This report contains forward-looking statements. 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, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
• the economic environment affecting us and the markets we serve;

• the timing and impact of the Company's decisions to engage in restructuring actions and other expense-related matters;

• sources of revenues and anticipated revenues, including the contribution from new products and markets;

• our expectations regarding our cash flows and capital requirements and the impact of the timing of receipts and disbursements and requirements of our credit facility;

• our ability to successfully integrate and grow our new and acquired businesses;

• marketing and commercialization of our products under development and services;

• our ability to attract customers and the market acceptance of our products;

• our ability to establish relationships with suppliers, systems integrators and OEMs for the supply and distribution of our products;

• plans for future products and services and for enhancements of existing products and services; and

• plans for future acquisitions of products, technologies and businesses.

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 and are based on assumptions, which may or may not prove to be correct, and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these statements. We discuss many of these risks in greater detail in Item 1A - Risk Factors in our Annual Report on Form 10-K filed on September 24, 2012. Statements made in this report represent our estimates and assumptions only as of the date of this report.
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.
OVERVIEW 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. We also have autonomous mobile robot and fleet management capabilities that enhance our offerings for target markets. In addition, we provide a full complement of robotics services and support for our customers. Through sales to system 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.
Strategy
Our strategy focuses on specific industries where the use of automation 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 non-existent or extremely inflexible. The markets we have targeted are: mobile automation, packaging, clean-tech industries such as semiconductor, electronics, and medical. Currently, we are primarily focusing our current investments on our MobileRobots technology for mobile automation, as we believe this market hold significant near-term growth opportunities. We have invested significantly in our MobileRobots technology to take advantage of emerging opportunities for mobile automation applications across a number of vertical industries, including medical, logistics and light manufacturing. In February 2012, we launched the new Adept Courier, a small autonomous robotic vehicle that performs everyday tasks such as moving goods, materials, samples or parts around an office or production environment. Currently, as further discussed under the heading "Product Developments" below, we are launching a new, internally designed mobile robot platform, Lynx, initially targeted to clean-tech manufacturing markets. A fleet of robots, along with appropriate control software, is typically needed to effectively solve the common logistics problems found in mobile automation environments. We, therefore, believe our unique mobile robot technology has tremendous long-term potential across a wide range of environments. We further believe that over time, our mobile automation business will be characterized by larger average order sizes and better visibility than our traditional businesses.
The packaging market has continued to increase its use of automation even during the last few years of worldwide economic weakness, and our Quattro robot has been well received in this market. Although adoption of certain InMoTx technologies was not successful leading to our recording impairment of intangible assets and goodwill in connection with that acquired business, we believe our acquisition of InMoTx in January 2011 further strengthened our capabilities in the packaging market, as InMoTx has differentiated gripping technology for global food processing applications sold under our SoftPic brand. Another area that we believe holds long-term growth opportunity for Adept is the worldwide China robotics market. In June 2011, we opened a new sales and service office in Shanghai with the aim of capitalizing on the rapid development of industrial automation in China. This office allows us to be more visible and to provide better 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 and we believe significant long-term opportunity exists.
Acquisitions
InMoTx
On January 10, 2011, we acquired InMoTx, Inc. ("InMoTx"), a privately-held provider of robotic platform solutions and gripping technology for the global food processing market.

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 15 of the Notes to Consolidated Financial Statements for further information regarding the acquisition of InMoTx. MobileRobots
On June 25, 2010, we acquired MobileRobots Inc. ("MobileRobots"), a privately-held provider of autonomous robot and automated guided vehicle technologies.
The results of MobileRobots' operations have been included in our consolidated financial statements since June 25, 2010. See Note 15 of the Notes to Consolidated Financial Statements for further information regarding the acquisition of MobileRobots.
Trends in Our Business
During the second quarter of fiscal 2013, our revenues decreased 29% compared with the same period in the previous fiscal year, primarily as a result of cyclical and economic downturns broadly experienced our traditional markets which persisted throughout the first half of fiscal 2013.
Sales to disk drive customers in Asia were significantly impacted in the fiscal 2013 due to the industry's cyclical downturn, following approximately several quarters of capital investment. The disk drive industry commonly experiences cycles of capital investment and absorption, which are unpredictable in terms of timing and duration. Given this unpredictability, we currently expect our disk drives sales to experience only modest growth from their current lower levels during the remainder of fiscal 2013.
In our target packaging market, during the second quarter of fiscal 2013 quarter, we experienced a lengthening of sales cycles in Europe as businesses became more cautious due to the weak economic environment, and U.S. sales also were affected by delays in the timing of orders.
Europe was generally very weak in the 2013 second quarter due to political and economic uncertainty, and our sales decreased sharply across our traditional markets including automotive, appliance and consumer goods, with sales to the solar market also decreasing. These unfavorable trends, driven largely by economic and cyclical patterns, are unlikely to recover meaningfully in the fiscal 2013 third quarter and we therefore expect that our sales will continue to be under pressure until our markets regain the confidence needed for capital investment but also expect modest revenue improvement and stabilization in some of our target industries by fiscal year end.
Europe historically has accounted for more than half of our total annual sales and therefore economic weakness in Europe has a disproportionate impact on our overall performance. We are focused on diversifying our revenue base and increasing activity in other regions. Our mobile automation business currently is focused on the U.S. market where there is opportunity in both the commercial and research environments. We have continued to build our customer base in the research sector, which includes universities, labs and similar environments, and are making investments in our new mobile robot platform that initially will be aimed at commercial environments. We believe that there is significant long-term potential for Adept to address material handling applications in the medical, semiconductor, industrial and other markets with differentiated mobile automation technology and expertise.

