April 8, 2005
Mail Stop 04-06
Ofer Segev
Chief Financial Officer
Attunity Inc.
40 Audubon Road
Wakefield, Massachusetts 01880
Re: Attunity Ltd.
Amendment No. 3 to Form F-3
Filed March 17, 2005
File No. 333-119157
Amendment No. 1 to Form 20-F Annual Report
For the Period Ended December 31, 2003
Filed on November 22, 2004
File No. 0-20892
Dear Mr. Segev:
This is to advise you that we have reviewed only that
portion
of the above registration statement and annual statement that
relates
to prior outstanding staff comments and your controls and
procedures
disclosure. Where indicated, we think you should revise your
document 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.
General
1. Please note that the comments issued to you in our staff
comment
letter dated March 24, 2005 concerning your Form 20-F annual
report
for the year ended December 31, 2003 will need to be resolved
prior
to the desired effective date for this Form F-3 registration
statement.
Form F-3
2. Revise to include updated annual financial information. See
Item
6 of Form F-3 and Item 8.A.4 of Form 20-F.
Form 20-F/A
Operating and Financial Review and Prospects, page 18
General
3. Disclosure in your 2002 20-F indicates that the BPI product as
under development as of the end of 2002 and suggests that you
expected BPI to represent a significant product offering in future
periods. However, your disclosure does not appear to indicate
that
you had been experiencing delays in the development of BPI.
Additionally, your disclosure does not appear to indicate that
factors including the development delays and increased competition
from superior products had led you to significantly reduce your
projections for future revenue from the BPI product. To the
extent
that similar trends or uncertainties with respect to develop or
in-
process products or projects exist in future periods, disclose
these
trends or uncertainties and discuss the impact that they may have
on
your financial condition or results of operations. See SEC
Release
No. 33-8350.
Financial Statements
Notes to Consolidated Financial Statements
Note 2:- Significant Accounting Policies, page F-12
Research and Development Costs
4. Your response to prior comment number 7 from our letter dated
February 15, 2005 indicates that "capitalized software costs are
amortized on a straight-line basis (which is greater than the
amount
computed using the ratio that current gross revenues for the
product
bear to the total of current and anticipated future gross revenues
for the product)." Separately, your response to prior comment
number
6 from that letter indicates that, to date, straight-line
amortization has been greater than amortization based on the ratio
of
current revenue to projected total revenue. This suggests that
you
are consistently overestimating the amount of total revenue
attributable to developed software products. In view of this,
supplementally explain your basis for concluding that your
estimates
of future revenues are reasonable and reliable for purposes of
determining amortization amounts and assessing the realizability
of
unamortized amounts. As part of your response provide copies or
summaries of your amortization calculations for each of your three
most recent years. Include sufficient detail to demonstrate how
the
amount of annual amortization for each product was determined.
Clearly indicate current and expected future revenue for each
product
for each period.
5. We note the projected cash flows related to the Attunity
Connect
product provided as part of your response to prior comment number
6.
These projections call for increases in direct license revenue in
excess of 50% for each of the next four years, and project total
direct license revenue for 2008 that is in excess of seven times
larger than the actual amount for 2004. Supplementally, explain
to
us your basis for concluding that these estimates are reasonable.
As
part of your response, describe any objective evidence you relied
on
to produce these projections. Additionally, explain how this
revenue
pattern is consistent with a five year economic life.
6. We note your statement that the national office of Ernst &
Young
has reviewed your accounting policies with respect to SFAS no. 86.
Please provide us with the name and telephone number of the person
in
the E&Y national office whom you consulted with.
7. Based on information provided in your response to comment
number 6
from our letter dated February 15, 2005, we understand that you
developed and released four different versions of Attunity Connect
between the fourth quarter of 2002 and the fourth quarter of 2004.
Separately, we note disclosure under the risk factors section of
your
most recent 20-F indicating that you operate in a market
characterized by rapid technological change. In view of these
factors, supplementally explain to us your basis for concluding
that
five years represents a reasonable estimated economic life for
your
capitalized software development costs. Identify any objective
evidence you have relied on to support this amortization period.
Note 5: - Software Development Costs, page F-21
8. Supplementally, explain to us what happens, both operationally
and
from a cost accounting stand point, to prior versions of your
products when new versions are released. As part of your
response,
tell us whether you continue to sell or otherwise market prior
versions. Additionally, explain how your accounting complies with
questions 23 through 25 of the FASB Staff Implementation Guide to
SFAS 86.
9. Supplementally, provide a schedule of gross and net software
development costs, by product, as of each of your two most recent
fiscal year ends.
* * *
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings to be certain that they
have provided all information investors require for an informed
decision. 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.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert this action 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 connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
Any questions should be directed to David Edgar at (202) 942-
2806 or me at (202) 942-1922. Questions regarding legal issues
should be directed to Neil Miller at (202) 942-1851. If you need
additional assistance you may contact Tangela S. Richter, Branch
Chief - Legal at (202) 942-1837 or Barbara C. Jacobs, Assistant
Director, at (202) 942-1800.
Sincerely,
Brad Skinner
Branch Chief - Accounting
cc: Steven J. Glusband, Esq. (via facsimile)
Carter Ledyard & Milburn LLP
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Attunity Ltd.
File No. 333-119157
April 8, 2005
Page 1