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Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2017	Feb. 22, 2018	Jun. 30, 2017
Document And Entity Information
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Trading Symbol	VDSI
Entity Registrant Name	VASCO DATA SECURITY INTERNATIONAL INC
Entity Central Index Key	0001044777
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		40,160,900
Entity Public Float			$ 441,357,597

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current assets
Cash and equivalents	$ 78,661	$ 49,345
Short term investments	79,733	94,856
Accounts receivable, net of allowance for doubtful accounts of $520 in 2017 and $535 in 2016	48,126	36,693
Inventories, net	12,040	17,420
Prepaid expenses	3,876	3,249
Foreign sales tax receivable	836	186
Other current assets	4,665	5,410
Total current assets	227,937	207,159
Property and equipment
Furniture and fixtures	5,655	5,547
Office equipment	13,084	13,028
Property and equipment, gross	18,739	18,575
Accumulated depreciation	(13,963)	(15,294)
Property and equipment, net	4,776	3,281
Goodwill	56,332	54,409
Intangible assets, net of accumulated amortization	37,888	46,549
Deferred income taxes	5,460	11,116
Other assets	5,229	4,756
Total assets	337,622	327,270
Current liabilities
Accounts payable	8,144	8,915
Deferred revenue	33,295	36,364
Accrued wages and payroll taxes	11,643	10,894
Short-term income taxes payable	3,673	4,594
Other accrued expenses	7,746	5,464
Deferred compensation	1,652	1,729
Total current liabilities	66,153	67,960
Other long-term liabilities	12,938	5,709
Long-term income taxes payable	12,848
Deferred income taxes	7,753	439
Total liabilities	99,692	74,108
Stockholders' equity
Preferred stock: 500 shares authorized, none issued and outstanding at December 31, 2017 and 2016	0	0
Common stock: $.001 par value per share, 75,000 shares authorized; 40,086 and 40,097 issued and outstanding at December 31, 2017 and 2016, respectively	40	40
Additional paid-in capital	90,307	87,481
Accumulated income	156,151	178,551
Accumulated other comprehensive loss	(8,568)	(12,910)
Total stockholders' equity	237,930	253,162
Total liabilities and stockholders' equity	$ 337,622	$ 327,270

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Consolidated Balance Sheets
Accounts receivable, allowance for doubtful accounts	$ 520	$ 535
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	40,086,000	40,097,000
Common stock, shares outstanding	40,086,000	40,097,000

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Revenue
Product and license	$ 147,257	$ 156,057	$ 218,908
Services and other	46,034	36,247	22,535
Total revenue	193,291	192,304	241,443
Cost of goods sold
Product and license	48,333	53,191	95,028
Services and other	10,444	8,456	2,875
Total cost of goods sold	58,777	61,647	97,903
Gross profit	134,514	130,657	143,540
Operating costs:
Sales and marketing	58,994	57,347	38,199
Research and development	23,119	23,214	17,457
General and administrative	37,400	31,648	32,489
Amortization of purchased intangible assets	8,809	8,849	4,942
Total operating costs	128,322	121,058	93,087
Operating income	6,192	9,599	50,453
Interest income, net	1,431	785	364
Other income (expense), net	758	993	38
Income from continuing operations before income taxes	8,381	11,377	50,855
Provision for income taxes	30,780	863	8,704
Net income (loss)	$ (22,399)	$ 10,514	$ 42,151
Net income (loss) per share
Basic (in dollars per share)	$ (0.56)	$ 0.27	$ 1.07
Diluted (in dollars per share)	$ (0.56)	$ 0.27	$ 1.06
Weighted average common shares outstanding:
Basic (in shares)	39,802	39,719	39,568
Diluted (in shares)	39,802	39,782	39,736

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income (loss)	$ (25,837)	$ 2,755	$ 110	$ 573	$ 5,012	$ 478	$ 2,825	$ 2,199	$ (22,399)	$ 10,514	$ 42,151
Other Comprehensive income (loss):
Currency translation adjustment, net									4,029	(2,488)	(3,292)
Pension adjustment, net of tax of $53 in 2017, $509 in 2016, and $70 in 2015									313	(1,736)	(552)
Comprehensive income (loss)									$ (18,057)	$ 6,290	$ 38,307

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Pension adjustment, tax amount	$ 53	$ 509	$ 70

Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Income	Accumulated Other Comprehensive Income (Loss)	Total
Balance at Dec. 31, 2014	$ 40	$ 82,450	$ 125,885	$ (4,842)	$ 203,533
Balance (in shares) at Dec. 31, 2014	39,660
Change in Stockholders' Equity
Net income (loss)			42,151		42,151
Foreign currency translation adjustment				(3,292)	(3,292)
Restricted stock awards		3,835			3,835
Stock based compensation awards issued shares	448
Tax payments for stock issuances		(837)			(837)
Tax benefits of stock based compensation		318			318
Pension adjustment, net of tax of $53 in 2017, $509 in 2016, and $70 in 2015				(552)	(552)
Balance at Dec. 31, 2015	$ 40	85,766	168,036	(8,686)	245,156
Balance (in shares) at Dec. 31, 2015	40,108
Change in Stockholders' Equity
Net income (loss)			10,514		10,514
Foreign currency translation adjustment				(2,488)	(2,488)
Restricted stock awards		2,766			2,766
Stock based compensation awards issued shares	(11)
Tax payments for stock issuances		(1,051)			(1,051)
Pension adjustment, net of tax of $53 in 2017, $509 in 2016, and $70 in 2015				(1,736)	(1,736)
Balance at Dec. 31, 2016	$ 40	87,481	178,550	(12,910)	253,161
Balance (in shares) at Dec. 31, 2016	40,097
Change in Stockholders' Equity
Net income (loss)			(22,399)		(22,399)
Foreign currency translation adjustment				4,029	4,029
Restricted stock awards, Shares	(11)
Restricted stock awards		3,466			3,466
Tax payments for stock issuances		(640)			(640)
Pension adjustment, net of tax of $53 in 2017, $509 in 2016, and $70 in 2015				313	313
Balance at Dec. 31, 2017	$ 40	$ 90,307	$ 156,151	$ (8,568)	$ 237,930
Balance (in shares) at Dec. 31, 2017	40,086

Consolidated Statements of Stockholders' Equity (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Pension adjustment, tax amount	$ 53	$ 509	$ 70

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities:
Net income (loss) from operations	$ (22,399)	$ 10,514	$ 42,151
Adjustments to reconcile net income (loss) from operations to net cash provided by operations:
Depreciation and amortization	10,601	10,777	6,302
Loss on disposal of assets	185	14	0
Deferred tax expense (benefit)	13,053	(4,936)	(691)
Stock-based compensation	3,466	2,766	3,835
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable, net	(8,428)	(8,106)	2,860
Inventories, net	5,380	3,198	13,257
Foreign sales tax receivable	(692)	336	49
Other current assets	(1,574)	(410)	(358)
Accounts payable	(1,013)	163	(6,645)
Income taxes payable	11,926	(582)	2,946
Accrued expenses	2,514	4	1,351
Current deferred compensation	(77)	226	697
Deferred revenue	3,704	14,396	2,996
Other long-term liabilities	981	55	42
Net cash provided by operating activities	17,627	28,415	68,792
Cash flows from investing activities
Purchase of short term investments	(178,658)	(184,690)	(109,747)
Maturities of short term investments	195,000	134,775	129,725
Purchase of eSignLive, net of cash acquired			(74,486)
Additions to property and equipment	(3,088)	(2,043)	(1,362)
Additions to intangible assets	(107)	(144)	(89)
Other	(349)	(4,394)	3
Net cash provided by (used in) investing activities	12,798	(56,496)	(55,956)
Cash flows from financing activities of continuing operations:
Repayment of debt			(5,925)
Tax payments for restricted stock issuances	(640)	(1,051)	(837)
Tax benefit of stock-based compensation			318
Net cash used in financing activities	(640)	(1,051)	(6,444)
Effect of exchange rate changes on cash	(469)	(45)	(311)
Net increase (decrease) in cash	29,316	(29,177)	6,081
Cash and equivalents, beginning of period	49,345	78,522	72,441
Cash and equivalents, end of period	78,661	49,345	78,522
Supplemental cash flow disclosures:
Cash paid for income taxes	6,427	5,982	6,781
Cash paid for interest	$ 0	$ 0	$ 0

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 1 – Summary of Significant Accounting Policies

Nature of Operations

VASCO Data Security International, Inc. and its wholly owned subsidiaries design, develop, market and support hardware and software security systems that manage and secure access to information assets. VASCO has operations in Austria, Australia, Belgium, Brazil, Canada, China, France, Japan, The Netherlands, Singapore, Switzerland, the United Arab Emirates, the United Kingdom (U.K)., and the United States (U.S.).

In accordance with ASC 280, Segment Reporting, our operations are reported as a single operating segment.

Revision of Previously Issued Financial Statements

We have revised amounts reported in previously issued financial statements for periods presented in the Annual Report on Form 10-K related to immaterial errors associated with previously unrecorded net unfunded pension obligations, accumulated other comprehensive income and the related deferred tax impacts related to defined benefit plans maintained in our Belgium and Switzerland legal entities. We evaluated the aggregate effects of the errors to our previously issued financial statements in accordance with SEC Staff Accounting Bulletins No. 99 and No. 108 and, based upon quantitative and qualitative factors, determined that the errors were not material to the previously issued financial statements and disclosures included in our Annual Report on Form 10-K as of December 31, 2016 or for the years ended December 31, 2016 and 2015, or for any quarterly periods included therein or through our most recent Quarterly Report on Form 10-Q. As part of this evaluation, we considered a number of qualitative factors, including, among others, that the errors did not change total revenue, had an immaterial impact to operating income in every period, and did not mask a change in earnings or other trends when considering the overall competitive and economic environment within the industry during the period.

