. dollar, more Euros were needed to purchase the U.S. Dollar to settle the payable. The foreign currency transaction losses recorded in fiscal year 2011 were primarily generated from realized losses from U.S. dollars used to pay accounts payable in Japanese Yen, as the Yen strengthened against the U.S. dollar during the period, and losses related to the payments of intercompany payables in U.S. Dollar by the European entities.
As we conduct business on a global basis we are continually exposed to adverse or beneficial movements in foreign currency exchange rates, which can vary considerably from period to period. The dollar/euro and the dollar/yen markets currently present the largest exchange rate risk for Adept.
Provision (Benefit) for Income Taxes. Adept typically provides for income taxes during interim reporting periods based upon an estimate of our annual effective tax rate. We also maintain a liability to cover the cost of additional tax exposure items on the filing of federal and state income tax returns as well as filings in foreign jurisdictions. Each of these filing jurisdictions may audit the tax returns filed and propose adjustments. Adjustments arise from a variety of factors, including different interpretations of statutes and regulations.
We recorded a tax benefit of $396,000 for fiscal 2012, compared to $56,000 for fiscal 2011. For fiscal 2012, the tax benefit represents a release of $760,000 in reserves related to our ASC 740 analysis. This release was due to expired statutes of limitations in France and Germany and net operating loss true ups in Germany offset by a provision of $362,000 representing state minimum tax requirements as well as foreign tax expense. For fiscal 2011, the tax benefit represents state minimum tax requirements as well as a foreign tax expense adjustment primarily related to our Singapore operations. We have net operating losses that are sufficient to offset a significant portion of our domestic and foreign tax obligations, except when annual net operating loss limitations exist for domestic and foreign jurisdictions that result in some tax expense.
Liquidity and Capital Resources
Changes in the Company’s liquidity during and since the year ended June 30, 2012 primarily reflect the net effect of cash used by operations, cash provided from common stock issued in connection with a public offering, borrowings from the Company’s line of credit and capital expenditures. Since the end of fiscal 2012, Adept also completed an $8.0 million private placement of preferred stock as further discussed below.

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Cash and cash equivalents were $8.7 million at June 30, 2012. In fiscal year 2012, cash increased by $95,000. Changes in liquidity include proceeds from common stock of $3.1 million and borrowings from our line of credit for $1.6 million offset by operational losses of $3.9 million and by purchases of property and equipment of $1.1 million
Net cash used in operations was $3.9 million, primarily resulting from the net cash loss from operations of $1.9 million and an increase of $1.9 million in net accounts receivable due primarily to the increase in sales.
In fiscal year 2012, the Company used $1.5 million of cash in investing activities, including $1.1 million for purchases of property and equipment, and $508,000 in stock forfeited by the InMoTx shareholders as indemnification for Adept's cash outlays for claims for matters arising prior to the acquisition by Adept, offset by $115,000 in proceeds from the sale of property and equipment. In fiscal year 2012, cash provided from financing activities of $4.9 million primarily consisted of the $3.1 million proceeds from a stock offering in the fourth quarter, and $1.6 million draw on the Company’s line of credit. On September 18, 2012, the Company issued 8,000 shares of the Company's preferred stock, par value $0.001 per share (the “Preferred Stock”), at a price of $1,000 per share to Hale Capital Partners, LP (“Hale Capital”). The Company received net proceeds of approximately $7.6 million from the issuance of the Preferred Stock, after deducting estimated expenses payable by the Company.
Holders of Preferred Stock will be entitled to receive dividends payable quarterly in arrears payable, at the election of the Company either in cash or, subject to certain equity conditions, in Common Stock. Dividends on the Preferred Stock will accrue at Prime Rate (Wall Street Journal Eastern Edition) plus 3% up to a maximum amount of 4%.
Each share of the Preferred Stock will be convertible, at the option of the holder and upon certain mandatory conversion events described below, at a conversion rate of $4.60.
If on or after the first anniversary of the issuance of the Preferred Stock, the Common Stock price exceeds the “Applicable Percentage” (meaning, 200% from the first anniversary to the second anniversary, 175% until the third anniversary, and 150% thereafter) for a consecutive 60 days, such price is maintained until conversion, and certain equity conditions providing that such shares of Common Stock issued upon conversion can be immediately saleable by the holders (the "Equity Conditions"), the Company can convert the Preferred Stock up to an amount equal to the greater of the then-one week trading volume of the Common Stock (the “Volume Limit”) or the amount of an identified bona fide block trade at a price not less than the then-current market price.
Starting 18 months after issuance of the Preferred Stock, if the trading price of the Common Stock is more than 110% of the conversion price for a specified period, the Company may convert up to 10% of the Preferred Stock issued pursuant to the Securities Purchase Agreement per quarter at 100% of the original price plus the amount of any accrued and unpaid dividends, subject to a maximum conversion equal to the Volume Limit per month and subject to the Equity Conditions. The ability to require conversion requires that the Company (i) maintains on deposit such amount of cash and cash equivalents and (ii) satisfies such EBITDA threshold, in each case as is mutually determined by the Company and Silicon Valley Bank and reasonably acceptable to Hale Capital. If the Company cannot convert the Preferred Stock due to its failure to satisfy the conditions, then it may redeem the shares for cash at the same price subject to agreement of the Holder.
Upon certain triggering events, such as bankruptcy, insolvency or a material adverse effect or failure of the Company to issue shares upon conversion of the Preferred Stock in accordance with its obligations, the Holders may require the Company to redeem all or some of the Preferred Stock at a price equal to 100% of the conversion amount, and in certain events, the higher trading price of the Common Stock underlying the Preferred Stock between the date of the redemption notice and redemption, plus accrued and unpaid dividends.
On or after September 30, 2016, each holder can require the Company to redeem its Preferred Stock in cash at a price equal to 100% of the conversion amount being redeemed plus accrued and unpaid dividends.
Silicon Valley Bank Line of Credit
We have a revolving line of credit with Silicon Valley Bank, or SVB. We originally entered into the Loan and Security Agreement and related agreements for the revolving line in May 2009. In March 2011, we entered into an additional Loan and Security Agreement (EX-IM Loan Facility) and related agreements with SVB, pursuant to which a portion of the revolving line (the “EX-IM Line”) is guaranteed by the Export-Import Bank of the United States, and Adept is able to borrow against foreign accounts receivable and export-related inventory. In February 2012, we entered into amendments to the May 2009 Loan and Security Agreement (as previously amended), the March 2011 Loan and Security Agreement (EX-IM Loan Facility) and related agreements. In September 2012, we entered into further amendments to the May 2009 Loan and Security Agreement.

