This excerpt taken from the VSNT 10-K filed Feb 15, 2005.
Research and Development Expenses
Research and development expenses consist primarily of salaries, recruiting and other employee-related expenses, depreciation, and expenses associated with development tools, equipment, supplies and travel. We believe that a significant level of research and development expenditures is required to remain competitive and to timely complete products under development. Accordingly, we anticipate that we will continue to devote substantial resources to research and development to design, produce and increase the quality, competitiveness and acceptance of our products. However, if we continue our research and development efforts without corresponding increases in revenue, our results of operations would be adversely affected. To date, all research and development expenditures have been expensed as incurred.
Fiscal 2004 Compared to Fiscal 2003
The increase of approximately $800,000 in research and development expense in 2004 was due primarily to the addition of Poets research and development organization in Europe (approximately $700,000 of the increase) and secondarily due to engineering work contracted to a third party in China (approximately $100,000 of the increase). Average headcount in our research and development organization during 2004 was down slightly compared with 2003 on a worldwide basis, however the geographic mix of employees in this organization was different. We reduced headcount slightly in North America in efforts to control costs and we experienced turnover and inflationary pressures on salaries in our Indian organization in a similar fashion to many high tech employers in that region. We exited the year with 47 research and development employees worldwide comprised of 9 in North America, 12 in Europe and 26 in India.
Fiscal 2003 Compared to Fiscal 2002
Research and development expenses decreased 26% in 2003 to $4.3 million from $5.8 million for 2002, primarily due to reduction of headcount made in conjunction with cost reduction efforts.