The following tables present the effects of the aforementioned revisions on our consolidated balance sheet as of December 31, 2016, our consolidated statements of comprehensive income for the years ended December 31, 2016 and 2015, and our consolidated statements of stockholders’ equity for the years ended December 31, 2016 and 2015. The effects of the errors were inconsequential to our previously issued consolidated statements of operations and cash flows the years ended December 31, 2016 and 2015, therefore no revisions to those financial statements were recorded.


Consolidated Balance Sheet
	As of December 31, 2016
	As previously
	Reported		Adjustment		Corrected

Other long-term liabilities	$	1,878	$	3,831	$	5,709
Deferred income taxes		853		(414)		439
Total liabilities		70,691	$	3,417		74,108

Accumulated other comprehensive Income (loss)		(9,493)	$	(3,417)		(12,910)
Total stockholders' equity		256,579		(3,417)		253,162
Total liabilities and stockholders' equity	$	327,270	$	—	$	327,270


Consolidated Statements of Comprehensive Income (Loss)	For the year ended December 31, 2016
	As previously
	Reported		Adjustment		Corrected
Net income (loss)	$	10,514	$	—	$	10,514
Other comprehensive income (loss):
Cumulative translation adjustment, net		(2,488)		—		(2,488)
Pension adjustment, net		(1,211)		(525)		(1,736)
Comprehensive income (loss)	$	6,815	$	(525)	$	6,290

	For the year ended December 31, 2015
	As previously
	Reported		Adjustment		Corrected
Net income (loss)	$	42,151	$	—	$	42,151
Other comprehensive income (loss):
Cumulative translation adjustment, net		(3,292)		—		(3,292)
Pension adjustment, net		—		(552)		(552)
Comprehensive income (loss)	$	38,859	$	(552)	$	38,307

Consolidated Statements of Stockholders’ Equity


	Accumulated Other Comprehensive Income
	As previously
	Reported		Adjustment		Corrected
Balance at January 1, 2015	$	(2,502)	$	(2,340)	$	(4,842)
Foreign currency translation adjustment, net		(3,292)		—		(3,292)
Pension adjustment, net of tax of $70		—		(552)		(552)
Balance at December 31, 2015		(5,794)		(2,892)		(8,686)
Foreign currency translation adjustment, net		(2,488)		—		(2,488)
Pension adjustment, net of tax of $509		(1,211)		(525)		(1,736)
Balance at December 31, 2016	$	(9,493)	$	(3,417)	$	(12,910)


	Total Stockholders' Equity
	As previously
	Reported		Adjustment		Corrected
Balance at January 1, 2015	$	205,873	$	(2,340)	$	203,533
Net income		42,151				42,151
Foreign currency translation adjustment, net		(3,292)				(3,292)
Restricted stock		3,835				3,835
Tax payments for stock issuances		(837)				(837)
Tax benefits of stock based compensation		318				318
Pension adjustment, net of tax of $70		—		(552)		(552)
Balance at December 31, 2015		248,048		(2,892)		245,156
Net income		10,514				10,514
Foreign currency translation adjustment, net		(2,488)				(2,488)
Restricted stock		2,766				2,766
Tax payments for stock issuances		(1,051)				(1,051)
Pension adjustment, net of tax of $509		(1,211)		(525)		(1,736)
Balance at December 31, 2016	$	256,578	$	(3,417)	$	253,161

Financial information presented in the accompanying notes to these consolidated financial statements reflect the correction of these errors (see Note 6 and Note 11). Periods not presented herein will be revised, as applicable, as included in future filings.

Principles of Consolidation

The consolidated financial statements include the accounts of VASCO Data Security International, Inc. and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

Certain amounts from prior years have been reclassified to conform to current year presentation.

Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation and Transactions

The financial position and results of the operations of the majority of the company’s foreign subsidiaries are measured using the local currency as the functional currency. Accordingly, assets and liabilities are translated into U.S. Dollars using current exchange rates as of the balance sheet date. Revenues and expenses are translated at average exchange rates prevailing during the year. Translation adjustments arising from differences in exchange rates are charged or credited to other comprehensive income (loss). Gains or (losses) resulting from foreign currency transactions were $464, $111, and ($1,247) in 2017, 2016, and 2015, respectively, and are included in other income, net in the consolidated statements of operations.

The financial position and results of our operations in Canada, Singapore, and Switzerland are measured in U.S. Dollars. For these subsidiaries, gains and losses that result from foreign currency transactions are included in the consolidated statements of operations in other income, net.

Revenue Recognition

We recognize revenue in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 985 605, Software – Revenue Recognition, ASC 605 25, Revenue Recognition – Multiple Element Arrangements and Staff Accounting Bulletin 104.

Product and License Revenue includes hardware products and software licenses. Services and Other includes software as a service (“SaaS”), maintenance and support, and professional services.

Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the fee is fixed or determinable and collection of the revenue is probable.

In multiple-element arrangements, some of our products are accounted for under the software provisions of ASC 985 605 and others under the provisions that relate to the sale of non-software products.

In our typical multiple-element arrangement, the primary deliverables include:

a client component (i.e., an item that is used by the person being authenticated in the form of either a new standalone hardware device or software that is downloaded onto a device the customer already owns),

host system software that is installed on the customer’s systems (i.e., software on the host system that verifies the identity of the person being authenticated) or licenses for additional users on the host system software if the host system software had been installed previously,

post contract support (“PCS”) in the form of maintenance on the host system software or support.

Our multiple-element arrangements may also include other items that are usually delivered prior to the recognition of any revenue and incidental to the overall transaction such as initialization of the hardware device, customization of the hardware device itself or the packaging in which it is delivered, deployment services where we deliver the device to our customer’s end-use customer or employee and, in some cases, professional services to assist with the initial implementation of a new customer.

In multiple-element arrangements that include a hardware client device, we allocate the selling price among all elements, delivered and undelivered, based on our internal price lists and the percentage of the selling price of that element, per the price list, to the total of the estimated selling price of all of the elements per the price list. Our internal price lists for both delivered and undelivered elements were determined to be reasonable estimates of the selling price of each element based on a comparison of actual sales made to the price list.

In multiple-element arrangements that include a software client device, we account for each element under the standards of ASC 985 605 related to software. When software client devices and host software are delivered elements, we use the Residual Method for determining the amount of revenue to recognize for token and software licenses if we have vendor-specific objective evidence (VSOE) for all of the undelivered elements. Any discount provided to the customer is applied fully to the delivered elements in such an arrangement. VSOE for undelivered elements is established using the “bell curve method.” Under this method, we conclude VSOE exists when a substantial majority of PCS renewals are within a narrow range of pricing. The estimated selling price of PCS items is based on an established percentage of the user license fee attributable to the specific software . In sales arrangements where VSOE of fair value has not been established, revenue for all elements is deferred and amortized over the life of the arrangement.

For transactions other than multiple-element arrangements, we recognize revenue as follows:

Product and License Revenue: Revenue from the sale of computer security hardware or the license of software is recorded upon shipment or, if an acceptance period is allowed, at the latter of shipment or customer acceptance. No significant obligations or contingencies exist with regard to delivery, customer acceptance or rights of return at the time revenue is recognized.

SaaS: We generate SaaS revenues from our cloud services offerings. SaaS revenues include fees from customers for access to the eSignLive suite of solutions. Our standard customer arrangements generally do not provide the customer with the right to take possession of the software supporting the cloud-based application service at any time. As such, these arrangements are considered service contracts and revenue is recognized ratably over the service period of the contract.

Maintenance and Support Agreements: Maintenance and support agreements generally call for us to provide software updates and technical support, respectively, to customers. Revenue on maintenance and technical support is deferred and recognized ratably over the term of the maintenance and support agreement.

Professional Services: We provide professional services to our customers. Revenue from such services is recognized during the period in which the services are performed.

We recognize revenue from sales to distributors and resellers on the same basis as sales made directly to customers. We recognize revenue when there is persuasive evidence that an arrangement exists, delivery has occurred, the fee is fixed or determinable and collection of the revenue is probable.

For large-volume transactions, we may negotiate a specific price based on the number of users of the software license or quantities of hardware supplied. The per unit prices for large-volume transactions are generally lower than transactions for smaller quantities.

All revenue is reported on a net basis, excluding any sales or value added taxes.

Cash and Cash Equivalents

Cash and cash equivalents are stated at cost plus accrued interest, which approximates fair value. Cash equivalents are high-quality short term money market instruments and commercial paper with maturities at acquisition of three months or less. Cash and cash equivalents are held by a number of U.S. and non-U.S. commercial banks and money market investment funds.

Short Term Investments

Short term investments are stated at cost plus accrued interest, which approximates fair value. Short term investments are high-quality commercial paper and bank certificates of deposit with maturities at acquisition of more than three months and less than twelve months.

Accounts Receivable and Allowance for Doubtful Accounts

The credit worthiness of customers is reviewed prior to shipment. A reasonable assurance of collection is a requirement for revenue recognition. Verification of credit and the establishment of credit limits are part of the customer contract administration process. Credit limit adjustments for existing customers may result from the periodic review of outstanding accounts receivable. The company records trade accounts receivable at invoice values, which are generally equal to fair value.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make payments for goods and services. We analyze accounts receivable balances, customer credit-worthiness, current economic trends and changes in our customer payment timing when evaluating the adequacy of the allowance for doubtful accounts. The allowance is based on a specific review of all significant past-due accounts. If the financial condition of our customers deteriorates, resulting in an impairment of their ability to make payments, additional allowances may be required. Generally, accounts are charged off when decision is taken to no longer pursue collection.

Inventories

Inventories, consisting principally of hardware and component parts, are stated at the lower of cost or market. Cost is determined using the first-in-first-out (FIFO) method. We write down inventory where it appears that the carrying cost of the inventory may not be recovered through subsequent sale of the inventory. We analyze the quantity of inventory on hand, the quantity sold in the past year, the anticipated sales volume in the form of sales to new customers as well as sales to previous customers, the expected sales price and the cost of making the sale when evaluating the valuation of our inventory. If the sales volume or sales price of a specific model declines significantly, additional write downs may be required.