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The revolving line of credit (including the EX-IM Line) matures on March 25, 2013. All borrowings bear interest at the prime rate announced from time to time by SVB plus 1.75%. Our maximum aggregate borrowing availability under the revolving line of credit is $10 million. We may borrow up to the lesser of $10 million or 80% of our eligible domestic accounts receivable, and up to the lesser of $8 million or the borrowing base calculated by applying specified advance rates to our eligible foreign accounts receivable and inventory destined for export from the United States. The loan documents specify the criteria for determining eligible domestic and foreign accounts receivable and eligible inventory destined for export. Our available borrowing base under the revolving line is reduced by the principal balance of outstanding advances under the domestic portion of the revolving line and the EX-IM Line.
Our ability to make borrowings under the revolving line is subject to ongoing conditions precedent that our representations and warranties in the loan documents are true, in all material respects, on the date on which we request the borrowing and on the funding date, and that SVB determines, in its sole discretion, that there has been no material impairment in our business, results of operation, financial condition, or the prospect of repayment of our obligations to SVB, or any material adverse deviation from our most recent business plan submitted to SVB. Adept and certain subsidiaries have granted SVB a security interest in substantially all of their respective assets (including certain shares of subsidiaries) to secure the obligations outstanding under the revolving line, and under any separate bank service agreements that may be entered into by Adept and SVB covering foreign exchange contracts, cash management services or letters of credit.
We must meet certain financial covenants under the loan documents. As amended in September 2012, the loan documents require us to maintain (a) liquidity (domestic cash plus the available domestic borrowing base, measured monthly) of at least $5 million, and (b) minimum aggregate rolling six-month EBITDA (measured at the end of each fiscal quarter for the six months ending on such date and applying a definition of EBITDA specified in the Loan and Security Agreement) equal to or exceeding specified amounts for each quarter. These quarterly EBITDA amounts are minimum amounts for financial covenant purposes only, and do not represent projections of Adept's financial results.
We also must remain in compliance with various other covenants. For example, we must maintain our primary operating deposit accounts with SVB, and require our U.S. customers to transmit payments to a lockbox account at SVB. During the second quarter of 2012, SVB began to first apply collections from the lockbox account toward repayment of our obligations to SVB, and then transfer any excess to Adept's designated deposit account with SVB (a payment mechanism commonly referred to as “dominion mode”). In February 2012, the loan documents were amended to perpetuate dominion mode and remove the threshold that previously triggered it. One of the September 2012 amendments reinstitutes a new threshold so that Adept is no longer automatically in dominion mode. Under this amendment, if our liquidity (domestic cash plus the available domestic borrowing base) is $7.5 million or above and there is no event of default under the revolving line, SVB will transfer all collections from the lockbox account to our designated deposit account. If Adept's liquidity falls below $7.5 million, Adept will be in dominion mode and SVB will apply all collections from the lockbox account first toward repayment of our obligations to SVB, with any excess transferred to our designated deposit account. While in dominion mode, we may continue to borrow funds under the revolving line if there is available borrowing base to do so, and we meet the other conditions precedent for borrowing set forth in the loan documents.
We may not permit or suffer any specified change in control, including any change in the beneficial ownership of 30% or more (or 40% or more, in the case of shares held by one specified stockholder group) of Adept's outstanding shares, without SVB's consent. Various other covenants restrict the manner in which we conduct our business, our ability to pay dividends, incur additional indebtedness or encumber our assets, the types of transactions (including mergers and acquisitions) we may enter into and our ability to transfer funds to subsidiaries. A September 2012 amendment to the loan documents modified certain covenants in the revolving line to permit Adept to meet dividend payment and mandatory redemption provisions under the terms, rights, obligations and preferences of the preferred stock we issued to Hale Capital. This amendment also requires SVB consent before we can make certain specified types of changes to the terms, rights, obligations and preferences of the preferred stock. Adept became subject to additional covenants related to permissible use of proceeds and other matters in the loan documents for the EX-IM Line.
Adept would be deemed to be in default under the loan documents if we failed to timely pay any amount owed to SVB; if we failed to comply with specified financial and other covenants, including those listed above; if we otherwise materially breached, without cure, any of our representations under or other provisions in the loan documents; if there occurs a material adverse change in our or any guarantor subsidiary's business, operations or condition, or a material impairment of the prospect of repayment of our obligations to SVB, or a material impairment in the perfection or priority of SVB's security interests or the value of SVB's security interest in our or any guarantor subsidiary's assets, or if SVB determines there is a reasonable likelihood that we will not meet our financial covenants in the next succeeding quarter; if any involuntary lien or attachment is issued against Adept's or any guarantor subsidiary's assets, or any judgment or order in excess of $100,000 is entered against Adept or any guarantor subsidiary, that is not discharged, vacated or satisfied within ten days; if Adept or any guarantor subsidiary becomes insolvent or is generally not paying its debts as they become due; if Adept or any guarantor subsidiary makes any material written misrepresentation to SVB, if we fail to pay amounts due under or otherwise materially breach any

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agreements with third parties, or if a default occurs under such agreements which permits indebtedness in excess of $100,000 to be accelerated; if breaches occur under agreements related to subordinated debt that may be outstanding during the term of the loan; if there is any revocation or termination of, or nonperformance of any obligation or covenant under, any guaranty of Adept's obligations; or if we lose government approvals or become subject to certain governmental actions that could materially adversely affect us. In addition, if the Export-Import Bank's guarantee of the EX-IM Line is declared void or revoked for any reason, whether or not caused by Adept's actions, such event may trigger an event of default under the loan documents unless Adept is able to repay all outstanding obligations under the EX-IM Line and no other events of default are occurring simultaneously. Upon a default, SVB may, among other things, cease making loans to Adept; accelerate and declare all or any part of our obligations to be immediately due and payable, and enforce its security interest against the collateral.
Adept paid a $25,000 fee to SVB in September 2012, and will pay certain bank expenses, in connection with entry into the September amendments. We have agreed to pay a termination fee of $100,000 if the revolving line is terminated prior to its maturity date. We must pay a fee, quarterly in arrears, equal to .50% per annum of the average unused portion of the credit line. During periods when there are outstanding balances of principal and interest under the revolving line, SVB is entitled to charge a “float” charge, payable monthly, in an amount equal to one extra day of interest on each payment received by SVB from Adept during the month. A collateral monitoring fee of $850 per month, which was payable every month pursuant to the February 2012 amendment, is now payable only if our liquidity falls below $7.5 million and if there is any principal or interest outstanding under the revolving line of credit during the month. We also must pay all other bank fees and expenses related to the loan transaction.
We were in compliance with the covenants of the loan documents as of June 30, 2012. At June 30, 2012, we had an outstanding principal balance of $5.5 million under the revolving line, up from $3.9 million at the end of fiscal 2011, reflecting net principal repayments from domestic cash receipts and re-borrowing for cash management purposes during fiscal 2012. Based on operating needs, strategic activities and other factors, we may further utilize the line of credit in the future or seek alternative credit or other financing in the future to pursue additional expansion opportunities or make other investments in our growth.

Long-Lived Assets
Our long-lived assets consist of property and equipment, including capitalized software development costs, of $2.3 million and $1.8 million (net of depreciation) at June 30, 2012 and 2011, respectively, and $4.7 million and $5.1 million of goodwill and other intangible assets (net of amortization) at June 30, 2012 and 2011, respectively.
Critical Accounting Policies
Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates, including those related to warranty obligations, bad debt, inventories, cancellation costs associated with long-term commitments, investments, intangible assets, income taxes, service contracts, stock-based compensation, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making estimates and judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Estimates, by their nature, are based on judgment and available information. Therefore, actual results could differ from those estimates and could have a material impact on our consolidated financial statements, and it is possible that such changes could occur in the near term.
Reclassifications. Certain reclassifications have been made to prior-period balances to present the financial statements on a consistent basis with current year presentation. Such reclassifications have not changed previously reported net income (loss) or stockholders’ equity.
We have identified the accounting principles which we believe are most critical to our consolidated financial statements while considering accounting policies that involve the most complex or subjective decisions or assessments. These critical accounting policies described below include:
revenue recognition;
allowance for doubtful accounts;
inventories;

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warranties;
capitalization of software development costs;
accounting for income taxes;
foreign currency accounting;
goodwill and purchased intangible assets;
valuation of stock-based awards; and
commitments and contingencies.
Revenue Recognition. We generate revenues primarily from sales of production automation equipment and parts, and to a lesser extent from support and service activities associated with this equipment. Non-software product revenue consists primarily of sales of robots, refurbished robots and spare parts. We recognize non-software product revenue when persuasive evidence of a non-cancelable arrangement exists, delivery has occurred and/or services have been rendered, the price is fixed or determinable, collectability is reasonably assured, legal title and economic risk is transferred to the customer, and when an economic exchange has taken place. We use the signed purchase contract or purchase order as evidence of an arrangement. Product revenues are normally recognized at the point of shipment from our facilities since title and risk of loss passes to the customers at that time. Customers generally have no right of return other than for product defects covered by our warranty. Adept maintains a warranty liability based on our historical warranty experience and management’s best estimate of our warranty liability at each balance sheet date. There are no acceptance criteria on our standard non-software products. We do not deem the fee to be fixed or determinable where a significant portion of the price is due after our normal payment terms, which are 30 to 90 days from the invoice date. In recording revenue, management exercises judgment about the collectability of receivables based on a number of factors, including the customer’s past payment history and its current creditworthiness. If we conclude that collection is not reasonably assured, then the revenue is deferred until the uncertainty is removed, generally upon receipt of payment. Our experience is that we have been able to reliably determine whether collection is reasonably assured.
Our robots and controllers have features that are enabled or enhanced through the use of software enabling tools and other software elements, which are embedded within our robot and controller products. Our software enabling tools or other software elements do not operate independently of the robots or controllers, and they are not sold separately and cannot be used without the robots or controllers. We also sell optional software used to enhance capability of our products. We believe that the software component of our products is incidental to our products and services taken as a whole.
Service and Support revenue consists primarily of sales of spare parts and refurbished robots. Service revenue also includes training, consulting and customer support, the latter of which includes all field service activities; i.e., maintenance, repairs, system modifications or upgrades. Revenues from training and consulting are recognized at the time the service is performed and the customer has accepted the work. These revenues are not essential to the product functionality and, therefore, do not bear on the revenue recognition policy for our component products.
Deferred revenues represent payments received from customers in advance of the delivery of products and/or services, or before the satisfaction of all revenue recognition requirements enumerated above, as well as cases in which we have invoiced the customer but cannot yet recognize the revenue for the same reasons discussed above.
Revenue for robot refurbishment relates to Adept-owned or customer-owned refurbished robots and components. We receive parts returned from customers under warranty contracts, or we purchase surplus used parts available from customers or suppliers. These parts traditionally have lower cost, and internal analysis indicates that on average, we pay a percentage of the new part cost to acquire these components. The standard cost for acquired parts is therefore set at such percentage of cost in compliance with U.S. generally accepted accounting principles, or GAAP, requiring valuation of inventory at “lower of cost or market”. By contrast, the cost basis starting point for customer-owned refurbished or repaired robots is zero since we do not own the robots. For all refurbishment and remanufacturing, we track all related costs and activities (materials and labor) required to bring the robots up to standard using work orders. This revenue stream is included within our Services and Support segment.
Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We assess the customer’s ability to pay based on a number of factors, including our past transaction history with the customer and creditworthiness of the customer. Management specifically analyzes accounts receivable and historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in our customer payment terms when evaluating the adequacy of the allowances for doubtful accounts. We perform ongoing credit evaluations of our customers and generally do not request collateral from our customers. However, we may require customers to make payments in advance of shipment or provide a letter of credit under certain circumstances. If