Restructuring and Cost Reduction Actions Due to the decline in the Company's revenues in the first half of fiscal 2013 because of the weaker economic environment and reduced capital spending in the Company's markets, the Company has defined a comprehensive restructuring plan to more closely align the Company's spending levels with the Company's near-term revenue expectations. The restructuring included headcount reductions, streamlining operations to prioritize sales and marketing activities, reduce non-core engineering expense and eliminating duplicate functions and non-essential administrative services, and is expected to be completed within the remainder of fiscal 2013. The Company believes that such actions will allow the Company, by fiscal year end, to reduce normal yearly operating expenses for next fiscal year to a level reflecting approximately $6 million annualized savings as compared to fiscal 2012 and in order to permit breakeven at annual revenue of approximately $52 million.
While lowering the cost structure of our business overall to generate positive cash flow, we also continued to focus on our strategic priorities by focusing our growth initiatives of putting mobile robots products into the market as further described under the heading "Product Developments" below, to expand our packaging business by redirecting our efforts to a focus on offering robotic components through our integration channel partners versus sales to direct users who must integrate our products into a complete line of manufacturing and logistics products, and to revitalize our core robotics business.

Product Developments
During the first quarter of fiscal 2013, we introduced Adept ClamPAC™, a robotic packaging automation cell that gently packs hinged food packaging known as "clamshells" into cases at high speeds. The application is designed to reduce the total cost of ownership by delivering a standardized, fully-integrated solution that can be dropped into any production line. ClamPAC reduces integration complexity and deployment time for food processors while providing flexibility, dexterity and speed.
During the third quarter of fiscal 2012, we introduced the Adept Courier, a small autonomous vehicle that simplifies the everyday task of moving goods, materials, samples, or parts around an office or production environment. Using self-navigation software, the Adept Courier finds its own way to destinations, drives around obstacles in its path, and can be deployed in a matter of hours, thus reducing manual transport tasks, shortening turnaround time, and increasing operational efficiencies by re-applying expensive labor from moving goods to higher-value tasks.
During the second quarter of fiscal 2012, we introduced the Adept Viper™ s1700D, a high-performance 6-axis robot. Featuring new motors that are faster and more efficient, the Viper s1700D delivers higher speed motion and increased productivity. Like the previous Viper 1700 robot, the new s1700D offers a long reach and high payload capacity within a small footprint. Designed for applications that require fast and precise automation, the Viper s1700D is ideally suited for material handling, machine tending, packaging, cutting and assembly.
We recently launched our Lynx mobile robot and deployed the first Lynx robot to a semiconductor customer integrating our mobile robot with our vision guided robot arm technology to autonomously transport and automatically load components of the semiconductor foundry process in a fab environment.