Property and Equipment

Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets ranging from three to seven years. Additions and improvements are capitalized, while expenditures for maintenance and repairs are charged to operations as incurred. Gains or losses resulting from sales or retirements are recorded as incurred, at which time related costs and accumulated depreciation are removed from the accounts. Depreciation expense for the years ended December 31, 2017, 2016, and 2015 of $1,792, $1,928, and $1,345, respectively, is included in operating expenses.

Long Term Investments

Included in Other Assets are minority equity investments in companies we believe may be beneficial in executing our strategy. At December 31, 2017 and 2016, investments were $4,361 and $4,073, respectively. In accordance with ASC 325, the investments are recorded at cost, which approximates fair value, and are evaluated for impairment annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Cost of Goods Sold

Included in product and license cost of goods sold are direct product costs. Cost of goods sold related to services and other revenues are primarily costs related to SaaS solutions, including personnel and equipment costs, and personnel costs of employees providing professional services and maintenance and support.

Research and Development Costs

Costs for research and development, principally the design and development of hardware, and the design and development of software prior to the determination of technological feasibility, are expensed as incurred on a project-by-project basis.

Software Development Costs

We capitalize software development costs in accordance with ASC 985-20, Costs of Software to be Sold, Leased, or Marketed. Research costs and software development costs, prior to the establishment of technological feasibility, determined based upon the creation of a working model, are expensed as incurred. Our software capitalization policy currently defines technological feasibility as a functioning beta test prototype with confirmed manufacturability (a working model), within a reasonably predictable range of costs. Additional criteria include receptive customers, or potential customers, as evidenced by interest expressed in a beta test prototype, at some suggested selling price. Our policy is to amortize capitalized costs by the greater of (a) the ratio that current gross revenue for a product bear to the total of current and anticipated future gross revenue for that product or (b) the straight-line method over the remaining estimated economic life of the product, generally two to five years, including the period being reported on. No software development costs were capitalized in any of the years ended December 31, 2017, 2016, or 2015.

Income Taxes

Our provision for income taxes includes amounts payable or refundable for the current year, the effects of deferred taxes and impacts from uncertain tax positions. We recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax basis of our assets and liabilities, operating loss carryforwards and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those differences are expected to reverse.

The realization of certain deferred tax assets is dependent on generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. When assessing the need for a valuation allowance, we consider any carryback potential, future reversals of existing taxable temporary differences (including liabilities for unrecognized tax benefits), future taxable income and tax planning strategies.

We have significant net operating loss and other deductible carryforwards in certain jurisdictions available to reduce the liability on future taxable income. A valuation allowance has been provided to offset some of these future benefits because we have not determined that their realization is more likely than not.

We recognize tax benefits in our financial statements from uncertain tax positions only if it is more likely than not that the tax position will be sustained based on the technical merits of the position. The amount we recognize is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon resolution. Future changes related to the expected resolution of uncertain tax positions could affect tax expense in the period when the change occurs.

We monitor changes in tax laws and reflect the impacts in the period of enactment. In response to the U.S. tax reform legislation enacted on December 22, 2017 (“Tax Reform”), the U.S. Securities and Exchange Commission (“SEC”) issued guidance (“SAB 118”) allowing provisional amounts for recording the impacts of Tax Reform. For provisions of Tax Reform where we are unable to make a reasonable estimate of the impact, the guidance allows continued application of historical tax provisions in computing our income tax liability and deferred tax assets and liabilities as of December 31, 2017. The guidance requires final accounting for Tax Reform within one year of the December 22, 2017 enactment date. See Note 6, Income Taxes, for additional information on the impacts of the Tax Reform.

Fair Value of Financial Instruments

At December 31, 2017, and 2016, our financial instruments were cash and equivalents, short term investments, accounts receivable, accounts payable and accrued liabilities. The estimated fair value of our financial instruments has been determined by using available market information and appropriate valuation methodologies, as defined in ASC 820, Fair Value Measurements. The fair values of the financial instruments were not materially different from their carrying amounts at December 31, 2017 and 2016.

Accounting for Leases

All of our leases are operating leases. Rent expense on facility leases is charged evenly over the life of the lease, regardless of the timing of actual payments.

Goodwill and Other Intangibles

Intangible assets arising from business combinations, such as acquired technology, customer relationships, and other intangible assets, are originally recorded at fair value. Intangible assets other than patents with definite lives are amortized over the useful life, generally three to seven years for proprietary technology and five to twelve years for customer relationships. Patents are amortized over the life of the patent, generally 20 years in the U.S.

Goodwill represents the excess of purchase price over the fair value of net identifiable assets acquired in a business combination. We assess the impairment of goodwill each November 30 or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company’s impairment assessment begins with a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. The qualitative assessment includes comparing the overall financial performance of the reporting unit against the planned results used in the last quantitative goodwill impairment test. Additionally, the reporting unit’s fair value is assessed in light of certain events and circumstances, including macroeconomic conditions, industry and market considerations, cost factors, and other relevant entity- and reporting unit specific events. The selection and assessment of qualitative factors used to determine whether it is more likely than not that the fair value of the reporting unit exceeds the carrying value involves significant judgments and estimates. If it is determined under the qualitative assessment that it is more likely than not that the fair value of the reporting unit is less than its carrying value, then a two-step quantitative impairment test is performed. Under the first step, the estimated fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. If the estimated fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation in acquisition accounting. The residual amount after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit under the two-step assessment is determined using a combination of both income and market-based variation approaches. The inputs and assumptions to valuation methods used to estimate the fair value of the reporting unit involves significant judgments.

During the third quarter of 2017, we determined certain events and circumstances resulted in a change in the composition of our reporting units. Previously, we considered the Company to be two reporting units, the operations of eSignLive and the remainder of our operations. Due to the continued integration of eSignLive operations and changes in management, we now consider the Company to be a single reporting unit. The change in the composition of our reporting units was reflected in our annual impairment test performed as of November 30.

Our qualitative assessment of our reporting unit did not indicate an impairment. Accordingly, we did not recognize any impairment for the year ended December 31, 2017.

Stock-Based Compensation

We have stock-based employee compensation plans, which are described more fully in Note 8. ASC 718, Compensation-Stock Compensation requires us to estimate the fair value of restricted stock granted to employees, directors and others and to record compensation expense equal to the estimated fair value. Compensation expense is recorded on a straight-line basis over the vesting period for time-based awards and on a graded basis for performance-based awards.. Forfeitures are recorded as incurred.

Retirement Benefits

We record annual expenses relating to its pension defined benefit plans based on calculations which include various actuarial assumptions, including discount rates, assumed asset rates of return, compensation increases, and turnover rates. We review our actuarial assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends. The effects of gains, losses, and prior service costs and credits are amortized over the average service life. The funded status, or projected benefit obligation less plan assets, for each plan, is reflected in our consolidated balance sheets using a December 31 measurement date.

Warranty

Warranties are provided on the sale of certain of our products and an accrual for estimated future claims is recorded at the time revenue is recognized. We estimate the cost based on past claims experience, sales history and other considerations. We regularly assess the adequacy of our estimates and adjust the amounts as necessary. Our standard practice is to provide a warranty on our hardware products for either a one or two year period after the date of purchase. Customers may purchase extended warranties covering periods from one to four years after the standard warranty period. We defer the revenue associated with the extended warranty and recognize it into income on a straight-line basis over the extended warranty period. We have historically experienced minimal actual claims over the warranty period.

Recently Issued Accounting Pronouncements

We adopted ASU 2015‑11, Inventory (Topic 330) – Simplifying the Measurement of Inventory as of January 1, 2017. ASU 2015‑11 requires measurement of inventory at the lower of cost or net realizable value, defined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Adoption of ASU 2015‑11 did not have a significant impact on our financial statements.

In September 2015, the FASB issued Accounting Standards Update No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, (ASU 2015-16), which eliminates the requirement for an acquirer to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. The ASU is effective for annual periods beginning after December 15, 2015 and interim periods within such annual periods and applies prospectively to adjustments to provisional amounts that occur after the effective date. We have adopted ASU 2015-16 in our consolidated financial statements as of January 1, 2016. Measurement period adjustments identified subsequent to December 31, 2015 for the eSignLive Acquisition, further described in Note 4 to the Consolidated Financial Statements, were recorded and disclosed in accordance with ASU 2015-16.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The standard creates a five-step model to achieve its core principle: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the separate performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers. In addition, entities must disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative disclosures are required about: (i) the nature, amount, timing and uncertainty of revenue under the entity’s contracts with customers; (ii) the significant judgments, and changes in judgments, made in applying the guidance to those contracts; and (iii) any assets recognized from the costs to obtain or fulfill a contract with a customer.

The FASB has issued numerous amendments to ASU 2014-09 from August 2015 through January 2018, which provides supplemental and clarifying guidance, as well as amend the effective date of the new standard.

The new standard is effective for us on January 1, 2018. We will adopt ASU 2014-09 on a modified-retrospective basis. Such method provides the cumulative effect from prior periods upon applying the new guidance to be recognized in our consolidated balance sheets as of the date of adoption, including an adjustment to retained earnings. Prior periods will not be retrospectively adjusted.

We expect this new guidance to have a material impact on the timing of revenue recognition for certain of our multiple element arrangements. Currently, software license revenue from term license sales (“Term Licenses”) is generally recognized ratably over the respective license term (“over time”) due to a lack of VSOE for the PCS that is provided during the Term License. Upon adoption of the new standard, we expect to recognize the portion of the transaction price allocated to the distinct Term License upon delivery of the software to the customer (“point in time”) and the non-license portion (e.g., PCS) of the transaction price over the respective PCS term (“over time”). During 2017, revenue recognized associated with term licenses, and related PCS, represented approximately 6% of 2017 consolidated revenues. At December 31, 2017, these term arrangements had remaining license periods ranging up to four years. Also, under legacy GAAP when professional services are provided in a Term License for which VSOE of PCS does not exist, the professional services fees are currently recognized over the PCS period as well, as it is typically longer than the period to deliver professional services. Under the new standard, the professional services will be considered a separate performance obligation, and we will recognize the portion of the transaction price allocated to the professional services as those services are performed. We also expect the adoption of the new standard to have a significant impact on the nature and extent of disclosures of contracts with customers and related costs.