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the financial condition of our customers were to deteriorate in the future, resulting in an impairment of their ability to make payments, additional allowances may be required.
Our policy is to record specific allowances against known doubtful accounts. An additional allowance is also calculated based on 0.5% of consolidated accounts receivable. Specific allowances are netted out of the respective receivable balances for purposes of calculating this additional allowance. On an ongoing basis, we evaluate the creditworthiness of our customers and, should the default rate change or the financial positions of our customers change, we may increase this additional allowance percentage.
Inventories. Inventories are stated at the lower of standard cost or market value. We perform a detailed assessment of inventory at each balance sheet date, which includes, among other factors, a review of component demand requirements, product lifecycle and product development plans, and quality issues. As a result of this assessment, we write down inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of the inventory and the estimated liquidation value based upon assumptions about future demand and market conditions. If actual demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required.
Manufacturing inventory includes raw materials, work-in-process, and finished goods. The inventory valuation provisions are based on an excess and obsolete systems report, which captures all obsolete parts and products and all other inventory, which have quantities on hand in excess of one year’s projected demand. Individual line item exceptions are identified for either inclusion or exclusion from the inventory valuation provision. The materials control group and cost accounting function monitor the line item exceptions and make periodic adjustments as necessary.
Warranties. Our warranty policy is included in our Terms of Sale, generally as a two year parts and one year labor limited warranty on most hardware and component products, and states that there are no rights of return, and that a refund may be made at our discretion, and only if there is an identified fault in the product and the customer has complied with our approved maintenance schedules and procedures, and the product has not been subject to abuse. We provide for the estimated cost of product warranties at the time revenue is recognized. Factors that affect our warranty liability include the number of installed units, historical and anticipated rates of warranty claims, and costs per claim for repair or replacement. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our components suppliers, our warranty obligation is affected by product failure rates, material usage and service labor and delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage, service labor or delivery costs differ from our estimates, revisions to the estimated warranty liability would be required.

Capitalization of Software Development Costs. We capitalize certain software development costs. We begin capitalizing software development costs upon the establishment of technological feasibility, which is established upon the completion of a working model or a detailed program design. Costs incurred prior to technological feasibility are charged to expense as incurred. Capitalization ceases when the product is considered available for general release to customers. Capitalized software development costs are amortized to costs of revenues over the estimated economic lives of the software products based on product life expectancy. Generally, estimated economic lives of the software products do not exceed three years.
Accounting for Income Taxes. As part of the process of preparing our consolidated financial statements, we are required to compute income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax exposure, including assessing the risks associated with tax audits, and assessing temporary differences resulting from different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. Significant judgment is required in determining the valuation allowance recorded against our deferred tax assets. In assessing the valuation allowance, we consider all available evidence including past operating results and estimates of future taxable income. Our net deferred tax assets relate predominantly to our United States tax jurisdiction. We currently maintain a full valuation allowance on our net deferred tax assets. The valuation allowance was determined using an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable; such assessment is required on a jurisdiction by jurisdiction basis. Our U.S. loss, among other considerations, provides negative evidence and accordingly, a full valuation allowance was recorded against our net deferred tax assets. We intend to maintain a full valuation allowance on our net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance.
If our assumptions and consequently our estimates change in the future, the valuation allowances we have established may be increased or decreased, resulting in a respective increase or decrease in income tax expense.
We believe that our reserve for uncertain tax positions, including related interest, is adequate. The amounts ultimately paid upon resolution of audits could be materially different from the amounts previously included in our income tax expense and

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therefore could have a material impact on our tax provision, net income and cash flows.
In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to record additional income tax expense or establish an additional valuation allowance, which could materially impact our financial position and results of operations.
Foreign Currency Accounting. Each of our non-U.S. subsidiaries uses its respective local currency as the functional currency. Our foreign subsidiaries’ balance sheet accounts are translated at current period ending exchange rates and statements of operations accounts are translated at the average rate for the period. Translation gains and losses are recorded as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity.
Realized and unrealized gains and losses from transactions, including intercompany balances not considered to be a permanent investment, denominated in currencies other than an entity’s functional currency are included in other income (expense), net in the accompanying consolidated statements of operations.
We do not currently apply a hedging strategy against our currency positions.

Goodwill and Purchased Intangible Assets. Goodwill is recorded when the consideration paid for an acquisition exceeds the fair value of net tangible and intangible assets acquired. Acquisition-related intangible assets with finite lives are amortized on a straight-line basis over their economic lives.
Goodwill is measured and tested for impairment on an annual basis as of June 30, or more frequently if we believe indicators of impairment exist. Triggering events for impairment reviews may be indicators such as adverse industry or economic trends, restructuring actions, lower projections of profitability, or a sustained decline in our market capitalization. The performance of the test involves a two-step process. The first step requires comparing the fair value of each of our reporting units to its net book value, including goodwill. We have defined our reporting units at the business unit level, one level below our reportable segments. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and forecasted operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable. Actual future results may differ from those estimates. Future competitive, market and economic conditions could negatively impact key assumptions including our market capitalization or the carrying value of our net assets which could require us to realize an impairment of our goodwill and intangible assets.
A potential impairment exists if the fair value of the reporting unit is lower than its net book value. The second step of the process is only performed if a potential impairment exists, and it involves determining the difference between the fair value of the reporting unit’s net assets other than goodwill to the fair value of the reporting unit and if the difference is less than the net book value of goodwill, an impairment exists and is recorded.
We review the carrying values of long-lived assets whenever events or changes in circumstances, such as significant decreases in the market price, reductions in demand, lower projections of profitability, significant changes in the manner of the Company’s use of acquired assets, or significant negative industry or economic trends, indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. If this review indicates the carrying value of the asset exceeds the fair value and the carrying amount of the asset is not recoverable, an impairment loss is recognized by writing down the impaired asset to its fair value, which is typically calculated using: (i) quoted market prices and/or (ii) discounted expected future cash flows utilizing a discount rate.
Valuation of Stock-Based Awards. Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period of the individual equity instrument. Determining the fair value of stock-based awards at the grant date requires judgment, including estimating the expected term of stock options, the expected volatility of our stock, and expected dividends. The computation of the expected volatility assumption used in the Black-Scholes calculation for option grants is based on historical volatility as options on our stock are not traded. When establishing the expected life assumption, we review annual historical employee exercise behavior of option grants with similar vesting periods. In addition, judgment is also required in estimating the amount of stock-based awards that are expected to be forfeited. If actual forfeitures differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially affected.
Commitments and Contingencies. We evaluate potential commitments and contingencies based on their anticipated outcome. If we determine, after consideration of all known facts and consultation with legal counsel, that a loss related to the potential matter is neither probable or cannot be reasonably estimated as of the date of issuance of our fiscal period-end reports, we do not accrue for the potential liability. If a loss is reasonably possible related to the matter, we will disclose the relevant facts of

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the matter along with an estimated loss amount or range if such amount or range can be reasonably estimated.

New Accounting Pronouncements
See Note 1 to the Consolidated Financial Statements for a description of certain other recent accounting pronouncements including the expected dates of adoption and effects on our results of operations and financial condition.

ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to Adept as a smaller reporting company.
 
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements and a Financial Statement Schedule as of June 30, 2012 and 2011 and for each of the years in the two year period ended June 30, 2012 are included in Items 15(a)(1) and (2) included in this Annual Report on Form 10-K.
No Supplementary Financial Information is required in this Annual Report on Form 10-K as such data is not required of Adept as a smaller reporting company.
 
