[Robocom Letterhead]
June 1, 2005
Mr. Craig D. Wilson
US Securities and Exchange Commission
Washington, D.C. 20549
RE: Robocom Systems Internatonal Inc.
Form 10-KSB
Filed August 23, 2004
File No. 000-22735
Dear Mr. Wilson,
We have reviewed your comments on our Form 10-KSB for the year ended May 31,
2004, in your letter dated May 24, 2005, and respond to each comment as follows:
1. We recognize revenues for project management and modification
services on a percentage of completion basis. We consider these
services to be an integral part of our software and essential to the
functionality of the software in accordance with the terms of
paragraph 70, 71 and 74 of SOP 97-2 as follows:
a. Our project management and software modification services are
not available from other vendors and are unique to us.
b. We are an experienced provider of these services.
c. Software modifications may include significant alterations to
the features and functionality of RIMS, our standard software,
and complex interfaces may be necessary for our software to
operate in the customer's environment.
d. Milestones and acceptance criteria may be requested by the
customer and affect the recognition of software license fees.
However, other implementation services, such as training,
installation and consulting are recognized upon completion. These
services may be requested by customers in the initial contract or
may be ordered on an individual basis as needed.
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2. We offer standard 30-day terms to most of our customers on all
purchases. For two customers, payment terms are extended to as long
as 60 days. Upon the signing of a contract or receipt of a purchase
order from a customer, fees for licensing, services and/or hardware
are fixed and determinable. We do not offer any installment payment
plans and are not in the business of financing our software or
services. As a result, we believe we are in compliance with
paragraph 27-30 of SOP 97-2, in that the payments are fixed and
determinable and have a short payment period. Furthermore,
recognition of revenues is based upon delivery of the product and/or
completion of the service and unrelated to the timing of the receipt
of payment from the customer.
3. We sell third party software and hardware products. The revenues for
these sales are recorded gross as a principal in accordance with
EITF 99-19 based on the following factors:
a. We act as the principal in the transaction, contracting with
the customer to deliver the third party product. We enter into
reseller agreements with third party vendors that authorize us
to sell third party products and provide a discounted purchase
price.
b. We purchase third party products from vendors and take title
to such products prior to delivery to the end user.
c. We assume the risk of loss for third party products, as well
as the rewards of such ownership.
4. Our standard contract for RIMS includes a warranty provision as
follows.
SECTION 4. WARRANTY
4.1 We warrant that, if the Basic Software is installed by you on
the System as provided in the Software Documentation and the
user manuals and other documentation provided by the
manufacturer, licensor, or distributor of the Equipment and
the Third-Party Software (the "Third-Party Documentation")
(Software Documentation and Third-Party Documentation,
collectively referred to as "Documentation") then for a period
of twelve (12) months from the date the Licensed Property is
delivered to you ("Warranty Period"), the Basic Software shall
be free from any defect in workmanship or materials which
prevents it from performing or operating substantially in
accordance with the specifications in the Software
Documentation. If we receive written notice from you of such a
defect arising in the Basic Software within the Warranty
Period and if the Basic Software has not been modified,
changed or altered by you in any manner, then at no charge to
you, we will correct or repair the defect or replace the
defective component of the Basic Software as promptly as
practicable. Our liability, and your sole remedy, for breach
of the foregoing warranty shall be limited to the correction
of defects or replacement of the Basic Software. After the
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Warranty Period, all correction, repairs and replacement will
only be made under a separate Support and Maintenance
Agreement.
4.2 Any changes, additions or modifications to the Basic Software
not made by us or with our specific written authorization
shall void the warranty and we will have no further obligation
to correct, repair and/or replace the Basic Software as
provided hereunder.
4.3 If any defect identified in a written notice to us from you
during the Warranty Period proves not to be a defect covered
by the warranty contained in Section 4.2, all expenses,
including hourly service rates, incurred by us in response to
your written notice, shall be paid by you no later than
fifteen (15) days after delivery of an invoice for those
expenses.
4.4 EXCEPT AS SPECIFICALLY PROVIDED IN SECTION 4.1, THERE ARE NO
WARRANTIES, EXPRESS OR IMPLIED, MADE BY US IN CONNECTION WITH
THIS AGREEMENT OR THE LICENSED PRODUCT, INCLUDING, BUT NOT
LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
a. Historically, we have not experienced any significant costs
associated with our warranty and therefore, we do not disclose
or account for contingencies for our warranty.
b. In certain instances, the customer can request conditions of
acceptance. In these cases, we do not recognize the full
license fee as revenue until all the conditions of acceptance
have been met.
c. Other than as stated above, our product sales do not have any
other rights of return, conditions of acceptance, or
warranties.
d. There are no significant assumptions, material changes or
reasonably likely uncertainties associated with our product
sales.
5. We currently have two active distributors, one of which is located
in Argentina and the other is located in Indonesia. Our former UK
distributor is no longer selling the RIMS product. Each of these
distributors is required to sign an international distributor
agreement with us. We then receive revenue from the sale of
licensing and maintenance from these distributors. All costs of
selling and implementing the software by a distributor are borne by
that distributor. We will provide second-line support to the
distributor with respect to standard services and maintenance. We
warrant the software to distributors in the same manner as stated in
the explanation for number 4. We do not account for contingencies of
warranty based on immaterial historical expenses.
a. For our Argentina distributor, licensing revenues are
recognized at 50% of the distributor's contracted sales price
with the end user. For our
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Indonesia distributor, our net license fee is negotiated based
on the number of concurrent users and modules specified. In
both cases, we receive a copy of the contract as evidence of
the sale and then forward the software to the distributor for
release to the customer. Revenue is recognized at this time.
b. Maintenance revenues are recognized at 50% of the distributors
contracted sales price with the end user. We recognize a
portion of the annual maintenance contract ratably over twelve
months.
c. We do not offer our resellers any rights of return, price
concessions, rebates or cooperative advertising.
Based on our review of your comments, we believe our accounting policies are in
compliance with GAAP and we are not required to amend our Form 10-KSB for the
year ended May 31, 2004.
We acknowledge that we is responsible for the adequacy and accuracy of our
disclosures and that staff comments or changes to disclosure in response to
staff comments do not foreclose the Commission from taking any action with
respect to the filing. We acknowledge that we may not assert staff comments as a
defense in any proceeding initiated by the Commission or any person under
federal securities laws of the United States.
If you have any comments or concerns about our responses, you may contact the
undersigned at (516) 795-5100, extension 221 or Kathleen Poulos at (516)
795-5100, extension 287.
Thank you,
/s/ Irwin Balaban
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Irwin Balaban
President and
Chief Executive Officer
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