We have determined the significant incremental costs incurred to obtain contracts with customers are sales commissions paid to our sales teams. Under legacy GAAP, we expense sales commissions as earned, and record such amounts as a component of Sales and marketing operating costs in our consolidated statements of operations. We recognized sales commission expense of $4,250 in the 2017. Under the new guidance, we expect to capitalize portions of our sales commissions as an asset, and amortize the benefit to expense over an amortization period that will include the expected contract renewals, which we currently estimate may be up to 7 years. However, we will apply the practical expedient to expense commissions as incurred when the amortization period is one year or less. In addition, we will allocate the costs of obtaining a contract in each contract to the performance obligations in the contract and amortize the allocated cost commensurate with the transfer of control of each respective performance obligation. This will generally result in a large portion of the capitalized cost of obtaining the contract to be recognized when software licenses or hardware is delivered to the customer, usually at the outset of the arrangement. At the date of the adoption of this new guidance, we expect to record an asset in our consolidated balance sheets for the amount of unamortized sales commissions for prior periods, as calculated under the new standard. We are finalizing the impact of this adjustment upon adoption of the new standard.

We continue to execute our implementation plan, which will continue through the filing of our consolidated interim financial statements for the period ended March 31, 2018. We are completing our stand-alone selling price analyses for certain goods and services, the evaluation of material rights in certain customer contracts, the income tax effect on our transition adjustments, and our evaluation of the new disclosure requirements. We are also finalizing on our newly developed processes and internal controls over revenue recognition and continue to implement system changes and enhancements.

We are in the process of evaluating all contracts not completed as of January 1, 2018, and we expect to record a material impact to retained earnings from the adoption of the new standard primarily due to the effect of Term License arrangements discussed above that would have been recognized as revenue in 2018 and beyond. For fiscal year 2018, we expect the financial impact of adoption of the new standard, which has the effect of reducing our 2018 revenue that would have been recognized under legacy GAAP, to be offset by the recognition of Term License revenue from newly executed contracts post-adoption that would have been deferred and recognized over multiple periods under legacy GAAP. However, our assessment of the foregoing is ongoing and subject to finalization, such that the actual impact of the adoption may differ materially from the discussion above.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard will replace most existing lease guidance in U.S. GAAP. The core principle of the ASU is the requirement for lessees to report a right to use asset and a lease payment obligation on the balance sheet but recognize expenses on their income statements in a manner similar to today’s accounting, and for lessors the guidance remains substantially similar to current U.S. GAAP. The ASU is effective for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2018. However, early adoption is permitted. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. We are in the process of evaluating the impact this standard will have on our consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Such guidance will impact how we account for our investments reported under the cost method of accounting as follows: Equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) will be required to be measured at fair value with changes in fair value recognized in net earnings. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The impairment assessment of equity investments without readily determinable fair values will require a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. We are currently evaluating the impact on our consolidated financial statements and related disclosures.

On March 30, 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, to improve accounting for share-based payment transactions as part of the FASB’s simplification initiative. The ASU changes certain aspects of accounting for share-based payment award transactions, including: (1) recognition of excess tax benefits and tax deficiencies as income tax expense or benefit instead of additional paid-in capital; (2) classification of excess tax benefits on the statement of cash flows, and (3) accounting for forfeitures. The other provisions of ASU 2016-09 are immaterial to the Company. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted. We have early adopted ASU 2016-09 in our consolidated financial statements as of January 1, 2016 and applicable aspects described were adopted prospectively. Prior periods were not retrospectively adjusted.

The adoption of ASU 2016-09 resulted in an increase to the tax provision of $169 that would have otherwise been debited to additional paid in capital. Similarly, as a result of the adoption of ASU 2016-09, cash flows from operating activities decreased $169 and cash flows from financing activities decreased by the same amount. The Company also elected to begin accounting for forfeitures when they occur. The impact of this policy change was immaterial to our consolidated financial statements. The impact of this ASU on future periods is dependent on our stock price at the time restricted stock awards vest.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (ASC 230) – Classification of Certain Cash Receipts and Cash Payments. This guidance clarifies eight specific cash flow issues in an effort to reduce diversity in practice in how certain transactions are classified within the statement of cash flows. This ASU is effective for the Company January 1, 2018, with early adoption permitted. Upon adoption, the ASU requires a retrospective application unless it is determined that it is impractical to do so in which case it must be retrospectively applied at the earliest date practical. The Company is currently evaluating the effect, if any, that the ASU will have on our consolidated financial statements and related disclosures.

In October 2016, the FASB issued ASU 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory. The new guidance is intended to simplify the accounting for intercompany asset transfers. The core principle requires an entity to immediately recognize the tax consequences of intercompany asset transfers. The ASU is effective for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2017. The Company will adopt this standard on January 1, 2018. We are currently evaluating the effect, if any, that the ASU will have on our consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations – Clarifying the Definition of a Business. This standard changes the definition of a business by requiring that at least one substantive process exist in the acquired entity. It also states that if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, then the set of transferred assets and activities is not a business. The guidance is effective for the Company beginning in the first quarter of 2018, and should be applied prospectively. Early adoption is permitted. The adoption of this standard is not expected to have a significant impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment. This standard eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (i.e. Step 2 of the current guidance), instead measuring the impairment charge as the excess of the reporting unit's carrying amount over its fair value (i.e. Step 1 of the current guidance). The guidance is effective for us beginning in the first quarter of 2020, and should be applied prospectively. Early adoption is permitted for impairment testing dates after January 1, 2017. The Company is currently evaluating the effect, if any, that the ASU will have on our consolidated financial statements and related disclosures.

In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (ASC 715) - Improving the Presentation of Net Periodic Pension Costs and Net Periodic Postretirement Benefit Cost. The new guidance will improve the presentation of pension cost by providing additional guidance on the presentation of net benefit cost in the income statement and on the components eligible for capitalization in assets. The core principle of the ASU is to provide more transparency in the presentation of these costs by requiring the service cost component to be reported in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented separately from the service cost component and outside a subtotal of income from operations. The amendments require that the Consolidated Statements of Income impacts be applied retrospectively, while Balance Sheet changes should be applied prospectively.

The ASU is effective for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2017. The Company will adopt the newly issued ASU as of January 1, 2018. The Company is currently evaluating the effect, if any, that the ASU will have on our consolidated financial statements and related disclosures.

Inventories

12 Months Ended

Dec. 31, 2017

Inventories

Inventories, net

Note 2 – Inventories

Inventories, consisting principally of hardware and component parts, are stated at the lower of cost or market.

Inventory is comprised of the following:


	December 31,
	2017		2016
Component parts	$	4,691	$	8,360
Work-in-process and finished goods		7,349		9,060
Total	$	12,040	$	17,420

Acquisition of eSignLive

12 Months Ended

Dec. 31, 2017

Acquisition of eSignLive

Acquisition of eSignLive

Note 3 – Acquisition of eSignLive

On November 25, 2015, we acquired Silanis Technology, Inc. (“eSignLive”), a privately-held provider of electronic signature and digital transaction solutions used to sign, send, and manage documents. Pursuant to the arrangement agreement, we acquired all of the issued and outstanding shares of eSignLive for an aggregate purchase price of $75,000 subject to further adjustment as provided in the arrangement agreement.

Upon acquisition, eSignLive became our wholly-owned subsidiary. The acquisition is accounted for as a business combination using the acquisition method accounting in accordance with FASB ASC Topic No. 805, Business Combinations, whereby the net assets acquired are recognized based on their estimated fair values on the acquisition date.

The results of operations of eSignLive subsequent to the acquisition date have been included in the Consolidated Statements of Operations. eSignLive revenue and net income (loss) included in the results of operations for the year ended December 31, 2015 were $541 and $(2,168), respectively.

Acquisition-related expense recognized during 2015 of approximately $2,374 is recorded in general and administrative expenses in the Consolidated Statements of Operations.

Aggregate Purchase Price Allocation

Purchase consideration has been allocated to assets and liabilities based on estimated acquisition-date fair values and are summarized in the following table:


	As initially
	reported
	on		Measurement
	December 31,		period		As
	2015		Adjustments		adjusted
Tangible assets and liabilities
Cash	$	514	$	96	$	610
Accounts receivable, net		4,471		(615)		3,856
Other current assets		4,234		(19)		4,215
Property and equipment		416		24		440
Current liabilities		(16,896)		1,576		(15,320)
Other non-current liabilities		(8,070)		5,731		(2,339)
Intangible assets		30,000		17,400		47,400
Goodwill		60,331		(24,419)		35,912
Net assets acquired	$	75,000	$	(226)	$	74,774

The excess of purchase consideration over net assets assumed was recorded as goodwill, which represents the strategic value assigned to eSignLive, including expected benefits from synergies resulting from the acquisition, as well as the knowledge and experience of the workforce in place. In accordance with applicable accounting standards, goodwill is not amortized and will be tested for impairment at least annually, or more frequently, if certain indicators are present. Goodwill and intangible assets related to this acquisition are not deductible for tax purposes.

The effect of measurement period adjustments recorded in the current period have been determined as if such adjustments had been accounted for at the acquisition date. Excluding prior measurement period adjustments reducing liabilities and goodwill each by $9,146, all measurement period adjustments were recorded in the fourth quarter of 2016 and resulted in a credit to the tax provision of $2,344.

The following table summarizes acquired intangible assets, as well as the respective amortization periods:


			Amortization
	Estimated		Period
Identifiable Intangible Assets	Fair Value		(Years)

Tradenames	$	2,400	10
Technology		10,000	5
Non-compete agreements		8,000	5
Customer Relationships		27,000	12
	$	47,400

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents the results of operations as if the acquisition had taken place on January 1, 2015. These amounts were prepared in accordance with the acquisition method of accounting under existing standards and are not necessarily indicative of the results of operations that would have occurred if the acquisition had been completed on the first day of 2015, nor are they indicative of our future operating results.