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
 
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the fiscal year ended June 30, 2012, Adept carried out an evaluation, under the supervision and with the participation of members of our management, including our Chief Executive Officer (or CEO) and our Chief Financial Officer (or CFO), of the effectiveness of the design and operation of Adept’s disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act. Our CEO and our CFO have concluded, based on their evaluation that as of June 30, 2012, Adept’s disclosure controls and procedures were effective at the end of the fiscal year to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit with the SEC under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Adept’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act). Internal control over financial reporting is a process, including policies and procedures, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Our management assessed our internal control over financial reporting based on the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of this assessment using such criteria, our management concluded that our internal control over financial reporting was effective as of June 30, 2012.
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met under all potential conditions, regardless of how remote, and may not prevent or detect all errors and all fraud. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Adept have been prevented or detected. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Auditor’s Report on Internal Control over Financial Reporting

34


This annual report does not include an attestation report of Adept’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to a permanent exemption for non-accelerated filers from the internal control audit requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.
Changes in Internal Controls over Financial Reporting
In connection with our continued monitoring and maintenance of our controls procedures which began as part of the implementation of section 404 of the Sarbanes-Oxley Act, we continue to review, test and improve the effectiveness of our internal controls. During fiscal year 2012 we evaluated and strengthened the systems and controls within our acquired InMoTx business in connection with the consolidation of InMoTx's operations into our Pleasanton, California facility, to ensure their procedures align with our general processes designed to ensure effectiveness of our internal controls. In addition, during fiscal year 2012, we continued to evaluate and strengthen MobileRobots systems and controls and make revisions accordingly to align MobileRobots procedures with our general processes designed to ensure effectiveness of our internal controls. There have been no other changes during or since the end of fiscal year 2012 in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 

35


ITEM 9B.
Other Information

Fiscal 2012 and 2013 Performance Plans
On September 20, 2012, the Compensation Committee of the Board adopted the Fiscal 2013 Performance Plan pursuant to which 170,000 restricted shares may be granted under the 2005 Equity Incentive Plan following fiscal 2013 if certain performance criteria are met. The Company will measure performance using an adjusted EBITDA measurement similar to that used for prior performance plans but without making an adjustment to EBITDA for restructuring expense (if any). The Compensation Committee also granted 175,000 restricted shares to participants in the Fiscal 2012 Performance Plan on a discretionary basis as the plan's adjusted EBITDA target was not met but adjusted EBITDA excluding currency expense exceeded plan targets
Executive Officer Compensation
On September 20, 2012, the Compensation Committee of the Board approved fiscal 2013 salaries for its executive officers, including a 10% salary reduction from fiscal 2012 salary levels to lower the operating expenses of the Company to help offset the impact of the slowdown in orders seen in the first fiscal quarter of 2013.  This reduction will be evaluated by the Compensation Committee during fiscal 2013 on the basis of the Company's revenue and expenses later in fiscal 2013.


PART III

ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to executive officers of the Company is set forth below. Certain information required by this item is incorporated by reference from our proxy statement related to the 2012 Annual Meeting of Stockholders, referred to as the Proxy Statement.
Adept has adopted a code of ethics, our Code of Business Conduct, that applies to all directors, officers and employees. Our Code of Business Conduct is available on our website, www.adept.com, under the “Investor Relations” heading of our website.
EXECUTIVE OFFICERS OF THE REGISTRANT
 
Name
 
Age
 
Position
John Dulchinos
 
50

 
Chief Executive Officer, President and Assistant Secretary
Lisa M. Cummins
 
42

 
Senior Vice President of Finance and Chief Financial Officer, Secretary
John Boutsikaris
 
64

 
Senior Vice President of Global Sales and Marketing
Joachim Melis
 
47

 
Vice President, Business Development and Managing Director of Europe
John Dulchinos was appointed to serve as Chief Executive Officer and as a member of the Board of Directors in September 2008. From June 2007 to September 2008 he held the position of President and Chief Operating Officer. Prior to that he held various positions within Adept including Vice President of Global Sales and Marketing, Vice President of Robotics, Vice President of Worldwide Sales, Vice President of North American Sales, and Director of OEM Business. He joined Adept in October 1987 as a regional sales engineer. Mr. Dulchinos is an active member of the robotics and vision industries, currently serving on the board of directors of Visicon Technologies, a privately held medical device inspection company as well as the Robotics Industry Association. He also served on the Assembly Technology Expo advisory board from 2003 to 2005. Mr. Dulchinos holds both a Bachelor’s and a Master’s degree in mechanical engineering from Rensselaer Polytechnic Institute with a concentration in robotics.
Lisa M. Cummins joined Adept in May 2007 as Corporate Controller and was appointed Vice President and Chief Financial Officer in July 2007. From September 2005 until joining Adept, Ms. Cummins served as Assistant Corporate Controller with Pacer International, Inc., a publicly-traded logistics and intermodal freight transportation provider. From 2001 to 2005, Ms. Cummins held several positions, most recently as Manager of Financial Planning and Analysis, with APL Logistics, an independent unit of Neptune Orient Lines Limited, a global transportation and logistics company. Ms. Cummins is a Certified Public Accountant and has an MBA from St. Mary’s College in Moraga, California, and a Bachelor’s degree from the University of California at Santa Barbara, CA.
John Boutsikaris joined Adept Technology on October 31, 2011 as Senior Vice President of Global Sales and Marketing. He has over 30 years of experience with domestic/international sales, marketing and aftermarket services with a broad set of

36


companies from Fortune 50 to Micro Caps. His early career started with Hewlett Packard holding various sales and channel management positions including Vice President, Worldwide Channel Partners. His most recent experience was as a Senior Vice President at Key Technologies where he grew orders almost 100% in five years and managed global Sales, Marketing and Aftermarket Services. Mr. Boutsikaris holds a bachelor's of science from the University of California, Fullerton.
Joachim Melis was appointed Vice President, Business Development and General Manager of Adept Europe in August 2010. Prior to this appointment, Mr. Melis served as Vice President, Worldwide Sales since June 2007 and as Vice President, Europe from August 2004 until June 2007. He joined Adept in October 1990 as an Applications Engineer in our German office and served in several roles, including Applications Supervisor, Manager of European Customer Service, Managing Director of the RDA Services Division and Managing Director for Sales and Service in Germany and France. Mr. Melis holds a degree in Electronics from the University of Dortmund, Germany.

ITEM 11.
EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from our Proxy Statement.

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference from our Proxy Statement.
 
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference from our Proxy Statement.
 
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference from our Proxy Statement.


37


PART IV

ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)(1) Financial Statements
The financial statements (including the Notes thereto set forth in Item 8 of Part II of this Form 10-K) are filed as part of this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedules
The following financial statement schedule is included herein:
Schedule II—Valuation and Qualifying Accounts. Additional schedules are not required under the related schedule instructions or are inapplicable, and therefore have been omitted.
(a)(3) Exhibits
 
 2.1  
Agreement and Plan of Merger dated November 4, 2005 between Adept Technology, Inc., a Delaware corporation ( the “Registrant”, “Adept” or “Adept-Delaware”) and Adept Technology, Inc., a California corporation (“Adept-California”) (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 8, 2005).
 
 
 2.2+
Share Purchase Agreement effective January 1, 2008, by and among Adept, Adept Technology France and the shareholders of Cerebellum Automation (incorporated by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q for the 2008 second fiscal quarter ended December 29, 2007, filed with the Securities and Exchange Commission on February 11, 2008).
 
 
 2.3+
Amendment dated January 18, 2008 to the Share Purchase Agreement effective January 1, 2008, by and among Adept, Adept Technology France and the shareholders of Cerebellum Automation (incorporated by reference to Exhibit 2.2 to the Registrant’s Quarterly Report on Form 10-Q for the 2008 second fiscal quarter ended December 29, 2007, filed with the Securities and Exchange Commission on February 11, 2008).
 
 
 2.4+
Agreement and Plan of Merger among Adept Technology, Inc., Tiger Merger Sub Inc., MobileRobots Inc., and Jeanne A. Dietsch, as Stockholder Agent, dated as of June 13, 2010 (incorporated by reference to Exhibit 2.4 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 17, 2010).
 
 
 2.5+
Agreement and Plan of Merger among Adept Technology, Inc. and InMoTx, Inc., Fast Food Acquisition Inc., and Robert Spears, as Stockholder Agent, dated as of January 4, 2011 (incorporated by reference to Exhibit 2.5 to the Registrant’s Quarterly Report on Form 10-Q for the 2011 second fiscal quarter ended December 25, 2010 filed with the Securities and Exchange Commission on February 7, 2011).
 
