SEC Comment Letter for OneSpan (OSPN) — Sep 28, 2011
OneSpan Inc.
Date: Sept. 28, 2011 · CIK: 0001044777 · Accession: 0000000000-11-057665
AI Filing Summary & Sentiment
File numbers found in text: 000-24389
Referenced dates: August 19, 2011, September 2, 2011
Letter
September 28, 2011 Via E-mail Mr. Clifford Bown Chief Financial Officer Vasco Data Security International, Inc. 1901 South Meyers Road, Suite 210 Oakbrook, IL 60181 Re: Vasco Data Security International, Inc. Form 10-K for Fiscal Year Ended December 31, 2010 Filed March 11, 2011 Form 10-Q for Fiscal Quarter Ended June 30, 2011 Filed August 5, 2011 File No. 000-24389
Dear Mr. Bown:
We have reviewed your letter dated September 2, 2011 in connection with the above- referenced filings and have the following commen ts. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter within ten business days by amending your filing, by providing the requested information, or by advi sing us when you will provide the requested response. If you do not believe our comments apply to your fact s and circumstances or do not believe an amendment is appropriate, pl ease tell us why in your response. After reviewing any amendment to your filing and the information you provide in response to these comments, we may have addi tional comments. Unless otherwise noted, where prior comments are referred to they re fer to our letter dated August 19, 2011. Form 10-K for Fiscal Year Ended December 31, 2010
Management’s Discussion and Analysis of Fi nancial Condition and Results of Operations
Operating Expenses, page 39
1. We note in your response to our prior comment 1 you state the specific operating expenses identified are either covered in the aggregate or are non-material items that are noted and discussed by management at a high level. You further state that you have included the non-material items to provide in formation that you believe will enhance the reader’s understanding of your financial c ondition and business as a whole however, you
Clifford Bown Vasco Data Security International, Inc September 28, 2011 Page 2 believe their understanding would not be enha nced further if you disclosed the dollar increases in specific categories. We continue to believe that such specific information would be beneficial to invest ors to provide context to your discussion. In this regard, you discuss specifics as they relate to compen sation expense and foreign exchange rates as part of your explanation for the increase in sales and marketing expense, however, it is unclear the extent to which the other items lis ted have impacted such expenses. If you continue to believe that including the dolla r amount of changes in specific expenses would not be beneficial, pleas e tell us your consideration for stating as part of your disclosure whether each item identified had a ma terial or non-material impact to the total change period over period.
Income Taxes, page 43
2. In your response to our previous comment 2 you note the earnings of your service provider subsidiaries are relativ ely constant but tend to be in jurisdictions with higher tax rates. You also note that fluctuations in earnings tend to flow to the U.S. and Swiss companies, which have lower effective tax ra tes, accounting for the change in effective rates. Please further explain the impact these various subsidiaries have on the effective rate as it is unclear how the U.S. NOL a ffects the rate. In addition, tell us your consideration to disclose thos e tax jurisdictions that have a more significant impact on your effective tax rate. Als o, please provide us with your proposed revisions to your disclosures for future filings. 3. In addition, tell us how your reference to th e lower effective tax ra tes in the U.S. and Swiss companies as noted in your response, supports your MD&A discussion regarding the changes in effective tax rates. In th is regard, you attribute the decrease in your effective tax rate for fiscal 2010 compared to fiscal 2009 to the “benef it of discrete items related to the adjustment of pr ior year’s tax provisions.” Ex plain further and revise your disclosure in future filings to clarify such disclosures and the impact on your effective tax rates. Liquidity and Capital Resources, page 44
4. We note your response to our previous comment 3. For the net cash balances held outside of the U.S. that are not subject to repatriation restrictions , please clarify whether those funds would be subject to additiona l taxes upon repatriation. While we note you intend to disclose that repatr iation restrictions do not ha ve a material effect on your liquidity or capital resources, to the extent that a substantial por tion of your net cash balances are subject to additional taxes and/or restriction on repatr iation, please confirm that in future filings you will disclose th e amount of cash held in non-U.S. commercial banks along with a discussion regarding the f act that additional taxes may be assessed upon repatriation.
Clifford Bown Vasco Data Security International, Inc September 28, 2011 Page 3 Form 10-Q for Fiscal Quarter Ended June 30, 2011
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Revenue Recognition, page 8
5. We note your response to our previous comment 4. Please further explain to us how the internal price lists are developed for the hardwa re client device and the system software. Also please tell us whether these elements ar e sold separately and if so, how often. If these individual elements are not sold separa tely, please tell us how these prices are established including market c onditions and entity-specifi c factors considered. In addition, to the extent that these elements are not sold separately, tell us how you determined that your internal price lists are reasonable estimates of your selling price and tell us what you mean by “actual sales” in your response. In this regard, explain further how you compare the price list for each de livered item to the actual sales when you do not have separate sales.
