SEC Comment Letter for ZIX CORP (CIK 0000855612) — Jun 13, 2005
ZIX CORP (CIK 0000855612)
Date: June 13, 2005 · CIK: 0000855612 · Accession: 0000000000-05-029444
AI Filing Summary & Sentiment
File numbers found in text: 333-120548
Referenced dates: May 19, 2005
Letter
Room 4561 Bradley C. Almond Chief Financial Officer Zix Corporation 2711 N. Haskell Avenue, Suite 2300 LB 36 Dallas, Texas 75204-2960 Form 10-K for the fiscal year ended December 31, 2004 Form 10-Q for the quarter ended March 31, 2005 File No. 0-17995
Re: Zix Corporation Supplemental Response concerning Registration Statement on Form S-3 File No. 333-120548
Dear Mr. Almond:
Based on our limited review of the referenced filings, we have the following comments. Where indicated, we think you should revise your documents in response to these comments. With respect to the comments on the referenced periodic reports your response should be provided as soon as possible and not later than June 27, 2005. 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. Feel free to call us at the telephone numbers listed at the end of this letter.
Form S-3 1. Please refer to comment 6 of our letter dated May 19, 2005. We note intent to file your amended legal opinion either as an exhibit to a pre-effective amendment to your S-3 or as an exhibit to a Form 8-K. Please file an amended legal opinion as an exhibit to your Form S-3.
Form 10-K
Consolidated Financial Statements
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Revenue Recognition 2. Please refer to comment 6 of our letter dated May 19, 2005. As previously requested, tell us how you considered footnote 1 of SOP 81-1 with regards to your service contracts offered on a stand- alone basis. Tell us the specific accounting literature you relied upon in accounting for such contracts, and provide us with analysis, which demonstrates how that literature applies to you. Your prior response addressed your accounting for services sold in connection with your products (i.e., instead of on a standalone basis). If the Company does not offer stand-alone services, then please revise your disclosures in future filings to clarify your accounting for such services. Quantify the amount of revenues associated with initial set-up fees relating to the PocketScript product line. If material, supplementally clarify the nature of these costs and tell us how you account for the revenue applicable to this element in your e- prescribing service arrangements.
Note 7. Intangible Assets and Goodwill 3. Please refer to comment 8 of our letter dated May 19, 2005. Please clarify your statement that the accounting for the impairment charge was "more accurately guided by SFAS 144" given your historical classification of the amortization of these intangibles to the cost of sales. Tell us how you considered EITF 96-9 by analogy when classifying the write-down as an element of operating expense instead of the cost of sales. Please be advised that the amortization expense, including any write-downs of capitalized software should be included in cost of revenues pursuant to Question 17 of SFAS 86 FASB Staff Implementation Guide.
Note 10. Notes Payable Convertible Promissory Note 4. Please refer to comment 9 of our letter dated May 19, 2005. Your response indicates that you are still conducting the research required to account for the modification of the convertible notes. Tell us what stage your evaluation is at. Explain the delay in determination of your expected accounting for the modification given the fact that a definitive agreement was reached on April 13, 2005 and the terms of the modification are known.
Note 22. Subsequent Events 5. Please refer to comment 10 of our letter dated May 19, 2005. You indicate in your response that the Company did not meet the criteria in paragraph 30 of SFAS 144, as "management did not have the authority to approve the plan and had made no commitment to sell the assets as of December 31, 2004." Clarify for us, who had the authority to approve the plan. 6. Please refer to comment 10 of our letter dated May 19, 2005. You indicate in your response that upon sale of the Web Inspector and Message Inspector product lines the Company allocated 50% of the carrying amount of the Elron goodwill to the carrying amount of assets sold in the gain / loss calculation in accordance with paragraph 39 of SFAS 142. Tell us how you determined the relative fair value of the business to be disposed of and the portion of the reporting unit that will be retained and provide a recap of your analysis. Clarify for us, the other material products, if any, associated with the Elron acquisition that the Company is still actively selling. * * * * * As appropriate, please amend your filings in response to these comments. You may wish to provide us with marked copies of the amendments to expedite our review. Please furnish a cover letter with your amendments that keys your responses to our comments and provides any requested supplemental information. Detailed cover letters greatly facilitate our review. Please understand that we may have additional comments after reviewing your amendments and responses to our comments.
We direct your attention to Rule 461 regarding requesting acceleration of a registration statement. Please allow adequate time after the filing of any amendment for further review before submitting a request for acceleration. Please provide this request at least two business days in advance of the requested effective date.
You may contact Meghan Akst, at (202) 551-3407 or Kathleen Collins, Accounting Branch Chief, at (202) 551-3499 if you have any questions regarding comments on the financial statements and related matters. If you have any other questions, please call Adam Halper, at (202) 551-3482. If you require additional assistance you may contact me, at (202) 551-3462 or in my absence Barbara C. Jacobs, Assistant Director at, (202) 551-3730.