 
 3.1  
Certificate of Incorporation of Adept-Delaware (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K12G3 filed with the Securities and Exchange Commission on November 10, 2005).
 
 
 3.2  
Certificate of Amendment of Certificate of Incorporation of Adept-Delaware (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K12G3 filed with the Securities and Exchange Commission on November 10, 2005).
 
 
 3.3
Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock.
 
 
 3.4
Amended and Restated Bylaws of Adept-Delaware, as amended.

38


 
 
 4.1  
Specimen of Common Stock Certificate of Adept-Delaware (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K12G3 filed with the Securities and Exchange Commission on November 10, 2005).
 
 
 4.2   
Specimen of Preferred Stock Certificate of Adept Delaware.
 
 
 4.3   
Form of Registration Rights Agreement, dated as of November 18, 2003 by and among the Registrant and the investors party thereto (incorporated by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form S-2 (No. 333-112360) filed on January 30, 2004).
 
 
 4.4  
Form of Registration Rights Agreement, dated as of November 18, 2003 by and among the Registrant and the investors party thereto (incorporated by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form S-2 (No. 333-112360) filed on January 30, 2004).
 
 
 4.5
Registration Rights Agreement, dated as of September 5, 2012 by and among Adept Technology, Inc. and Hale Capital Partners, LP.
 
 
 4.6
Side Letter Agreement, dated as of September 5, 2012 by and among Adept Technology, Inc. and Hale Capital Partners, LP.
 
 
10.1* 
1993 Stock Plan as amended, and form of Option Agreement thereto (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-8 (No. 333-50296) filed with the Securities and Exchange Commission on November 20, 2000).
 
 
10.2* 
1998 Employee Stock Purchase Plan as amended, and form of Agreements thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the fiscal 2003 first quarter ended September 68, 2002, filed with the Securities and Exchange Commission on November 12, 2002).
 
 
10.3* 
1995 Director Option Plan as amended, and form of Option Agreement thereto (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-K for the 1997 fiscal year ended June 30, 1997, filed with the Securities and Exchange Commission on September 66, 1997).
 
 
10.4
Form of Indemnification Agreement between Adept-California and its officers and directors (incorporated by reference to Exhibit 10.5 to the Registrant’s Registration Statement on Form S-1 (No. 33-98816.))
 
 
10.5
Form of Indemnification Agreement between Adept-Delaware and its officers and directors (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K12G3 filed with the Securities and Exchange Commission on November 10, 2005).
 
 
10.6* 
2003 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal 2006 third quarter ended April 1, 2006, filed with the Securities and Exchange Commission on May 16, 2006).
 
 
10.7* 
Form of Option Agreements under the 2003 Stock Option Plan (incorporated by reference to Exhibits 10.2 and 10.3 to the Registrant’s Registration Statement on Form S-8 (Registration No. 333-112148) filed with the Securities and Exchange Commission on January 19, 2005).
 
 
10.8
Removed and Reserved.
 
 
10.9
Removed and Reserved.
 
 
10.10* 
2001 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal 2006 third quarter ended March 31, 2006, filed with the Securities and Exchange Commission on May 16, 2006).
 
 
10.11*  
Form of Option Agreement under 2001 Stock Option Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 15, 2005).
 
 
10.12
Removed and Reserved.
 
 
10.13
Removed and Reserved.

39


 
 
10.14
Purchase Agreement, dated as of November 14, 2003 by and among the Registrant and the investors named therein (incorporated by reference to Exhibit 10.28 and 10.29 to the Registrant’s Registration Statement on Form S-2 (No. 333-112360) filed with the Securities and Exchange Commission on January 30, 2004).
 
 
10.16*
Amended and Restated 2004 Director Option Plan (incorporated by reference to Appendix A to Adept Technology, Inc. Proxy Statement on Schedule 14A for the 2006 Annual Meeting of Stockholders filed with the Securities and Exchange Commission on October 20, 2006).
 
 
10.17*
Form of Director Option Agreement for Initial Grant under the 2004 Director Option Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 2, 2006).
 
 
10.18*
Form of Director Option Agreement for Annual Grant under the 2004 Director Option Plan (incorporated by reference to Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2006, filed with the Securities and Exchange Commission on May 16, 2006).
 
 
10.19
Removed and Reserved.
 
 
10.20*
2005 Equity Incentive Plan, as amended (incorporated by reference to Appendix A the Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on September 24, 2009).
 
 
10.21*
Form of Restricted Stock and Option Agreements to 2005 Equity Incentive Plan (incorporated by reference to Exhibits 10.4, 10.5 and 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the 2006 fiscal third quarter ended March 31, 2006, filed with the Securities and Exchange Commission on May 16, 2006).
 
 
10.22
Letter of Understanding dated as of December 9, 2005 between Adept Technology, Inc. and Parker Hannifin Corporation (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the 2011 fiscal quarter ended September 25, 2010, filed with the Securities and Exchange Commission on November 9, 2010).
 
 
10.23*
Form of Change of Control Agreement between Adept Technology, Inc. and each of Mr. Dulchinos, Ms. Cummins and Mr. Boutsikaris (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 25, 2008).
 
 
10.24*
Summary of Non-employee Director Compensation (incorporated by reference to Item 1.01 of Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 8, 2010).
 
 
10.25*
Summary of Executive Officer Compensation (as of September 20, 2012).
 
 
10.26*
Fiscal 2012 Performance Plan - established under the Adept Technology, Inc. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 16, 2011).

 
 
10.27*
Fiscal 2012 Cash Incentive Plan.(incorporated by reference to Exhibit 10.27 to the Registrant's Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 6, 2011).

 
 
10.28*
Removed and Reserved.
 
 
10.29**
License Agreement between Registrant and Fundacion Fatronik dated December 21, 2006. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2008 filed with the Securities and Exchange Commission on May 13, 2008).
 
 
10.30**
Addendum dated March 30, 2010 to License Agreement dated December 21, 2006 between Adept Technology and Fundacion Fatronik (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 27, 2010 filed with the Securities and Exchange Commission on May 6, 2010).
10.31
Addendum dated April 25, 2012 to License Agreement dated December 21, 2006 between Adept Technology and Fundacion Fatronik.

40


 
 
10.32*
Offer Letter Agreement between Adept Technology and Lisa M. Cummins (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 19, 2007).
 
 
10.33
Settlement Agreement by and among Adept Technology, Inc. and the purchasers named therein affiliated with Crosslink Capital Partners, dated as of May 13, 2007 (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on 8K/A filed with the Securities and Exchange Commission on May 16, 2007).
 
 
10.34
Removed and Reserved.
 
 
10.35
Removed and Reserved.
 
 
10.36
Removed and Reserved.
 
 
10.37*
Fiscal 2009 Executive and Senior Management Payment Plan (incorporated by reference to Exhibit 10.49 to the Registrant’s Form 10-K for the 2008 fiscal year ended June 30, 2008, filed with the Securities and Exchange Commission on September 11, 2008).
 
 
10.38*  
Letter agreement re Employment terms between John Dulchinos and Adept Technology dated September 6, 2008 (incorporated by reference to Exhibit 10.50 to the Registrant’s Form 10-K for the 2008 fiscal year ended June 30, 2008, filed with the Securities and Exchange Commission on September 11, 2008).
 
 
10.39*  
Letter agreement re Employment terms between Robert Bucher and Adept Technology dated September 6, 2008 (incorporated by reference to Exhibit 10.51 to the Registrant’s Form 10-K for the 2008 fiscal year ended June 30, 2008, filed with the Securities and Exchange Commission on September 11, 2008).
 
 
10.40*  
Amended and Restated 2008 Employee Stock Purchase Plan. (incorporated by reference to Exhibit 10.40 to Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2009 filed with the Securities and Exchange Commission on September 18, 2009.)
 
 
10.41*  
Fiscal 2010 Cash Incentive Program for Vice President, Worldwide Sales (incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the 2010 fiscal first quarter ended September 66, 2009, filed with the Securities and Exchange Commission on November 9, 2009).
 
 
10.42*  
Fiscal 2010 Performance Program established under the Adept Technology, Inc. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q for the 2010 fiscal quarter ended September 26, 2009, filed with the Securities and Exchange Commission on November 9, 2009).
 
 
10.43*  
Removed and Reserved.
 
 
10.44*  
Fiscal 2011 Performance Plan - established under the Adept Technology, Inc. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.43 to Registrant’s Annual Report on Form 10-K for the 2010 fiscal year, filed with the Securities and Exchange Commission on September 17, 2010).
 