You may contact Melissa Kinde lan at (202) 551-3564 if you have questions regarding comments on the financial statements and relate d matters. Please contact me at (202) 551-3499 with any other questions. Sincerely, /s/ Kathleen Collins Kathleen Collins Accounting Branch Chief
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September 28, 2011 Via E-mail Mr. Clifford Bown Chief Financial Officer Vasco Data Security International, Inc. 1901 South Meyers Road, Suite 210 Oakbrook, IL 60181 Re: Vasco Data Security International, Inc. Form 10-K for Fiscal Year Ended December 31, 2010 Filed March 11, 2011 Form 10-Q for Fiscal Quarter Ended June 30, 2011 Filed August 5, 2011 File No. 000-24389 Dear Mr. Bown: We have reviewed your letter dated September 2, 2011 in connection with the above- referenced filings and have the following commen ts. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter within ten business days by amending your filing, by providing the requested information, or by advi sing us when you will provide the requested response. If you do not believe our comments apply to your fact s and circumstances or do not believe an amendment is appropriate, pl ease tell us why in your response. After reviewing any amendment to your filing and the information you provide in response to these comments, we may have addi tional comments. Unless otherwise noted, where prior comments are referred to they re fer to our letter dated August 19, 2011. Form 10-K for Fiscal Year Ended December 31, 2010 Management’s Discussion and Analysis of Fi nancial Condition and Results of Operations Operating Expenses, page 39 1. We note in your response to our prior comment 1 you state the specific operating expenses identified are either covered in the aggregate or are non-material items that are noted and discussed by management at a high level. You further state that you have included the non-material items to provide in formation that you believe will enhance the reader’s understanding of your financial c ondition and business as a whole however, you Clifford Bown Vasco Data Security International, Inc September 28, 2011 Page 2 believe their understanding would not be enha nced further if you disclosed the dollar increases in specific categories. We continue to believe that such specific information would be beneficial to invest ors to provide context to your discussion. In this regard, you discuss specifics as they relate to compen sation expense and foreign exchange rates as part of your explanation for the increase in sales and marketing expense, however, it is unclear the extent to which the other items lis ted have impacted such expenses. If you continue to believe that including the dolla r amount of changes in specific expenses would not be beneficial, pleas e tell us your consideration for stating as part of your disclosure whether each item identified had a ma terial or non-material impact to the total change period over period. Income Taxes, page 43 2. In your response to our previous comment 2 you note the earnings of your service provider subsidiaries are relativ ely constant but tend to be in jurisdictions with higher tax rates. You also note that fluctuations in earnings tend to flow to the U.S. and Swiss companies, which have lower effective tax ra tes, accounting for the change in effective rates. Please further explain the impact these various subsidiaries have on the effective rate as it is unclear how the U.S. NOL a ffects the rate. In addition, tell us your consideration to disclose thos e tax jurisdictions that have a more significant impact on your effective tax rate. Als o, please provide us with your proposed revisions to your disclosures for future filings. 3. In addition, tell us how your reference to th e lower effective tax ra tes in the U.S. and Swiss companies as noted in your response, supports your MD&A discussion regarding the changes in effective tax rates. In th is regard, you attribute the decrease in your effective tax rate for fiscal 2010 compared to fiscal 2009 to the “benef it of discrete items related to the adjustment of pr ior year’s tax provisions.” Ex plain further and revise your disclosure in future filings to clarify such disclosures and the impact on your effective tax rates. Liquidity and Capital Resources, page 44 4. We note your response to our previous comment 3. For the net cash balances held outside of the U.S. that are not subject to repatriation restrictions , please clarify whether those funds would be subject to additiona l taxes upon repatriation. While we note you intend to disclose that repatr iation restrictions do not ha ve a material effect on your liquidity or capital resources, to the extent that a substantial por tion of your net cash balances are subject to additional taxes and/or restriction on repatr iation, please confirm that in future filings you will disclose th e amount of cash held in non-U.S. commercial banks along with a discussion regarding the f act that additional taxes may be assessed upon repatriation. Clifford Bown Vasco Data Security International, Inc September 28, 2011 Page 3 Form 10-Q for Fiscal Quarter Ended June 30, 2011 Notes to Consolidated Financial Statements Note 1 - Summary of Significant Accounting Policies Revenue Recognition, page 8 5. We note your response to our previous comment 4. Please further explain to us how the internal price lists are developed for the hardwa re client device and the system software. Also please tell us whether these elements ar e sold separately and if so, how often. If these individual elements are not sold separa tely, please tell us how these prices are established including market c onditions and entity-specifi c factors considered. In addition, to the extent that these elements are not sold separately, tell us how you determined that your internal price lists are reasonable estimates of your selling price and tell us what you mean by “actual sales” in your response. In this regard, explain further how you compare the price list for each de livered item to the actual sales when you do not have separate sales. You may contact Melissa Kinde lan at (202) 551-3564 if you have questions regarding comments on the financial statements and relate d matters. Please contact me at (202) 551-3499 with any other questions. Sincerely, /s/ Kathleen Collins Kathleen Collins Accounting Branch Chief