Income tax impacts resulting from pro forma adjustments were calculated utilizing the statutory income tax rate of 35% for the year ended December 31, 2015.

These unaudited pro forma amounts include the following adjustments to historical results shown net of tax;

- To reflect estimated amortization of acquired identifiable intangible assets of $6,060 for the year ended December 31, 2015.

- To reflect estimated amortization of fair value adjustment of acquired deferred revenue of $(4,000) for the year ended December 31, 2015.

- To reverse benefit of certain refundable tax credits of $1,021 for the year ended December 31, 2015.


	December 31,
	2015

Revenue	$	256,416
Net income	$	22,247

Goodwill

12 Months Ended

Dec. 31, 2017

Goodwill

Goodwill

Note 4 – Goodwill

Goodwill activity for the two years ended December 31, 2017 consisted of the following:


Net balance at December 31, 2015	$	80,853
eSignLive measurement period adjustments		(24,419)
Net foreign currency translation		(2,025)
Net balance at December 31, 2016	$	54,409
Additions		—
Net foreign currency translation		1,923
Net balance at December 31, 2017	$	56,332

There were no impairment losses in 2017, 2016, or 2015.

Certain portions of goodwill are denominated in local currencies and are subject to currency fluctuations.

Intangible Assets

12 Months Ended

Dec. 31, 2017

Intangible Assets

Intangible Assets

Note 5 – Intangible Assets

Intangible asset activity for the two years ended December 31, 2017 is detailed in the following table;


	Acquired		Customer				Total Intangible
	Technology		Relationships		Other		Assets
Net balance at December 31, 2015	$	34,632	$	828	$	2,510	$	37,970
Additions-eSignLive		(19,000)		26,600		9,800		17,400
Additions-Other		—		—		143		143
Net foreign currency translation		(58)		(57)		—		(115)
Amortization expense		(4,182)		(2,597)		(2,070)		(8,849)
Net balance at December 31, 2016		11,392		24,774		10,383		46,549
Additions-Other		—		—		151		151
Disposals-Other		—		—		(32)		(32)
Net foreign currency translation		16		13		—		29
Amortization expense		(4,462)		(2,243)		(2,104)		(8,809)
Net balance at December 31, 2017	$	6,946	$	22,544	$	8,398	$	37,888

December 31, 2017 balance at cost	$	37,294	$	27,831	$	13,381	$	78,506
Accumulated amortization		(30,348)		(5,287)		(4,983)		(40,618)
Net balance at December 31, 2017	$	6,946	$	22,544	$	8,398	$	37,888

Additions - eSignLive refers to intangible assets acquired in the acquisition of eSignLive described in Note 3 including capitalized technology, trademarks, customer relationships and non-compete agreements. Certain intangible assets are denominated in local currencies and are subject to currency fluctuations. Expected amortization of the intangible assets for the years ended:


December 31, 2018	$	7,324
December 31, 2019		6,213
December 31, 2020		5,878
December 31, 2021		2,578
December 31, 2022		2,578
Thereafter		12,218
Subject to amortization		36,789
Trademarks		1,099
Total intangible assets	$	37,888

Income Taxes

12 Months Ended

Dec. 31, 2017

Income Taxes

Income Taxes

Note 6 – Income Taxes

On December 22, 2017, U.S. Tax Reform (“Tax Reform”) was enacted including a broad range of complex provisions impacting the taxation of businesses. Effective in 2018, Tax Reform reduces the U.S. statutory tax rate from 35% to 21% and creates new taxes on certain foreign-sourced earnings which are referred to as the global intangible low-taxed income tax (“GILTI”). In addition, in 2017 we were subject to a one-time transition tax on accumulated foreign subsidiary earnings not previously subject to U.S. income tax.

Due to the timing of the enactment and the complexity involved in applying the provisions of Tax Reform, we have made reasonable estimates of the effects and recorded provisional amounts in our financial statements as of December 31, 2017. As we collect and prepare necessary data, and interpret Tax Reform and any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially impact our provision for income taxes and effective tax rate in the period in which the adjustments are made. The accounting for the tax effects of Tax Reform will be completed in 2018.

Provisional amounts for the following income tax effects of Tax Reform have been recorded as of December 31, 2017 and are subject to change during 2018.

Tax Reform provides a taxable one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits through December 31, 2017. Our undistributed earnings and profits of our foreign subsidiaries of approximately $187 million is subject to the repatriation tax. Accordingly, we provided a provisional amount of $18,246 of income tax expense in the fourth quarter ended December 31, 2017. After the utilization of existing tax credits, we expect to pay U.S. federal taxes of approximately $14,436 over eight years related to the repatriation tax.

As a result of Tax Reform, earnings of all foreign subsidiaries have been designated as available for distribution. Previously, earnings of certain foreign subsidiaries were deemed permanently reinvested. During the fourth quarter of 2017, we provisionally provided deferred income tax expense of $7,281 for foreign taxes on distributions from foreign subsidiaries previously designated as permanently reinvested. However, we do not have the necessary information gathered, prepared and analyzed to make a reasonable estimate of the impact of any remaining outside basis differences inherent in our foreign subsidiaries. We will gather the information necessary and compute the outside basis differences for those subsidiaries where we are no longer indefinitely reinvested and record any new deferred taxes as reasonable estimates are available.

Beginning in 2018, Tax Reform reduces the maximum U.S. corporate income tax rate from 35% to 21%. Accordingly, we have remeasured our deferred taxes as of December 31, 2017 to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized. We recognized a deferred tax expense of $2,339 to reflect the reduced U.S. tax rate of Tax Reform. Although the tax rate reduction is known, we have not collected the necessary data to complete our analysis of the effect of Tax Reform on the underlying deferred taxes and as such, the amounts recorded as of December 31, 2017 are provisional.

The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company expects that it will be subject to incremental U.S. tax on GILTI income beginning in 2018. FASB Topic 740 allows the company to treat GILTI as either a deferred tax asset or liability or to account for the impacts in the period in which it is incurred. The Company has not yet decided how to account for GILTI tax, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the year ended December 31, 2017.

Income before income taxes was generated in the following jurisdictions:


	For the year ended December 31,
	2017		2016		2015

Domestic	$	(1,877)	$	(11,170)	$	(5,007)
Foreign		10,258		22,547		55,862
Total	$	8,381	$	11,377	$	50,855

For the year ended December 31, 2017, 2016, and 2015, domestic income excludes taxable intercompany dividend income of $0, $8,825, and $10,000, respectively.

The provision for income taxes consists of the following:


	For the year ended December 31,
	2017		2016		2015
Current:
Federal	$	14,299	$	(90)	$	—
State		141		5		1
Foreign		3,287		5,915		9,140
Total current		17,727		5,830		9,141

Deferred:
Federal		6,043		(2,985)		338
State		(200)		115		(135)
Foreign		7,210		(2,097)		(640)
Total deferred		13,053		(4,967)		(437)
Total	$	30,780	$	863	$	8,704

The U.S. federal corporate tax rate varies with taxable income. Our U.S. statutory rate for 2017 was 35%. For 2016 and 2015, our U.S. statutory rate was 34%. The differences between the income tax provisions computed using the statutory federal income tax rate and the provisions for income taxes reported in the consolidated statements of operations are as follows:


	For the year ended December 31,
	2017		2016		2015

Expected tax at statutory rate	$	2,933	$	3,884	$	17,305
Foreign taxes at other rates		(3,139)		(7,512)		(12,487)
US tax on foreign earnings, net of foreign tax credits		(226)		(405)		1,968
Valuation allowances on NOL carryforwards		3,997		3,816		469
US tax reform - deemed repatriation		18,472		—		—
US tax reform - changes in indefinite reinvestment assertion		7,281		—		—
US tax reform - deferred tax expense from tax rate change		2,339		—		—
State income taxes, net of federal benefit		(59)		83		26
Disallowed expenses and other		(818)		997		1,423
Total	$	30,780	$	863	$	8,704

Significant components of our deferred tax assets and liabilities are as follows:


	As of December 31,
	2017		2016
Deferred tax assets:
U.S. foreign tax credit	$	—	$	7,027
Stock and long-term compensation plans		1,855		2,304
Foreign NOL & other carryforwards		20,864		16,340
US state NOL carryforwards		823		803
US alternative minimum tax		—		357
Deferred revenue		1,278		358
Pension liability, net		974		1,038
Reserve for uncertain tax issues		—		(445)
Amortization and depreciation		753		708
Accrued expenses and other		1,246		523
Total gross deferred tax assets		27,793		29,013
Less: Valuation allowance		(12,805)		(6,274)
Net deferred income tax assets	$	14,988	$	22,739

Deferred tax liabilities:
Accruals	$	506	$	691
US tax on unremitted foreign earnings		—		424
Foreign tax on unremitted foreign earnings		7,434		—
Intangible assets		9,341		10,947
Deferred tax liabilities	$	17,281	$	12,062

Net deferred tax assets (liabilities)	$	(2,293)	$	10,677

Deferred tax assets and liabilities are netted by tax jurisdiction.

For the year ended December 31, 2015, a portion of tax benefits related to certain restricted stock and stock options of $318 was credited to additional paid-in capital. Consistent with the adoption of ASU 2016-09, the tax impact for 2017 and 2016 of $46 and $169 was recorded as an increase to the tax provision.