 
10.45*  
Form of Restricted Stock Unit Agreement pursuant to the 2005 Equity Incentive Plan for Fiscal 2011 Performance Plan (incorporated by reference to Exhibit 10.44 to Registrant’s Annual Report on Form 10-K for the 2010 fiscal year, filed with the Securities and Exchange Commission on September 17, 2010).
 
 
10.46*  
Form of Option Agreement for Consultants (incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q for the 2008 fiscal first quarter ended September 29, 2007, filed with the Securities and Exchange Commission on November 13, 2007).

41


 
 
10.47
Lease Termination Agreement dated as of December 16, 2007 by and between Tri-Valley Technology Campus LLC and Adept Technology, Inc. (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2008 filed with the Securities and Exchange Commission on May 13, 2008).
 
 
10.48
Settlement Agreement and Release made and entered into by and between Adept Technology, Inc. and Tri-Valley Technology Campus, LLC. (incorporated by reference to Exhibit 10.6 to Registrant’s Quarterly Report on Form 10-Q for the 2009 fiscal first quarter ended September 67, 2008, filed with the Securities and Exchange Commission on November 12, 2008).
 
 
10.49
Lease Agreement effective October 10, 2008 between Registrant and Park Lake Apartments, L.P. for premises located on Inglewood Drive in Pleasanton, California. (incorporated by reference to Exhibit 10.7 to Registrant’s Quarterly Report on Form 10-Q for the 2009 fiscal first quarter ended September 67, 2008, filed with the Securities and Exchange Commission on November 12, 2008).
 
 
10.50
Amendment dated November 14, 2008 to Lease Agreement effective October 10, 2008 between Registrant and Park Lake Apartments, L.P. for premises located on Inglewood Drive in Pleasanton, California (incorporated by reference to Exhibit 10.6 to Registrant’s Quarterly Report on Form 10-Q for the 2009 fiscal second quarter ended December 27, 2008, filed with the Securities and Exchange Commission on February 10, 2009).
 
 
10.51
Amendment dated November 14, 2008 to Lease Agreement effective October 10, 2008 between Registrant and W Group Holding III LLC and RASAP Franklin, LLC for premises located on Gibraltar Drive in Pleasanton, California (incorporated by reference to Exhibit 10.7 to Registrant’s Quarterly Report on Form 10-Q for the 2009 fiscal second quarter ended December 27, 2008, filed with the Securities and Exchange Commission on February 10, 2009).
 
 
10.52**
Professional Services Agreement by and between OneNeck IT Services Corporation and Adept Technology, Inc. dated November 11, 2008 (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the 2009 fiscal second quarter ended December 27, 2008, filed with the Securities and Exchange Commission on February 10, 2009).
 
 
10.53**
Outsourcing Services Agreement entered into on November 19, 2008 between OneNeck IT Services Corporation and Adept Technology, Inc., with an effective date of December 15, 2008 (incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the 2009 fiscal second quarter ended December 27, 2008, filed with the Securities and Exchange Commission on February 10, 2009).
 
 
10.54
Fiscal 2013 Performance Plan - established under Adept Technology. 2005 Equity Incentive Plan
 
 
10.55*  
Amendment dated February 4, 2009 to Letter Agreement re Employment terms between John Dulchinos and Adept Technology dated September 6, 2008 (incorporated by reference to Exhibit 10.50 to Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 11, 2008).
 
 
10.56*  
Form of Restricted Stock Agreement for April 2009 restricted stock grants pursuant to the 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the 2009 fiscal third quarter ended March 28, 2009, filed with the Securities and Exchange Commission on May 12, 2009).
 
 
10.57*  
Form of Restricted Stock Agreement pursuant to the 2005 Equity Incentive Plan for Fiscal 2012 Performance Plan (incorporated by reference to Exhibit 10.56 to Registrant’s Annual Report on Form 10-K for the 2011 fiscal year, filed with the Securities and Exchange Commission on September 6, 2011).
 
 
10.58
Loan and Security Agreement, dated as of May 1, 2009, by and between the Registrant and Silicon Valley Bank (incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q for the 2009 fiscal third quarter ended March 28, 2009, filed with the Securities and Exchange Commission on May 12, 2009).

42


 
 
10.59
Unconditional Guaranty and Security Agreement, dated as of May 1, 2009, by and among Adept Technology International, Ltd., Adept Technology Holdings, Inc., Adept Technology Canada Holding Co., and Adept Technology Canada Co. in favor of Silicon Valley Bank (incorporated by reference to Exhibit 10.5 to Registrant’s Quarterly Report on Form 10-Q for the 2009 fiscal third quarter ended March 28, 2009, filed with the Securities and Exchange Commission on May 12, 2009).
 
 
10.60
Pledge Agreement, dated as of May 1, 2009, by and between the Registrant and Silicon Valley Bank (incorporated by reference to Exhibit 10.6 to Registrant’s Quarterly Report on Form 10-Q for the 2009 fiscal third quarter ended March 28, 2009, filed with the Securities and Exchange Commission on May 12, 2009).
 
 
10.61
Intellectual Property Security Agreement, dated as of May 1, 2009, by and between the Registrant and Silicon Valley Bank (incorporated by reference to Exhibit 10.7 to Registrant’s Quarterly Report on Form 10-Q for the 2009 fiscal third quarter ended March 28, 2009, filed with the Securities and Exchange Commission on May 12, 2009).
 
 
10.62
Amendment No. 1 to Loan and Security Agreement dated June 15, 2010, by and between the Registrant and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 17, 2010).
 
 
10.63*
Amended and Restated 2004 Director Option Plan, as amended (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the 2011 second fiscal quarter ended December 25, 2010 filed with the Securities and Exchange Commission on February 7, 2011).
 
 
10.64*
Form of Director Option Agreement for Initial Grant under the 2004 Director Option Plan, as amended (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the 2011 second fiscal quarter ended December 25, 2010 filed with the Securities and Exchange Commission on February 7, 2011).
 
 
10.65*
Form of Director Option Agreement for Annual Grant under the 2004 Director Option Plan, as amended (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the 2011 second fiscal quarter ended December 25, 2010 filed with the Securities and Exchange Commission on February 7, 2011).
 
 
10.66*
Separation Agreement and Release of All Claims between David Pap Rocki and Adept Technology, Inc. dated February 4, 2011 (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the 2011 second fiscal quarter ended December 25, 2010 filed with the Securities and Exchange Commission on February 7, 2011).
 
 
10.67
Amendment No. 2 to Loan and Security Agreement dated as of December 30, 2010, by and between the Registrant and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2011).
 
 
10.68
Amendment No. 3 dated as of March 25, 2011 to Loan and Security Agreement dated as of December 30, 2010, by and between the Registrant and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 30, 2011).
 
 
10.69
Loan and Security Agreement (EX-IM Loan Facility), dated as of March 25, 2011 (incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 30, 2011).
 
 
10.70
Borrower Agreement, dated as of March 25, 2011, by and between the Registrant and Silicon Valley Bank (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the 2011 third fiscal quarter ended March 26, 2011 filed with the Securities and Exchange Commission on May 10, 2011).
 
 
10.71
Unconditional Guaranty and Security Agreement, dated as of May 1, 2009, by and among Adept Technology International, Ltd., Adept Technology Holdings, Inc., Adept Technology Canada Holding Co., and Adept Technology Canada Co., and Adept MobileRobots LLC and Adept InMoTx, Inc. (joined by assumption), in favor of Silicon Valley Bank (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the 2011 third fiscal quarter ended March 26, 2011 filed with the Securities and Exchange Commission on May 10, 2011).

43



 
 
 10.72
Pledge Agreement, dated as of May 1, 2009, by and between the Registrant and Silicon Valley Bank (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the 2011 third fiscal quarter ended March 26, 2011 filed with the Securities and Exchange Commission on May 10, 2011).
 
 
 10.73
Intellectual Property Security Agreement, dated as of May 1, 2009, by and between the Registrant and Silicon Valley Bank (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2011 filed with the Securities and Exchange Commission on February 7, 2012).
 
 
 10.74
Amendment No. 4 to Loan and Security Agreement. dated as of February 6, 2012, by and between the Registrant and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on February 7, 2012).
 
 
 10.75
Amendment No. 1 to Loan and Security Agreement (EX-IM Loan Facility), dated as of February 6, 2012 (incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on February 7, 2012).
 
 
 10.76*
Form of Director Option Agreement for Initial and Annual Grant under the 2005 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2011).
 
 
 10.77*
Offer letter agreement between John Boutsikaris and Adept Technology, Inc. dated October 14, 2011 (incorporated by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2011).
 
