CorVu Corporation
3400 West 66th Street, Suite 445
Edina, MN 55435
May 2, 2006
Stephen Krikorian
Accounting Branch Chief
Securities and Exchange Commission
Division of Corporate Finance
100 E Street, N.E.
Washington, D.C. 20549
Re: Corvu Corporation
Form 10-KSB for Fiscal Year Ended June 30, 2005
Forms 10-QSB for Fiscal Quarters Ended September 30, 2005 and
December 31, 2005
File No. 000-29299
Your Letter dated April 12, 2006
Dear Mr. Krikorian:
We are responding to the comment in your letter dated April 12, 2006 with
respect to the above-referenced filings. Our response is numbered to correspond
to the number of the relevant comment in your letter.
Form 10-KSB for the Fiscal Year Ended June 30, 2005
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies, page 21
(A) Revenue Recognition, page 21
Prior Comment Number 3
Stephen Krikorian
Accounting Branch Chief
Securities and Exchange Commission
February 2, 2006
Page 2
1. Explain why you believe that AICPA TPA 5100.75 is not applicable solely
because of your policy of separately pricing software, maintenance and
services. Be advised that even though the elements are separately priced,
the separate priced elements will still be viewed as a multi-element
("bundled") arrangement. See AICPA TPA 5100.39. Describe in greater detail
your pricing structure for license fees and maintenance fees under both
bundled and separately priced arrangements. Contrast your pricing
structure or methodology with that outlined in the TPA. That is, do you
have an unlimited deployment period? Indicate whether the customer will be
charged an additional license fee after the deployment fee.
Response:
We believe AICPA TPA 5100.75 is not applicable for contracts in which our
products are sold on a "per user" or on a "site license" basis. We have
reviewed TPA 5100.75 which refers to a pricing methodology that includes
an initial fee during an unlimited deployment period, followed by
subsequent additional fees (both license and PCS) based on the deployment
of additional copies of the software product after the unlimited
deployment period expires. We do not price our product and PCS services in
that way. Our customers are licensed to deploy either a fixed number of
licenses or an unlimited number of licenses. In situations involving an
unlimited number of licenses, the period of deployment is unlimited but,
the licensing fee does not change based on the actual licenses deployed,
i.e. we would not charge an additional fee after the initial licensing fee
based on the number of licenses deployed.
Per User Licenses:
We sell perpetual licenses to use our software in exchange for a one-time
fee. We price our software based on the number of users licensed under the
agreement with the customer. When products are sold on a "per user" basis,
this represents an arrangement to use multiple single licenses of the same
software. The license fee recognized is a function of the number of copies
delivered to the user. In accordance with paragraph 21 of SOP 97-2,
revenue is recognized as those licenses are delivered, provided all other
revenue recognition criteria have been met.
Site License:
In certain situations, we agree to license our software under site, or
unlimited user, licenses - "site license". A site license obligates us to
furnish an unlimited and unspecified number of licenses of the software,
but only if the licenses are requested by the user. The licensing fee is
payable in full, whether or not the user requests any additional licenses
under the agreement. Accordingly, assuming all other criteria of revenue
recognition have been met and in accordance with the principles stated in
paragraph 21 of SOP 97-2, license revenue is recognized upon delivery of
the first license of the software.
Stephen Krikorian
Accounting Branch Chief
Securities and Exchange Commission
May 5, 2006
Page 3
Whether the arrangement is priced separately or bundled does not impact
how we price the arrangement in terms of software license fees and
maintenance. Under either pricing arrangement discussed above, in addition
to the amounts charged for the software license, we charge an annual
maintenance fee equal to 20% of the software license fee paid.
The Company acknowledges that
o the Company is responsible for the adequacy and accuracy of the disclosure
in the filing;
o staff comments or changes to disclosure in responses to staff comments do
not foreclose the Commission from taking any action with respect to the
filing; and
o 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.
If you have any questions regarding this, please feel free to contact me at
952-843-7701.
Sincerely,
/s/ Joseph J. Caffarelli
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Joseph J. Caffarelli
Chief Executive Officer
CorVu Corporation