Mail Stop 0306
March 29, 2005
By U.S. Mail and facsimile to (925) 245-3510
Mr. Robert R. Strickland
Chief Financial Officer
Adept Technology, Inc.
3011 Triad Drive
Livermore, CA 94550
RE: Adept Technology, Inc.
Form 10-K for the fiscal year ended June 30, 2004
Form 10-Q for the quarter ended October 2, 2004
Form 10-Q for the quarter ended January 1, 2005
File No. 000-27122
Dear Mr. Strickland:
We have reviewed your filing and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and will make no further review of your
documents. Where indicated, we think you should revise your
document
in future filings in response to these comments. If you disagree,
we
will consider your explanation as to why our comment is
inapplicable
or a revision is unnecessary. Please be as detailed as necessary
in
your explanation. In some of our comments, we may ask you to
provide
us with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the fiscal year ended June 30, 2004
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations - Page 16
Critical Accounting Policies and Estimates - Page 17
1. Critical accounting policy disclosure should provide insight
about
complex judgments and estimates that underlie your key accounting
policies. That information should generally expand upon and not
merely repeat basic accounting policies. We see that the revenue
discussion is mostly factual. Please expand that item to more
specifically identify and describe the nature and extent of
complex
estimates and subjective judgments associated with your revenue
practices, including discussion about the susceptibility of those
estimates and judgments to change. That disclosure should also
describe the factors you consider in evaluating the significance
of
subjective matters in determining the amounts and timing of
revenue.
Apply in future filings. Refer to FR-60 and Exchange Act release
34-
48960 for further guidance.
Results of Operations
Net Revenues - Page 21
2. Where significant, please quantify the impact of changes in
exchange rates on reported revenues and expenses. Apply in future
filings.
Item 9A. Controls and Procedures - Page 47
3. We note your statement that "the design of any system of
controls
is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions, regardless of how remote." You should delete the
referenced sentence. Alternatively, you should expand to state
clearly, if true, that your disclosure controls and procedures are
designed to provide reasonable assurance of achieving their
objectives and that your principal executive officer and principal
financial officers concluded that disclosure controls and
procedures
are effective at that reasonable assurance level. Refer to Section
II.F.4 of Management`s Reports on Internal Control Over Financial
Reporting and Certification of Disclosure in Exchange Act Periodic
Reports, Release No. 33-8238, available on our website at
www.sec.gov/rules/final/33-8238.htm. Apply in future filings,
including quarterly filings.
Financial Statements
Consolidated Statements of Operations - Page 57
4. We see from your business and MD&A discussions that you have
revenues from services provided to your customers and royalties
from
licenses. Tell us how your income statement considers the
formatting
guidance from Rules 5-03(b)(1) and 5-03(b)(2) to Regulation S-X.
Note 1: Summary of Significant Accounting Policies
Revenue Recognition - Page 63
5. We see the general criteria you apply for product revenue
recognition purposes. Tell us more about the terms and conditions
of
transactions with systems integrators. Show us how you apply the
disclosed criteria for transactions with those entities and
demonstrate to us that your revenue practices are appropriate for
transactions with those parties. We are particularly interested
in
considerations that drive the timing of revenue. Your
supplemental
response should be detailed and specific.
6. We see the complexity of the products you provide. Tell us
about
post shipment obligations (training, installation, etc...) and
acceptance protocols associated with product sales. Tell us how
you
consider these matters in determining the timing of revenue.
Unless
insignificant, you should present disclosure about these matters
in
future filings.
7. As a related matter, you indicate that you generally do not
have
multiple element arrangements. In light of the apparent
complexity
of your products, tell us more about the terms of product sales
and
explain the bases for that assertion. The supplemental response
should explain how you have considered the requirements of EITF
00-
21. Please be detailed and specific.
8. Tell us about return policies and practices, including how your
policies are considered in determining the timing of revenue. As
relevant, tell us how your revenue practices consider the
requirements of FAS 48.
9. For software revenue purposes, tell us more about how you
evaluate
the criteria from SOP 97-2, as amended. For instance, describe
the
nature and extent of post contract support generally associated
with
your license arrangements and describe the criteria you evaluate
in
assessing whether that post shipment support is significant.
Describe
your practices when that support is deemed significant. How are
upgrade or enhancement rights considered in your practices? Do you
apply multiple-element accounting for software transactions? If
not,
why not; and, if so, how do you apply the multiple-element method?
The supplemental narrative should show us that your application of
the SOP in accounting for software sales is appropriate in your
circumstances.
10. For software to be installed by the customer you disclose that
revenue is recognized at shipment if functionality has been
previously established and if there are no customizations that
cause
substantial acceptance risk. Tell us more about how you apply
that
policy. How do you determine whether acceptance risk is
"substantial?" What accounting is applied when these criteria are
not achieved?
11. Unless insignificant, please make disclosure about the nature
and
extent of vendor sales consideration as described in EITF 01-09.
Make disclosure about how you estimate discounts and incentives,
including how amounts are reported in the financial statements.
Apply in future filings.
Note 5 - Goodwill and Other Intangible Assets- Page 70
12. In light of your recent losses and accumulated deficit, please
make more specific disclosure about how you perform the annual
goodwill impairment testing. Make disclosure about the method and
to
the extent important to an understanding of the method,
significant
assumptions, and clarify why you believe goodwill is recoverable.
Also make disclosure about the nature and extent of subjective
estimates associated with that process. For instance, evaluations
are often based on projected cash flows that are inherently
uncertain. Apply in future filings.
Note 13 - Segment Information - Page 79
13. Disclosure of long-lived assets by geographic area under SFAS
131
should present tangible assets only and should not include
intangibles or investments. See question 22 to the FASB
publication
"Segment Information: Guidance on Applying Statement 131." Apply
in
future filings.
Form 10-Q for the quarter ended January 1, 2005
Item 4. Controls and Procedures - Page 35
14. In a supplemental response, provide us a more specific
description of the material weakness and the related error. Tell
us
how FAS 52 was not properly applied and quantify the related
adjustment. Tell us what you did to ensure that there are not
similar
errors in prior periods. Also more specifically describe what you
did
to mitigate the material weakness. That is, describe more
specifically how you altered internal controls for this matter.
Future filings should present a more detailed description of the
weakness, including identification and description of the aspects
of
FAS 52 that were not properly applied.
* * * *
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter with your response that keys your
responses to our comments and provides any requested supplemental
information. Detailed cover letters greatly facilitate our
review.
Please file your cover letter on EDGAR. Please understand that we
may have additional comments after reviewing your responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require.
Since the company and its management are in possession of all
facts
relating to a company`s disclosure, they are responsible for the
accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Patrick Enunwaonye, Staff Accountant, at
(202)
824-5529 or me, at (202) 942-2862 if you have questions regarding
comments on the financial statements and related matters. In this
regard, do not hesitate to contact Brian Cascio, Accounting
Branch
Chief , at (202) 942-1791 with any other concerns.
Sincerely,
Gary Todd
Review Accountant
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Mr. Robert R. Strickland
Adept Technology, Inc.
March 29, 2005
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