 
 10.78
Underwriting Agreement between Adept Technology, Inc. and Roth Capital Partners, LLC dated June 8, 2012 (incorporated by reference to Exhibit 1.1 to Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 8, 2012.

 
 
 10.79
Securities Purchase Agreement (the “Purchase Agreement”) with affiliates of Hale Capital Partners, LP dated as September 5, 2012
.
 
 10.80
Amendment No. 5 and Consent to Loan and Security Agreement, dated as of September 5, 2012, by and between the Registrant and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 18, 2012).
 
 
 10.81
Amendment No. 6 to Loan and Security Agreement, dated as of September 11, 2012 by and between the Registrant and Silicon Valley Bank (incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 18, 2012).
 
 
 14.1
Code of Business Conduct, as amended (incorporated by reference to Exhibit 14.1 to the Registrant’s Form 10-K for the 2010 fiscal year ended June 30, 2010, filed with the Securities and Exchange Commission on September 17, 2010).
 
 
 21.1
Subsidiaries of the Registrant.
 
 
 23.1
Consent of Independent Registered Public Accounting Firm, Armanino McKenna LLP.
 
 
 24.1
Power of Attorney (See Signature Page to this Form 10-K).
 
 
 31.1
Certification by the Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 31.2
Certification by the Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 32.1
Certification by the Chief Executive Officer and the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
101.1-
The following financial information from the Company's quarterly report on Form 10-K for the period ended June 30, 2012, is formatted in XBRL interactive data files: (i) Consolidated Balance Sheets as of June 30, 2012, and 2011; (ii) Consolidated Statements of Operations for the Twelve Months Ended June 30, 2012 and 2011; (iii) Consolidated Statements of Stockholders Equity for the Twelve Months Ended June 30, 2012 and 2011; (iv) Consolidated Statements of Cash Flows for the Twelve Months Ended June 30 2012 and 2011; and (v) Notes to Consolidated Financial Statements.
 
 
 

44


*
Management contract or compensatory plan or arrangement.
**
Confidential treatment has been requested as to certain portions of this exhibit. An unredacted version of this exhibit has been filed separately with the Securities and Exchange Commission.
+
Schedules to this exhibit have not been filed herewith or with the filing incorporated by reference herein, but will be furnished supplementally to the Securities and Exchange Commission upon request.
-
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections
(b)    Exhibits.
See Item 15(a)(3) above.
(c)    Financial Statement Schedules.
See Item 15(a)(2) above.

45


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
ADEPT TECHNOLOGY, INC.
 
 
 
 
Date:
September 24, 2012
By:
/s/    LISA M. CUMMINS        
 
 
 
Lisa M. Cummins
Senior Vice President, Finance and
Chief Financial Officer
 
 
 
 
Date:
September 24, 2012
By:
/s/    JOHN DULCHINOS        
 
 
 
John Dulchinos
President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John Dulchinos and Lisa M. Cummins and each of them, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, or any of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature
  
Title
 
Date
 
 
 
 
 
/S/    JOHN DULCHINOS        
  
President and Chief Executive Officer (Principal Executive Officer); Director
 
September 24, 2012
(John Dulchinos)
 
 
 
 
 
 
 
 
 
/S/    LISA M. CUMMINS        
  
Senior Vice President, Finance and Chief Financial Officer (Principal Financial and Principal Accounting Officer)
 
September 24, 2012
(Lisa M. Cummins)
 
 
 
 
 
 
 
 
 
/S/    MICHAEL P. KELLY        
  
Chairman of the Board
 
September 24, 2012
(Michael P. Kelly)
 
 
 
 
 
 
 
 
 
/S/    A. RICHARD JUELIS        
  
Director
 
September 24, 2012
(A. Richard Juelis)
 
 
 
 
 
 
 
 
 
/S/    HERBERT J. MARTIN        
  
Director
 
September 24, 2012
(Herbert J. Martin)
 
 
 
 
 
 
 
 
 
/S/    ROBERT J. RICHARDSON        
  
Director
 
September 24, 2012
(Robert J. Richardson)
 
 
 
 
 
 
 
 
 
/S/    BENJAMIN A. BURDITT
 
Director
 
September 24, 2012
(Benjamin A. Burditt)
  
 
 
 
 
 
 
 
 
/S/    Martin Hale, Jr.
 
Director
 
September 24, 2012
Martin Hale, Jr.
 
 
 
 


46


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ADEPT TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 

47


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Stockholders
Adept Technology, Inc.
Pleasanton, California

We have audited the accompanying consolidated balance sheets of Adept Technology, Inc. Adept Technology as of June 30, 2012 and June 30, 2011, and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity and cash flows for each of the fiscal years in the two-year period ended June 30, 2012. Our audits also included the financial statement schedule for each of the fiscal years in the two-year period ended June 30, 2012 listed in the Index at Item 15(a)(2). The Company's management is responsible for these consolidated financial statements and schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of the Company's internal control over financial reporting. Our audits included consideration over internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Adept Technology, Inc. as of June 30, 2012 and 2011, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2012 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule for each of the years in the two-year period ended June 30, 2012, when considered in relation to the consolidated financial statements as a whole, presents fairly in all material respects the information set forth therein.

/s/ Armanino McKenna LLP


ARMANINO McKENNA LLP
San Ramon, California
September 24, 2012

48


ADEPT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
 
June 30,
2012
 
June 30,
2011
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
8,722

 
$
8,627

Accounts receivable, less allowance for doubtful accounts of $629 and $698 in fiscal 2012 and 2011, respectively
11,905

 
10,883

Inventories
7,954

 
9,547

Other current assets
514

 
416

Total current assets
29,095

 
29,473

Property and equipment at cost
14,241

 
13,358

Accumulated depreciation and amortization
(11,949
)
 
(11,589
)
Property and equipment, net
2,292

 
1,769

Goodwill
2,967

 
2,967

Other intangible assets, net
1,686

 
2,152

Other assets
121

 
774

Total assets
$
36,161

 
$
37,135

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
6,183

 
$
8,165

Line of credit
5,500

 

Accrued payroll and related expenses
2,006

 
2,214

Accrued warranty expenses
1,243

 
1,116

Deferred revenue
280

 
132

Accrued income tax, current
80

 
78

Other accrued liabilities
1,680

 
947

Total current liabilities
16,972

 
12,652

Long-term liabilities:
 
 
 
Line of credit, long-term

 
3,900

Deferred income tax, long-term
399

 
1,364

Long-term obligations
446

 
397

Total liabilities
17,817

 
18,313

Commitments and contingencies (See Note 7)

 

Stockholders’ equity:
 
 
 
Preferred stock, $0.001 par value: 1,000 shares authorized, none issued and outstanding

 

Common stock, $0.001 par value: 19,000 shares authorized, 10,534 shares issued and 10,529 shares outstanding at June 30, 2012 and 9,750 shares issued and 9,745 shares outstanding at June 30, 2011
177,446

 
173,377

Treasury stock, at cost, 5 shares at June 30, 2012 and June 30, 2011
(42
)
 
(42
)
Accumulated deficit
(159,004
)
 
(155,281
)
Accumulated other comprehensive income (loss)
(56
)
 
768

Total stockholders’ equity
18,344

 
18,822

Total liabilities and stockholders’ equity
$
36,161

 
$
37,135

The accompanying notes are an integral part of these Consolidated Financial Statements.

49


ADEPT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
 
 
Years Ended June 30,
 
2012
 
2011
Revenues
$
66,219

 
$
57,505

Cost of revenues
38,219

 
32,604

Gross margin
28,000

 
24,901

Operating expenses:
 
 
 
Research, development and engineering
8,714

 
8,209

Selling, general and administrative
20,701

 
22,189

Restructuring charges, net
1,256

 
662

Amortization of other intangible assets
466

 
349

Total operating expenses
31,137

 
31,409

Operating loss
(3,137
)
 
(6,508
)
Foreign currency exchange loss
(732
)
 
(188
)
Interest income
20

 
9

Interest expense
(270
)
 
(133
)
Loss before benefit from income taxes
(4,119
)
 
(6,820
)
Benefit from income taxes
(396
)
 
(56
)
Net loss
$
(3,723
)
 
$
(6,764
)
Basic and diluted net loss per share
$
(0.40
)
 
$
(0.77
)
Number of shares used in computing basic and diluted per share amounts:
9,386

 
8,802

Comprehensive loss
 
 
 
Net loss
$
(3,723
)
 
$
(6,764
)
Foreign currency translation adjustment
(824
)
 
1,021

Total comprehensive loss
$
(4,547
)
 
$
(5,743
)





















 The accompanying notes are an integral part of these Consolidated Financial Statements.

