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Natural
MicroSystems Corporation
Management’s
Discussion and Analysis of Financial Condition and Results
of Operations
(continued)
In October
1997, we acquired ViaDSP, Inc. for aggregate consideration
of 144,562 shares of our common stock in a transaction accounted
for as a purchase. ViaDSP was created to define, develop and
deliver standard products for the telecommunications markets
using advanced digital signal processing technology. The value
of the transaction was $7.1 million, including approximately
$236,000 of expenses related to the acquisition.
Our revenues
consist primarily of product sales and, to a lesser extent,
services provided to our customers. We sell our products worldwide
principally through direct sales focusing on large original
equipment manufacturer and significant system supplier customers.
We use indirect channels to focus on all other customers and
prospects. This strategy allows us to focus our resources
on customers that offer us the largest revenue opportunities.
Our revenue
is recognized from product sales upon completion of delivery,
provided that collection is deemed probable. Service revenues
are recognized ratably over applicable contract periods or
as the services are performed.
Our cost
of revenues consists primarily of product cost, cost of services
provided to our customers and the overhead associated with
testing and fulfillment operations.
Sales,
general and administrative expenses consist primarily of salaries,
commissions and related personnel expenses for those engaged
in our sales, marketing, promotional, public relations, executive
accounting and administrative activities and other general
corporate expenses. As we add personnel, launch new products
and incur additional costs related to the growth of our business,
we expect these expenses to increase.
Research
and development expenses consist primarily of salaries, personnel
expenses and prototype fees related to the design, development,
testing and enhancement of our products. As of December 31,
1999, all research and development costs have been expensed
as incurred. We believe that continued investment in research
and development is critical to attaining our strategic product
and cost reduction objectives, and that these expenses will
increase in the future.
RESULTS
OF OPERATIONS
The following
table sets forth, for the periods indicated, selected items
from our consolidated statements of operations as a percentage
of revenues.
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