Results of Operations This discussion summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and cash flows during the three and six month periods ended December 29, 2012 and December 31, 2011. Unless otherwise indicated, references to any quarter in this Management's Discussion and Analysis of Financial Condition and Results of Operations refer to our 2013 second fiscal quarter ended December 29, 2012. This discussion should be read with the unaudited condensed consolidated financial statements and related disclosures included in this Quarterly Report on Form 10-Q and in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2012, included in our Annual Report on Form 10-K as filed with the SEC on September 24, 2012.
Revenues. Summary information by segment for the three and six months ended December 29, 2012 and December 31, 2011 is shown below (in thousands, except %):

                                         Three Months Ended                            Six Months Ended
Revenue by Segment            December 29,       %        December 31,     December 29,       %        December 31,
(unaudited)                       2012         Change         2011             2012         Change         2011
Robotics
Revenues                     $      8,199       (36 )%   $     12,874     $     17,051       (35 )%   $     26,098
Percentage of total revenues           76 %                        85 %             77 %                        82 %
Services and Support
Revenues                            2,609        15  %          2,278            5,127       (10 )%          5,673
Percentage of total revenues           24 %                        15 %             23 %                        18 %
Total Revenues               $     10,808       (29 )%   $     15,152     $     22,178       (30 )%   $     31,771

For the three months ended December 29, 2012, revenues were $10.8 million, down 29% from revenues of $15.2 million for the three months ended December 31, 2011 as a result of lower sales in our Robotics segments, offset by the slight increase in our Services and Support segment sales. For the six months ended December 29, 2012, revenues were $22.2 million, down 30% from revenues of $31.8 million for the six months ended December 31, 2011 as a result of lower sales in both our Robotics and Services and Support segments.
Robotics segment revenues, which result from the sale of our intelligent robotics systems, vision-guidance technology and/or third party robot mechanisms, were $8.2 million for the three months ended December 29, 2012, a decrease of 36% from $12.9 million for the three months ended December 31, 2011. Robotics segment revenues were $17.1 million for the six months ended December 29, 2012 a decrease of 35% from $26.1 million for the six months ended December 31, 2011. The decreases were primarily due to a cyclical downturn in the disk drive market, a weaker economy in Europe that affected sales across most of our markets, decreased levels of capital investment in the solar market, and delays of orders for our packaging automation solutions.

Services and Support revenues, which result from the sale of robotics services and support as well as replacement parts, were $2.6 million for the three months ended December 29, 2012, up 15% from $2.3 million for the three months ended December 31, 2011 as a result of increased sales efforts in the U.S. to increase training and spare parts revenue. Services and Support revenues, were $5.1 million for the six months ended December 29, 2012, down 10% from $5.7 million for the six months ended December 31, 2011, as a result of weaker economic conditions in the majority of our markets in the first four months of fiscal year 2013.
Revenue by geography for the three and six months ended December 29, 2012 and December 31, 2011 is shown below (in thousands, except %):

                                         Three Months Ended                            Six Months Ended
Revenue by Geography          December 29,       %        December 31,     December 29,       %        December 31,
(unaudited)                       2012         Change         2011             2012         Change         2011
United States
Revenues                     $      2,675       (43 )%   $      4,683     $      6,426       (22 )%   $      8,195
Percentage of total revenues           25 %                        31 %             29 %                        26 %
Europe
Revenues                     $      6,194        (6 )%   $      6,576     $     11,534       (23 )%   $     14,967
Percentage of total revenues           57 %                        43 %             52 %                        47 %
Asia
Revenues                     $      1,679       (26 )%   $      2,265     $      3,587       (44 )%   $      6,426
Percentage of total revenues           16 %                        15 %             16 %                        20 %
Other countries
Revenues                     $        260       (84 )%   $      1,628     $        631       (71 )%   $      2,183
Percentage of total revenues            2 %                        11 %              3 %                         7 %
Total International Revenues $      8,133       (22 )%   $     10,469     $     15,752       (33 )%   $     23,576
Percentage of total revenues           75 %                        69 %             71 %                        74 %
Total Revenues               $     10,808       (29 )%   $     15,152     $     22,178       (30 )%   $     31,771

U.S. sales were $2.7 million for the three months ended December 29, 2012 accounting for 25% of total revenue and down 43% compared with $4.7 million for the three months ended December 31, 2011. This decrease primarily was due to lower sales of our mobile solutions for universities and labs as well as decreased sales to automotive and packaging markets. U.S. sales were $6.4 million for the six months ended December 29, 2012, accounting for 29% of total revenue and down 22% compared with $8.2 million for the six months ended December 31, 2011. This decrease primarily was due to lower sales to packaging markets.
Total international sales were $8.1 million for the three months ended December 29, 2012, accounting for 75% of total revenue and down 22% compared with $10.5 million for the three months ended December 31, 2011. Total international sales were $15.8 million for the six months ended December 29, 2012, accounting for 71% of total revenue and down 33% compared with $23.6 million for the six months ended December 31, 2011. Performance for individual regions is explained below.
European sales decreased 6% to $6.2 million, and accounted for 57% of total revenue in the three months ended December 29, 2012 compared with the three months ended December 31, 2011, due to a weaker economic environment across most of the Company's European markets. European sales decreased 23% to $11.5 million, and accounted for 52% of total revenue in the six months ended December 29, 2012 compared with the six months ended December 31, 2011, also due to a weaker economic environment across most of the Company's European markets. Sales from Asia decreased 26% to $1.7 million, and accounted for 16% of total revenue in the three months ended December 29, 2012 compared with the three months ended December 31, 2011, when Asia accounted for 15% of total revenue. This change resulted primarily from decreased disk drive sales as this market entered a cyclical downturn. Sales from Asia decreased 44% to $3.6 million, and accounted for 16% of total revenue in the six months ended December 29, 2012 compared with the six months ended December 31, 2011, when Asia accounted for 20% of total revenue. This change also resulted primarily from decreased disk drive sales as this market entered a cyclical downturn.
Revenues from other countries were a relatively small percentage of the Company's sales in the three and six months ended December 29, 2012 and December 31, 2011.