50


ADEPT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
 
Common Stock
 
Treasury Stock
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
Balance at June 30, 2010
9,219

 
$
169,253

 
(5
)
 
$
(42
)
 
$
(148,517
)
 
$
(253
)
 
$
20,441

Common stock issued under employee stock incentive program and stock purchase plan
103

 
226

 

 

 

 

 
226

Restricted stock awards issued
160

 

 

 

 

 

 

Restricted stock awards surrendered to satisfy tax obligation
(32
)
 
(155
)
 

 

 

 

 
(155
)
Stock-based compensation classified as restructuring

 
498

 

 

 

 

 
498

Stock-based compensation

 
2,577

 

 

 

 

 
2,577

Common stock issued as part of InMoTx acquisition
200

 
978

 

 

 

 

 
978

Restricted stock issued under employee stock incentive program as part of InMoTx acquisition
100

 

 

 

 

 

 

Net loss

 

 

 

 
(6,764
)
 

 
(6,764
)
Foreign currency translation adjustment

 

 

 

 

 
1,021

 
1,021

Balance at June 30, 2011
9,750

 
173,377

 
(5
)
 
(42
)
 
(155,281
)
 
768

 
18,822

Common stock issued under employee stock incentive program and stock purchase plan
95

 
275

 

 

 

 

 
275

Restricted stock awards issued
5

 

 

 

 

 

 

Restricted stock forfeited
(81
)
 

 

 

 

 

 

Restricted stock awards surrendered to satisfy tax obligation
(36
)
 
(132
)
 

 

 

 

 
(132
)
Common stock issued under public offering
920

 
3,138

 

 

 

 

 
3,138

Indemnification shares received under InMoTx, Inc. merger agreement
(119
)
 
(508
)
 

 

 

 

 
(508
)
Stock-based compensation classified as restructuring

 
95

 

 

 

 

 
95

Stock-based compensation

 
1,201

 

 

 

 

 
1,201

Net loss

 

 

 

 
(3,723
)
 

 
(3,723
)
Foreign currency translation adjustment

 

 

 

 

 
(824
)
 
(824
)
Balance at June 30, 2012
10,534

 
$
177,446

 
(5
)
 
$
(42
)
 
$
(159,004
)
 
$
(56
)
 
$
18,344

The accompanying notes are an integral part of these Consolidated Financial Statements.

51



ADEPT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Years Ended
June 30,
 
 
2012
 
2011
Operating activities
 
 
 
Net loss
$
(3,723
)
 
$
(6,764
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation
893

 
1,063

Deferred taxes
(686
)
 
709

Gain on disposal of property and equipment
(100
)
 
(54
)
Stock-based compensation
1,296

 
3,075

Amortization of other intangible assets
466

 
349

Net changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(1,913
)
 
2,668

Inventories
455

 
1,196

Other assets
(97
)
 
423

Accounts payable
(1,909
)
 
(1,199
)
Other accrued liabilities and deferred revenue
1,411

 
(1,084
)
Accrued restructuring charges
(57
)
 
57

Other long-term liabilities
50

 
(283
)
Net cash provided by (used in) operating activities
(3,914
)
 
156

Investing activities
 
 
 
Purchase of property and equipment
(1,117
)
 
(872
)
Proceeds from sale of property and equipment
115

 
54

Payment for purchase of InMoTx, Inc., net of cash acquired

 
(1,462
)
Cash outlay for indemnification shares received under InMoTx, Inc. merger agreement
(508
)
 

Net cash used in investing activities
(1,510
)
 
(2,280
)
Financing activities
 
 
 
Borrowing from line of credit, net
1,600

 
2,900

Borrowings from long-term debt
83

 
11

Principal payments on capital leases
(44
)
 
(9
)
Principal payments on long-term obligations
(35
)
 
(56
)
Proceeds from employee stock incentive program and employee stock purchase plan
275

 
226

Proceeds from common stock issued under public offering
3,138

 

Payment for taxes for restricted stock awards surrendered to satisfy employee tax obligation
(132
)
 
(155
)
Net cash provided by financing activities
4,885

 
2,917

Effect of exchange rates on cash and cash equivalents
634

 
(784
)
Increase in cash and cash equivalents
95

 
9

Cash and cash equivalents, beginning of period
8,627

 
8,618

Cash and cash equivalents, end of period
$
8,722

 
$
8,627

Cash paid during the period for:
 
 
 
Interest
$
270

 
$
133

Income taxes
$
58

 
$
25


52


ADEPT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) - Continued
 
Years Ended
June 30,
 
 
2012
 
2011
Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Transfers from inventory to property and equipment
$
362

 
$
176

Returned shares received under InMoTx, Inc. merger agreement for indemnification for cash outlay for claims for matters arising prior to the Acquisition.
$
508

 
$

The Company purchased all of the capital stock of InMoTx, Inc. in 2011:
 
 
 
Fair value of assets acquired, net of cash acquired
$

 
$
484

Goodwill and intangible assets acquired

 
2,771

Liabilities assumed

 
(735
)
Common stock issued

 
(978
)
Fair value of contingent cash consideration payable

 
(80
)
Cash payment for purchase of InMoTx, Inc. in 2011, net of cash acquired
$

 
$
1,462

The accompanying notes are an integral part of these Consolidated Financial Statements.


53


ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.
Company and Summary of Significant Accounting Policies
Company    
Adept Technology, Inc. (“Adept” or the “Company”) was incorporated under the laws of the state of California on June 14, 1983 and reincorporated in Delaware in November 2005. Through sales to system integrators, original equipment manufacturer (“OEM”) partners and end-user companies, the Company provides specialized, cost-effective robotics systems and services to emerging automation markets including packaging, solar and medical; as well as to the disk drive/electronics market and traditional industrial markets, including machine tool automation and automotive electronics.
Basis of Presentation
The accompanying consolidated financial statements as of June 30, 2012 and 2011 and for each of the years in the two-year period ended June 30, 2012 include the accounts of Adept and its wholly owned subsidiaries. All significant intercompany transactions and balances are eliminated upon consolidation. Adept includes consolidated financial statements for two fiscal years in its Annual Report on Form 10-K as a smaller reporting company.
Unless otherwise indicated, references to any year in these Notes to Consolidated Financial Statements refer to Adept’s fiscal year ended June 30.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to prior-period balances to present the financial statements on a consistent basis with the current year presentation. Such reclassifications have not changed previously reported net income (loss) or stockholders’ equity.
Foreign Currency
Each of Adept’s non-U.S. subsidiaries uses its respective local currency as the functional currency. The Company’s foreign subsidiaries’ balance sheet accounts are translated at current period ending exchange rates and statements of operations accounts are translated at the average rate for the period. Translation gains and losses are recorded as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity.
Foreign currency transaction losses were $732,000 in fiscal 2012 and foreign currency transaction losses were $188,000 in fiscal 2011.
The foreign currency transaction losses recorded in fiscal 2012 were primarily generated from realized losses related to the payments of intercompany payables in U.S. Dollar by the European entities. As the Euro decreased against the U.S. dollar, more Euros were needed to purchase the U.S. Dollar to settle the payable. The foreign currency transaction losses recorded in fiscal year 2011 were primarily generated from realized losses from U.S. dollars used to pay accounts payable in Japanese Yen, as the Yen strengthened against the U.S. dollar during the period, and losses related to the payments of intercompany payables held in U.S. Dollar by the European entities. As the Euro, decreased against the dollar, more Euros were needed to purchase the U.S. Dollar to settle the payable.
As Adept conducts business on a global basis, the Company is exposed to adverse or beneficial movements in foreign currency exchange rates, which can vary considerably from period to period. The dollar/euro and the dollar/yen markets currently present the largest exchange rate risk for Adept.
Cash, Cash Equivalents and Short-Term Investments
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Short-term investments typically consist of marketable securities and money market investments with maturities between three and twelve months. Investments are classified as held-to-maturity, trading, or available-for-sale at the time of

54


purchase. At June 30, 2012 and June 30, 2011, the Company had no marketable securities and had $8.7 million and $8.6 million, respectively, in cash.
Realized gains or losses, interest, and dividends are included in interest income.
Fair Values
The carrying amounts for cash, accounts receivable, accounts payable, and line of credit approximate fair value due to the short-term nature of these instruments or the adjustable interest rate associated with debt. The only asset or liability required to be reflected at fair value at June 30, 2012 or 2011 was cash and cash equivalents.
Inventories
Inventories are stated at the lower of standard cost or market value. The components of inventories are as follows (in thousands):
 
 
June 30,
 
2012
 
2011
Raw materials
$
5,573

 
$
6,225