At December 31, 2017, we had foreign and state net operating loss (NOL) carryforwards and other foreign deductible carryforwards as shown in the following table:


	Carryforward		Expiration
NOL Carryforward
Canada	$	48,622	2024-2037
Other foreign		14,451	None
Canada province		46,424	2024-2037
U.S. states		10,960	2019-2028
		120,457
Other Carryforwards
Canada		7,902	None
Canada province		22,033	None
Other foreign		1,226	2018
		31,161

	$	151,618

The net change in the valuation allowance for the year ended December 31, 2017 was an increase of $6,531 and decreases for the years ended December 31, 2016 and 2015 of $7,445 and $11,219, respectively. Valuation allowances are reviewed on a regular basis and adjustments made as appropriate. The increase in the valuation allowance in 2017 reflects NOLs for which the realization is not more likely than not. The change in the valuation allowance also reflects other factors including, but not limited to, changes in our assessment of our ability to use existing NOLs and other deduction carryforwards, changes in currency rates, and adjustments to reflect differences between the actual returns filed and the estimates we made at financial reporting dates. The company expects to generate taxable income to realize deferred tax assets net of valuation allowance in each jurisdiction.

Our policy is to record interest and penalties on income taxes as income tax expense. For the year ended December 31, 2017, 2016, and 2015 we provided $0, $51, and $0, respectively.

ASC 740, Income Taxes sets a “more likely than not” criterion for recognizing the tax benefit of uncertain tax positions. As of December 31, 2017, 2016, and 2015, we had a reserve of $107, $662, and $560, respectively.


	As of year ended December 31,
	2017		2016		2015
Reserve at beginning of year	$	662	$	560	$	560
Increases related to prior year tax positions		7		217		—
Lapse of statute of limitations		(562)		(115)		—
Total	$	107	$	662	$	560

Based on the possible expiration of the statute of limitations, it is reasonably possible that the liability for uncertain tax positions will change within the next twelve months. The associated tax impact on the effective tax rate is estimated to be a tax benefit of $107.

Our primary tax jurisdictions and the earliest tax year subject to audit are presented in the following table.


Australia		2009
Austria		2011
Belgium		2015
Canada		2013
Netherlands		2012
Singapore		2012
Switzerland		2016
United States		2014

Deferred Warranty Revenue and Warranty Reserve

12 Months Ended

Dec. 31, 2017

Deferred Warranty Revenue and Warranty Reserve

Deferred Warranty Revenue and Warranty Reserve

Note 7 – Deferred Warranty Revenue and Warranty Reserve

Our standard practice is to provide a warranty on our DIGIPASS hardware for one to two years after the date of purchase. Customers may purchase extended warranties covering periods from one to four years after the standard warranty period. We defer the revenue associated with the extended warranty and recognize it into income on a straight-line basis over the extended warranty period. The estimated cost of providing warranty services during the extended warranty period is less than the revenue related to such warranty service.

Deferred warranty revenue at December 31, 2017 will be recognized as revenue as follows:


Year	Amount
2018	$	12
2019		3
Total	$	15

We maintain a reserve for the potential cost of future warranty claims related to products sold and recognized in revenue. The reserve is included in accrued expenses. Activity in the warranty reserve account during the three years ended December 31, 2017 was as follows:


	For the year ended December 31,
	2017		2016		2015
Balance, beginning of period	$	153	$	43	$	85
Provision for warranty claims		80		165		165
Product or cash issued to settle claims		(139)		(55)		(207)
Balance, end of period	$	94	$	153	$	43

Stock Compensation Plans

12 Months Ended

Dec. 31, 2017

Stock Compensation Plans

Stock Compensation Plans

Note 8 – Stock Compensation Plans

In June 2009, our stockholders approved and in June 2014 our stockholders reapproved the VASCO Data Security International, Inc. 2009 Equity Incentive Plan (the “2009 Equity Plan”). The 2009 Equity Plan permits the issuance of awards in a variety of forms, including (1) shares of our common stock, (2) nonqualified and incentive stock options for the purchase of our common stock, (3) stock appreciation rights, (4) deferred stock, (5) other stock-based awards (including restricted shares, performance shares, performance units and other stock unit awards), and (6) cash incentive awards.

The 2009 Equity Plan may provide performance incentives to employees and non-employee directors, consultants and other key persons of the company. The plan are administered by the Compensation Committee as appointed by the Board of Directors and is intended to be a non-qualified plan.

As of December 31, 2017, the remaining number of shares allowed to be issued under the 2009 Equity Plan was 6,108 shares of the company’s common stock, representing 15.2% of the issued and outstanding shares of the company as of such date.

The following table summarizes compensation expense recorded under the two plans.


	For the year ended December 31,
	2017		2016		2015
Restricted stock	$	3,466	$	2,766	$	3,835
Long-term compensation plan		1,906		2,105		1,815
Total Compensation	$	5,372	$	4,871	$	5,650

Time-Based Restricted Stock

Time-based restricted stock awards granted to non-employee directors vest on the first anniversary date of the grant. Awards granted to an executive officer in 2017 vest in equal semi-annual installments over four years. Shares are subject to forfeiture if the service period requirement is not met. Compensation expense equal to the market value of the stock on the grant date is recorded on a straight-line basis over the vesting period as required by ASC 718 Compensation-Stock Compensation. Compensation expense was $2,148, $2,177, and $1,356 for 2017, 2016, and 2015, respectively. The following table summarizes the time-based restricted stock activity for the year ended December 31, 2017:


		Weighted
		average	Aggregate
		remaining	intrinsic
	Shares	term (years)	value
Outstanding at January 1, 2017	276	1.95	$	3,767
Shares vested	(110)			1,513
Shares awarded	120			1,717
Shares forfeited	(18)			337
Outstanding at December 31, 2017	269	1.58	$	3,736

The unamortized future compensation expense for time-based restricted stock awards was $2,734 at December 31, 2017.

Performance-Based Restricted Stock

Performance-based restricted stock awards granted to executive officers in 2017 were subject to achievement of three year performance targets established by the Board of Directors. Earned shares related to three-year targets vest upon completion of the three-year period. Shares are subject to forfeiture if the service period requirement is not met.

Compensation expense, equal to the market value of the stock on the grant date, is recorded on a graded basis over the vesting period at the performance level deemed probable, as required by ASC 718. Compensation expense in 2017, 2016, and 2015 was $1,318, $589, and $2,479. Unamortized future compensation expense for performance-based restricted stock was $892 at December 31, 2017.

The following table summarizes activity related to unvested performance restricted stock shares during 2017:


		Weighted
	Total	average	Aggregate
	Unvested	remaining	intrinsic
	Shares	term (years)	value
Outstanding at January 1, 2017	170	1.71	$	2,321
Shares vested	(25)			363
Shares awarded	171			2,573
Shares forfeited	(81)			1,190
Outstanding at December 31, 2017	236	1.85	$	3,276

At December 31, 2017, total unvested shares consists of 34 earned shares and 202 unearned shares.

Earnings per Common Share

12 Months Ended

Dec. 31, 2017

Earnings per Common Share

Earnings per Common Share

Note 9 – Earnings per Common Share

Basic earnings per share is based on the weighted average number of shares outstanding and excludes the dilutive effect of unvested common stock equivalents (45 shares in 2017). Diluted earnings per share is based on the weighted average number of shares outstanding and includes the dilutive effect of unvested common stock equivalents to the extent they are not anti-dilutive. A reconciliation of the shares included in the basic and fully diluted earnings per share calculations is as follows:


	For the year ended December 31,
	2017		2016		2015
Net income	$	(22,399)	$	10,514	$	42,151
Weighted average common shares outstanding:
Basic		39,802		39,719		39,568
Incremental shares with dilutive effect:
Restricted stock awards		—		63		168
Diluted		39,802		39,782		39,736

Basic income (loss) per share:
Total net income (loss) per share	$	(0.56)	$	0.27	$	1.07

Diluted income (loss) per share:
Total net income (loss) per share	$	(0.56)	$	0.27	$	1.06

Employee Benefit Plan

12 Months Ended

Dec. 31, 2017

Employee Benefit Plan

Employee Benefit Plan

Note 10 – Employee Benefit Plans

U.S. Plan

We maintain a defined contribution pension plan for U.S. employees established pursuant to Section 401(k) of the Internal Revenue Code. The plan allows voluntary employee contributions and discretionary employer contributions. For the years ended December 31, 2017, 2016, and 2015, we expensed contributions of $191, $167, and $110, respectively.

Non-U.S. Plan

We are subject to national mandatory pension systems and other compulsory plans, or make contributions to social pension funds based on local regulations. When our obligation is limited to the payment of the contribution into these plans or funds, the recognition of such liabilities is not required.

In addition, we have, in some countries, defined benefit plans consisting of final retirement salary and committed pension payments.

In Switzerland, the pension plan is a cash balance plan where contributions are expressed as a percentage of the pensionable salary. Contributions to Swiss plans are paid by the employees and the employer. The pension plan guarantees the amount accrued on the members’ savings accounts, as well as a minimum interest on those savings accounts. The plan assets are held in guaranteed investment contracts.

We also maintain a pension plan for our Belgian employees, in compliance with Belgian law. Contributions to Belgium plans are paid by the employees and the employer. Certain features of the plans require them to be categorized as defined benefit plans under ASC 715 due to Belgian social legislation, which prescribed a minimum annual return of 1.6% on employer contributions and 1.6% for employee contributions. The plan assets are held in guaranteed investment contracts.

Components of net periodic pension cost:


	Year ended December 31,
	2017		2016		2015

Service cost (gross)	$	1,397	$	783	$	601
Interest cost		188		243		261
Expected return on plan assets		(199)		(157)		(162)
Amortization of unrecognized actuarial gain		45		—		—
Net periodic pension cost	$	1,431	$	869	$	700

The net unfunded status of the Non-U.S. pension plans is as follows:


	As of December 31,
	2017		2016
Fair value of plan assets	$	12,390	$	11,024
Projected benefit obligation		(18,308)		(16,690)
Net unfunded benefit obligation	$	(5,918)	$	(5,666)

Net unfunded benefit obligation is recorded as other long-term liabilities in our consolidated balance sheets.