Sincerely,
Mark P. Shuman
Branch Chief - Legal
Show Raw Text
<DOCUMENT>
<TYPE>LETTER
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
June 13, 2005
Room 4561
Bradley C. Almond
Chief Financial Officer
Zix Corporation
2711 N. Haskell Avenue, Suite 2300
LB 36
Dallas, Texas 75204-2960
Re: Zix Corporation
Supplemental Response concerning Registration Statement on
Form
S-3
File No. 333-120548
Form 10-K for the fiscal year ended December 31, 2004
Form 10-Q for the quarter ended March 31, 2005
File No. 0-17995
Dear Mr. Almond:
Based on our limited review of the referenced filings, we
have
the following comments. Where indicated, we think you should
revise
your documents in response to these comments. With respect to the
comments on the referenced periodic reports your response should
be
provided as soon as possible and not later than June 27, 2005. 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. Feel free to call us at the
telephone numbers listed at the end of this letter.
Form S-3
1. Please refer to comment 6 of our letter dated May 19, 2005. We
note intent to file your amended legal opinion either as an
exhibit
to a pre-effective amendment to your S-3 or as an exhibit to a
Form
8-K. Please file an amended legal opinion as an exhibit to your
Form
S-3.
Form 10-K
Consolidated Financial Statements
Note 2. Basis of Presentation and Summary of Significant
Accounting
Policies
Revenue Recognition
2. Please refer to comment 6 of our letter dated May 19, 2005. As
previously requested, tell us how you considered footnote 1 of SOP
81-1 with regards to your service contracts offered on a stand-
alone
basis. Tell us the specific accounting literature you relied upon
in
accounting for such contracts, and provide us with analysis, which
demonstrates how that literature applies to you. Your prior
response
addressed your accounting for services sold in connection with
your
products (i.e., instead of on a standalone basis). If the Company
does not offer stand-alone services, then please revise your
disclosures in future filings to clarify your accounting for such
services. Quantify the amount of revenues associated with initial
set-up fees relating to the PocketScript product line. If
material,
supplementally clarify the nature of these costs and tell us how
you
account for the revenue applicable to this element in your e-
prescribing service arrangements.
Note 7. Intangible Assets and Goodwill
3. Please refer to comment 8 of our letter dated May 19, 2005.
Please clarify your statement that the accounting for the
impairment
charge was "more accurately guided by SFAS 144" given your
historical
classification of the amortization of these intangibles to the
cost
of sales. Tell us how you considered EITF 96-9 by analogy when
classifying the write-down as an element of operating expense
instead
of the cost of sales. Please be advised that the amortization
expense, including any write-downs of capitalized software should
be
included in cost of revenues pursuant to Question 17 of SFAS 86
FASB
Staff Implementation Guide.
Note 10. Notes Payable
Convertible Promissory Note
4. Please refer to comment 9 of our letter dated May 19, 2005.
Your
response indicates that you are still conducting the research
required to account for the modification of the convertible notes.
Tell us what stage your evaluation is at. Explain the delay in
determination of your expected accounting for the modification
given
the fact that a definitive agreement was reached on April 13, 2005
and the terms of the modification are known.
Note 22. Subsequent Events
5. Please refer to comment 10 of our letter dated May 19, 2005.
You
indicate in your response that the Company did not meet the
criteria
in paragraph 30 of SFAS 144, as "management did not have the
authority to approve the plan and had made no commitment to sell
the
assets as of December 31, 2004." Clarify for us, who had the
authority to approve the plan.
6. Please refer to comment 10 of our letter dated May 19, 2005.
You
indicate in your response that upon sale of the Web Inspector and
Message Inspector product lines the Company allocated 50% of the
carrying amount of the Elron goodwill to the carrying amount of
assets sold in the gain / loss calculation in accordance with
paragraph 39 of SFAS 142. Tell us how you determined the relative
fair value of the business to be disposed of and the portion of
the
reporting unit that will be retained and provide a recap of your
analysis. Clarify for us, the other material products, if any,
associated with the Elron acquisition that the Company is still
actively selling.
* * * * *
As appropriate, please amend your filings in response to
these
comments. You may wish to provide us with marked copies of the
amendments to expedite our review. Please furnish a cover letter
with your amendments that keys your responses to our comments and
provides any requested supplemental information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendments and
responses to our comments.
We direct your attention to Rule 461 regarding requesting
acceleration of a registration statement. Please allow adequate
time
after the filing of any amendment for further review before
submitting a request for acceleration. Please provide this
request
at least two business days in advance of the requested effective
date.
You may contact Meghan Akst, at (202) 551-3407 or Kathleen
Collins, Accounting Branch Chief, at (202) 551-3499 if you have
any
questions regarding comments on the financial statements and
related
matters. If you have any other questions, please call Adam
Halper,
at (202) 551-3482. If you require additional assistance you may
contact me, at (202) 551-3462 or in my absence Barbara C. Jacobs,
Assistant Director at, (202) 551-3730.
Sincerely,
Mark P. Shuman
Branch Chief - Legal
cc: Ronald A. Woessner, Senior Vice President, General Counsel,
and
Secretary
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??
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Bradley C. Almond
Zix Corporation
June 13, 2005
Page 4
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