Gross Margin. Summary information on gross margin for the three and six months ended December 29, 2012 and December 31, 2011 is shown below (in thousands, except %):

                                   Three Months Ended                             Six Months Ended
(unaudited)             December 29,        %        December 31,     December 29,        %        December 31,
                            2012         Change          2011             2012         Change          2011
Revenues               $     10,808                 $     15,152     $     22,178                 $     31,771
Gross profit margin           3,433        (47 )%          6,508            8,142        (41 )%         13,782
Gross margin %                 31.8 %                       43.0 %           36.7 %                       43.4 %

Gross margin as a percentage of revenues was 31.8% for the three months ended December 29, 2012, compared to 43.0% for the three months ended December 31, 2011. Lower gross margin in the fiscal 2013 period primarily resulted from a net increase in excess inventory reserve of $875,000 due to lower revenue demand of disc drive units and replacement of the MT400 with the new Lynx product line for our mobile product offering. Gross margin as a percentage of revenues was 36.7% for the six months ended December 29, 2012, compared to 43.4% for the six months ended December 31, 2011. Lower gross margin in the fiscal 2013 period primarily also resulted from a net increase in excess and obsolete inventory reserve of $875,000 due to lower demand for disc drive units and replacement of the MT400 with the new Lynx product line for our mobile product offering.
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. Operating Expenses
Research, Development and Engineering Expenses.
Research, development and engineering expenses for the three and six months ended December 29, 2012 and December 31, 2011 are as follows (in thousands, except %):

                                   Three Months Ended                              Six Months Ended
(unaudited)             December 29,        %        December 31,     December 29,        %         December 31,
                            2012         Change          2011             2012          Change          2011
Expenses               $      1,909        (14 )%   $      2,210     $      4,039         (8 )%    $      4,406
Percentage of revenues           18 %                         15 %             18 %                          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 for the three months ended December 29, 2012 were $1.9 million, or 18% of revenues, down 14% from $2.2 million, or 15% of revenues for the three months ended December 31, 2011 due to the consolidation of the InMoTx operations in Denmark into the Company's Pleasanton, California operations which historically carried higher R&D costs. R&D expenses for the six months ended December 29, 2012 were $4.0 million, or 18% of revenues, down 8% from $4.4 million, or 14% of revenues for the six months ended December 31, 2011 due to the consolidation of the InMoTx operations in Denmark into the Company's Pleasanton, California operations. As further discussed under the heading "Restructuring" in our Overview to management's discussion and analysis above, we expect R&D expenses to decrease in the near-term as a result of the Company's restructuring plan for the remainder of fiscal 2013. Selling, General and Administrative Expenses.
Selling, general and administrative expenses for the three and six months ended December 29, 2012 and December 31, 2011 are as follows (in thousands, except %):

                                    Three Months Ended                              Six Months Ended
(unaudited)             December 29,        %         December 31,     December 29,        %         December 31,
                            2012          Change          2011             2012          Change          2011
Expenses               $      4,630         (3 )%    $      4,776     $      9,787         (4 )%    $     10,172
Percentage of revenues           43 %                          32 %             44 %                          32 %

Selling, general and administrative ("SG&A") expenses consist primarily of employee compensation, professional fees arising from legal, auditing and other consulting services, indirect costs for service, as well as tradeshow participation and other marketing costs.

SG&A expenses were $4.6 million, or 43% of revenues for the three months ended December 29, 2012, down 3% from $4.8 million, representing 32% of revenues for the three months ended December 31, 2011. SG&A expenses were $9.8 million, or . . .