The change in the fair value of plan assets is as follows:


	Year ended December 31,
	2017		2016

Fair value of plan assets at January 1	$	11,024	$	9,264
Employee contributions		530		458
Actual return on plan assets		91		63
Benefits (paid), net of transfers		(1,277)		752
Employer contributions		992		832
Foreign exchange adjustment		1,030		(345)
Fair value of plan assets at December 31	$	12,390	$	11,024

The change in benefit obligations is as follows:


	Year ended December 31,
	2017		2016

Benefit obligations at January 1	$	16,690	$	12,674
Gross service cost		1,397		783
Interest cost		188		243
Employee contributions		530		458
Actuarial losses		30		2,296
Plan amendment		(356)		—
Benefits (paid), net of transfers		(1,277)		752
Foreign exchange adjustment		1,106		(516)
Benefit obligations at December 31	$	18,308	$	16,690

Our investment policy meets our responsibility under local social legislation and aligns plan assets with liabilities, while minimizing risk. For the years ended December 31, 2017 and 2016, plan assets are invested in guaranteed investment contracts. Fair value of guaranteed investment contracts is surrender value. Fair value is determined using Level 3 inputs as defined by ASC 820, Fair Value Measurements.

The net periodic cost for 2018 will include the amortization of prior service cost and unrecognized actuarial gains, currently included in Accumulated other comprehensive loss, of $89.

The accumulated benefit obligation for the plans were $7,984 and $8,247 as of December 31, 2017 and 2016, respectively.

Actuarial Assumptions

Certain actuarial assumptions such as the discount rate and the long-term rate of return on plan assets have a significant effect on the amounts reported for net periodic cost and the benefit obligation. The assumed discount rates reflect the prevailing market rates of a universe of high-quality, non-callable, corporate bonds currently available that, if the obligation were settled at the measurement date, would provide the necessary future cash flows to pay the benefit obligation when due. In determining the long-term return on plan assets, the Company considers long-term rates of return of comparable low risk investments, such as Euro AA bonds.

The following weighted average assumptions were utilized in pension calculations:


	As of December 31, 2017
	2017			2016
	(%)
Discount rates	0.7	-	1.5	0.7	-	1.6
Inflation	1.0	-	1.8	1.0	-	1.8
Expected return on plan assets	1.3	-	2.0	1.3	-	2.0
Rate of salary increases	2.0	-	2.8	2.0	-	2.8

Project future pension benefits as of December 31, 2017:


2018	$	529
2019		460
2020		478
2021		742
2022		1,169
Beyond		4,044

Geographic, Customer and Supplier Information

12 Months Ended

Dec. 31, 2017

Geographic, Customer and Supplier Information

Geographic, Customer and Supplier Information

Note 11 – Geographic, Customer and Supplier Information

In prior years, we classified our sales by our customers’ locations in four geographic regions: 1) EMEA, which included Europe, the Middle East and Africa; 2) the United States, which for our purposes included sales in Canada; 3) Asia Pacific Rim; and 4) Other Countries, including Australia, Latin America and India. In 2017, we reorganized this structure into three groups by eliminating the other countries category. United States has been renamed the Americas and now includes Latin America and Canada. Australia and India are now included with Asia/Pacific. Data for 2015 and 2016 have been adjusted to agree to the new structure. Information regarding geographic areas for the years ended December 31, 2017, 2016, and 2015 is as follows:


	Europe,
	Middle East,
	Africa (EMEA)		Americas		Asia Pacific		Total
2017
Revenue	$	92,859	$	52,981	$	47,451	$	193,291
Gross profit		61,506		41,491		31,517		134,514
Long-lived assets		8,437		897		68		9,401

2016
Revenue	$	95,897	$	33,204	$	63,203	$	192,304
Gross profit		67,008		21,519		42,130		130,657
Long-lived assets		7,013		634		74		7,721

2015
Revenue	$	164,180	$	25,596	$	51,667	$	241,443
Gross profit		92,916		18,416		32,207		143,540
Long-lived assets		2,778		620		63		3,461

For the years 2017, 2016, and 2015, our top 10 customers contributed 27%, 36% and 50%, respectively, of total worldwide revenue. In 2015, one customer accounted for approximately 30%, of total revenue. The majority of our products are manufactured by four independent vendors, headquartered in Hong Kong and Macau. Our hardware DIGIPASSES are assembled at facilities in mainland China.

Commitments and Contingencies

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies

Commitments and Contingencies

Note 12 – Commitments and Contingencies

The company leases office space and automobiles under operating lease agreements. Future minimum rental payments required under non-cancelable leases are as follows:


Year	Amount
2018	$	3,487
2019		2,803
2020		2,181
2021		1,748
2022		1,359
Thereafter		5,605
Total	$	17,183

Rent expense under operating leases aggregated $3,806, $3,384 and $2,998 for the years ended December 31, 2017, 2016, and 2015, respectively. Rent expense is recorded on a straight-line basis over the life of the lease agreement.

At December 31, 2017, we have inventory purchase obligations of $14,985. We expect all purchase obligations will be consummated within twelve months.

We include various types of indemnification clauses in our agreements. These indemnifications may include, but are not limited to, infringement claims related to our intellectual property, direct damages and consequential damages. The type and amount of such indemnifications vary substantially based on our assessment of risk and reward associated with each agreement. We believe the estimated fair value of these indemnification clauses is minimal, and we cannot determine the maximum amount of potential future payments, if any, related to such indemnification provisions. We have no liabilities recorded for these clauses as of December 31, 2017.

During the second quarter of 2015, our management became aware that certain of our products which were sold by our European subsidiary to a third-party distributor may have been resold by the distributor to parties in Iran, potentially including parties whose property and interests in property may be blocked pursuant to Executive Order 13224, Executive Order 13382 or that may be identified under Section 560.304 of 31 C.F.R. Part 560 as the “Government of Iran”.

We ceased shipping to such distributor. In addition, the Audit Committee of the Company’s Board of Directors initiated an internal review of this matter with the assistance of outside counsel. As a precautionary matter, concurrent initial notices of voluntary disclosure were submitted on June 25, 2015 to each of the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”), and the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”).

The Audit Committee with the assistance of outside counsel completed their review in 2015. On December 15, 2015, we filed a letter with BIS (Office of Export Enforcement) with the conclusion that the products supplied to the distributor were not subject to United States Export Control jurisdiction. The Office of Export Enforcement issued a “no action” letter, concluding the voluntary self-disclosure process under the Export Administration Regulations.

In addition, on January 13, 2016, we filed a letter with OFAC, with the conclusions that VASCO and its subsidiaries made no direct sales to Iran or any party listed by OFAC as a Specially Designated National over the five-year period under review (i.e., June 1, 2010 to June 30, 2015). The letter further noted that the investigation did not identify any involvement on the part of senior management officials of VASCO, and to the contrary, noted that VASCO executive management officials had sought to implement procedures and provided notices to VASCO’s sales personnel to prevent the diversion of VASCO products to unauthorized destinations and end users.

We have not received any response to the letter to OFAC and we cannot predict when OFAC will conclude their review of our voluntary self-disclosures. Based upon the OFAC guidelines for monetary penalties, in the fourth quarter of 2015, we accrued $900 for potential penalties if they are assessed by OFAC. Ultimately no penalty may be assessed or the penalty may be less or greater than the accrual, but in any event we do not believe that the final settlement will have a material adverse impact on our business.

On January 10, 2011, we purchased our wholly-owned subsidiary, DigiNotar B.V., a private company organized and existing in The Netherlands from the shareholders (“Sellers”). On September 19, 2011, DigiNotar B.V. filed a bankruptcy petition under Article 4 of the Dutch Bankruptcy Act in the Haarlem District Court, The Netherlands. On September 20, 2011, the court declared DigiNotar B.V. bankrupt and appointed a bankruptcy trustee and a bankruptcy judge to manage all affairs of DigiNotar B.V. through the bankruptcy process. The trustee took over management of DigiNotar B.V.’s business activities and is responsible for the administration and liquidation of DigiNotar B.V. In connection with the bankruptcy of DigiNotar B.V., subsequent to September 20, 2011, a number of claims and counter-claims were filed with the courts in The Netherlands (collectively, the “Court”) related to discontinued assets and discontinued liabilities and other available remedies. In November 2014, all matters with the Sellers related to the sale of DigiNotar B.V.were settled.

In January 2015, we received a notice of potential claim by the trustee against all of the individuals who served as Directors of DigiNotar, both before and after our acquisition of DigiNotar. T. Kendall Hunt, Jan Valcke, and Clifford K. Bown were the Directors of DigiNotar following its purchase by VASCO. The basis for the potential claim from the trustee appears to be based primarily on the same arguments that VASCO presented in its case against the sellers, which were adjudicated in VASCO’s favor. While we believe that we have strong defenses against the claim, we have also notified our provider of director and officer insurance and we are pursuing a settlement of the matter. We do not expect the resolution of the potential claim to have a material adverse effect on our business, financial condition or results of operations. VASCO is indemnifying Messrs. Hunt, Valcke, and Bown for this matter.

On July 28, 2015 a putative class action complaint was filed in the United States District Court for the Northern District of Illinois, captioned Linda J. Rossbach v. Vasco Data Security International, Inc., et al., case number 1:15‑cv‑06605, naming VASCO and certain of its current and former executive officers as defendants and alleging violations under the Securities Exchange Act of 1934, as amended. The suit was purportedly filed on behalf of a putative class of investors who purchased VASCO securities between April 28, 2015 and July 28, 2015, and seeks to recover damages allegedly caused by the defendants’ alleged violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b‑5 promulgated thereunder. The complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys’ fees. Pursuant to a September 1, 2015 scheduling order entered by the court, the lead plaintiff, once appointed, will have sixty days to file an amended complaint or notify the defendants that the lead plaintiff intends to rely on the current complaint. On January 30, 2017, the appointed lead plaintiff filed an amended complaint in which the allegations regarding OFAC related matters were dropped and replaced with allegations regarding public disclosures made by the defendants in April 2015 as compared to public statements made in July 2015, generally regarding the strength of the Company’s business and its future prospects. This case is now referred to by the name of the new lead plaintiff, Bunk. The defendants filed a motion to dismiss the Bunk complaint on March 31, 2017. A decision from the court on such motion has not been issued to date. Although the ultimate outcome of litigation cannot be predicted with certainty, the Company believes that this lawsuit is without merit and intends to defend against the action vigorously. VASCO is indemnifying its officers and directors for this matter.

On October 9, 2015, a derivative complaint was filed in the United States District Court for the Northern District of Illinois, captioned Elizabeth Herrera v. Hunt, et al., case number 1:15‑cv‑08937, naming VASCO’s Board of Directors and certain of its current and former executive officers as individual defendants and the Company as a nominal defendant. Two additional complaints, captioned Beth Seltzer v. Hunt, et al., case number 2015‑ch‑15541, and William Hooper v. Hunt, et al., case number 2016‑ch‑04054, were filed on October 22, 2015 and March 22, 2016, respectively, in the Circuit Court of Cook County, Illinois naming the same defendants.

The complaints assert, among other things, that the individual defendants breached their fiduciary duties by making material misstatements in, and omitting material information from, the Company’s public disclosures and by failing to maintain adequate internal controls and properly manage the Company. Among other things, the complaints seek unspecified compensatory damages and injunctive relief.

On October 29, 2015, a defendant removed the Seltzer action to the United States District Court for the Northern District of Illinois. Thereafter, the plaintiff filed a motion to remand the action back to the Circuit Court of Cook County, Illinois, which was denied on February 3, 2016. On February 9, 2016, the court granted an agreed motion for voluntary dismissal of the Seltzer action, which dismissed the action with prejudice as to the named plaintiff’s individual claims. As for the Hooper action, the court granted a stay on June 8, 2016 and on July 18, 2017, the plaintiff in Hooper amended the complaint to largely mirror the amended complaint in Bunk.

On July 19, 2017, a derivative complaint was filed in the Circuit Court of Cook County, Illinois, captioned Fancesco D’Angelo v. Hunt, et. al., naming VASCO’s Board of Directors and certain former officers as individual defendants and the Company as a nominal defendant. This complaint largely follows the allegations in the Bunk case. The D’Angelo case has been consolidated with the Hooper case and remains subject to stay.

In February 2017, we learned an integrated reseller and certain end customers, were named as defendants in a patent infringement lawsuit in Japan related to our CRONTO technology. We have indemnification obligations in favor of our reseller and end customers and are working with them to defend such suit. In December 2017 the Japan Patent Office ruled the plaintiff’s patent is invalid. In February 2018, a trial court decision declared the plaintiff’s patent to be invalid. The decision is subject to appeal. We believe there are strong grounds to argue the plaintiff’s patent is invalid

On March 14, 2017, a complaint was filed in the United States District Court for the District of Massachusetts, captioned StrikeForce Technologies, Inc. v. Vasco Data Security International, Inc., et al., claiming VASCO infringed on certain patent rights of the plaintiff. On May 8, 2017, VASCO answered the complaint denying the allegations of patent infringement. The parties then engaged in motion practice and discovery in the case. The plaintiff has also brought suit against various other companies in the cybersecurity industry. In one such suit in the federal district court for the Central District of California, on December 1, 2017, the court granted defendant’s motion to dismiss, finding that the StrikeForce asserted claims are invalid. StrikeForce is in the process of appealing such decision. In light of such ruling, on December 20, 2017, the court in the Company’s case granted a stay of the proceedings pending the appeal in the related case. Although the ultimate outcome of litigation cannot be predicted with certainty, the Company believes that this lawsuit is without merit and intends to defend itself vigorously.

On February 14, 2018, a complaint was filed in the United States District Court for the District of Delaware, captioned Vortex Pathway LLC (a Texas non-practicing entity) v. VASCO Data Security International, Inc. et. al. claiming one of VASCO’s hardware authenticators infringes on certain patent rights of the plaintiff. The Company will analyze this recent complaint in the ordinary course and intends to defend itself vigorously.

From time to time, we have been involved in litigation incidental to the conduct of our business. Excluding matters disclosed above, we are not a party to any lawsuit or proceeding that, in management’s opinion, is likely to have a material adverse effect on its business, financial condition or results of operations.

Quarterly Results of Operations (unaudited)

12 Months Ended

Dec. 31, 2017

Quarterly Results of Operations (unaudited)

Quarterly Results of Operations (unaudited)

Note 13 – Quarterly Results of Operations (unaudited)

The quarterly results of operations are as follows:


	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
2017
Total revenues	$	41,965		45,694		51,126		54,506
Gross profit		29,912		32,048		36,646		35,908
Operating costs		29,610		32,448		31,534		34,730
Operating income (loss)		302		(400)		5,112		1,178
Net income (loss)		573		110		2,755		(25,837)
Net income/(loss) per share:
Basic	$	0.01	$	0.00	$	0.07	$	(0.65)
Diluted	$	0.01	$	0.00	$	0.07	$	(0.65)

2016
Total revenues	$	46,767	$	54,293	$	43,648	$	47,597
Gross profit		32,104		36,551		30,050		31,954
Operating costs		28,990		33,165		29,138		29,765
Operating income		3,115		3,386		912		2,186
Net income (loss)		2,199		2,825		478		5,012
Net income/(loss) per share:
Basic	$	0.06	$	0.07	$	0.01	$	0.13
Diluted	$	0.06	$	0.07	$	0.01	$	0.13

The fourth quarter of 2017 Net loss includes a significant change due to the impact of Tax Reform, see Note 6.

Related Party	12 Months Ended
Related Party	Dec. 31, 2017
Related Party
Related Party	Note 14 – Related Party In August 2017, Able N.V. (“Able”), a wholly-owned subsidiary, was sold to an employee of Able for a de minimis amount. The operating results of Able through the date of sale are included in the consolidated financial statements and are not significant to our consolidated results. In addition, our results for the third quarter include a loss on sale of approximately $227, recorded within general and administrative expenses. Concurrent with the sale, we provided Able an unsecured line of credit of 1,500 Euro ($1,770 at an exchange rate of $1.18 dollars per Euro). Interest accrues at the rate of 2% per annum. Beginning in August 2017, Able may take advances against the line of credit for a period of eighteen months followed by twelve quarterly repayments. As of December 31, 2017, no amounts have been advanced. In addition, we entered into a transition services agreement with Able whereby we agreed to provide certain administrative services for a period of three months and Able agreed to provide office space and consulting services for an agreed upon periodic fee as long as the services are provided.

Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2017

Valuation and Qualifying Accounts

Valuation and Qualifying Accounts

SCHEDULE II

VASCO DATA SECURITY INTERNATIONAL, INC.

VALUATION AND QUALIFYING ACCOUNTS

Allowance for doubtful accounts for trade receivables.




			Provision		Foreign
	Beginning		for Bad		Currency	Ending
For the year ended December 31,	Balance		Debts	Chargeoffs	Translation	Balance
2017	$	535	120	(137)	2	$	520
2016	$	621	(85)	—	(1)	$	535
2015	$	223	686	(293)	5	$	621

See accompanying independent auditors’ report.

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Summary of Significant Accounting Policies

Nature of Operations

In accordance with ASC 280, Segment Reporting, our operations are reported as a single operating segment.

Revision of Previously Issued Financial Statements


Consolidated Balance Sheet
	As of December 31, 2016
	As previously
	Reported		Adjustment		Corrected

Other long-term liabilities	$	1,878	$	3,831	$	5,709
Deferred income taxes		853		(414)		439
Total liabilities		70,691	$	3,417		74,108

Accumulated other comprehensive Income (loss)		(9,493)	$	(3,417)		(12,910)
Total stockholders' equity		256,579		(3,417)		253,162
Total liabilities and stockholders' equity	$	327,270	$	—	$	327,270


Consolidated Statements of Comprehensive Income (Loss)	For the year ended December 31, 2016
	As previously
	Reported		Adjustment		Corrected
Net income (loss)	$	10,514	$	—	$	10,514
Other comprehensive income (loss):
Cumulative translation adjustment, net		(2,488)		—		(2,488)
Pension adjustment, net		(1,211)		(525)		(1,736)
Comprehensive income (loss)	$	6,815	$	(525)	$	6,290

	For the year ended December 31, 2015
	As previously
	Reported		Adjustment		Corrected
Net income (loss)	$	42,151	$	—	$	42,151
Other comprehensive income (loss):
Cumulative translation adjustment, net		(3,292)		—		(3,292)
Pension adjustment, net		—		(552)		(552)
Comprehensive income (loss)	$	38,859	$	(552)	$	38,307

Consolidated Statements of Stockholders’ Equity


	Accumulated Other Comprehensive Income
	As previously
	Reported		Adjustment		Corrected
Balance at January 1, 2015	$	(2,502)	$	(2,340)	$	(4,842)
Foreign currency translation adjustment, net		(3,292)		—		(3,292)
Pension adjustment, net of tax of $70		—		(552)		(552)
Balance at December 31, 2015		(5,794)		(2,892)		(8,686)
Foreign currency translation adjustment, net		(2,488)		—		(2,488)
Pension adjustment, net of tax of $509		(1,211)		(525)		(1,736)
Balance at December 31, 2016	$	(9,493)	$	(3,417)	$	(12,910)


	Total Stockholders' Equity
	As previously
	Reported		Adjustment		Corrected
Balance at January 1, 2015	$	205,873	$	(2,340)	$	203,533
Net income		42,151				42,151
Foreign currency translation adjustment, net		(3,292)				(3,292)
Restricted stock		3,835				3,835
Tax payments for stock issuances		(837)				(837)
Tax benefits of stock based compensation		318				318
Pension adjustment, net of tax of $70		—		(552)		(552)
Balance at December 31, 2015		248,048		(2,892)		245,156
Net income		10,514				10,514
Foreign currency translation adjustment, net		(2,488)				(2,488)
Restricted stock		2,766				2,766
Tax payments for stock issuances		(1,051)				(1,051)
Pension adjustment, net of tax of $509		(1,211)		(525)		(1,736)
Balance at December 31, 2016	$	256,578	$	(3,417)	$	253,161