Mail Stop 4561
January 31, 2006
Ben Barnes
ActivCard Corp.
6623 Dumbarton Circle
Fremont, CA 94555
Re: ActivCard Corp.
Form 10-K for Fiscal Year Ended September 30, 2005
Filed December 28, 2005
File No. 000-50223
Dear Mr. Barnes:
We have reviewed the above referenced filing and have the
following comments. Please note that we have limited our review
to
the matters addressed in the comments below. We may ask you to
provide us with supplemental information so we may better
understand
your disclosure. Please be as detailed as necessary in your
explanation. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for the Fiscal Year Ended September 30, 2005
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Results of Operations, page 14
1. We note your explanations surrounding the significant changes
in
your results of operations during 2005. Tell us how you
considered
Item 303 of Regulation S-K and Section IV of the "Commission
Guidance
Regarding Management`s Discussion and Analysis of Financial
Condition
and Results of Operations" (Release No. 34-48960) regarding your
MD&A
disclosures. For example, we note your disclosure, among others,
that "the increase in software revenue of 37% in fiscal 2005
compared
to the twelve months ended September 30, 2004 resulted primarily
from
increased sales to your enterprise customers." Tell us more about
the factors that led to your increase in sales including whether
management believes that these factors are a material trend that
will
impact future sales. One of the principal objectives of MD&A is
to
give readers a view of the company through the eyes of management
by
providing both a short and long-term analysis of the business. To
do
this, companies should identify and address those key variables
and
other qualitative and quantitative factors which are peculiar to
and
necessary for an understanding and evaluation of the individual
company.
Liquidity and Capital Resources, page 22
2. Your filing should discuss long-term and short-term needs and
sources of capital. In this regard, clearly indicate the
principal
sources of liquidity to focus on the primary drivers and other
material factors necessary to understand your cash flows and the
indicative value of historical cash flows as opposed to a
recitation
of amounts that are readily computable from the face of the
financial
statements. For example, it appears that operations have been a
significant use of cash, however, it is not clear how you plan to
manage your cash needs under these circumstances. Indicate
whether
this trend will continue and describe any plans to reverse this
use
of cash. The disclosure should clearly indicate the sources of
cash
to continue to fund operations over the long-term and the
availability of that source. Tell us how you considered Item 303
of
Regulation S-K and Section IV of the "Commission Guidance
Regarding
Management`s Discussion and Analysis of Financial Condition and
Results of Operations" (Release No. 34-48960) regarding your MD&A
disclosures.
Notes to Consolidated Financial Statements
1. Nature of Business and Summary of Significant Accounting
Policies,
page 47
Revenue Recognition, page 49
3. We note the phrase "rights to multiple software products"
included
within your critical accounting policies and notes to consolidated
financial statements. Tell us more about these "rights" as they
relate to your software arrangements. In this regard, tell us
whether the customer is able to exchange the right to use one
software product with the right to use another during the term of
the
software arrangement. Indicate how you are accounting for these
rights.
11. Restructuring Liability, page 62
4. We note that you accounted for the restructuring events
subsequent
to December 15, 2002 under SFAS 146. Note that SFAS 146 applies
to
costs including termination benefits provided to current employees
that are involuntarily terminated under the terms of a benefit
arrangement that is referred to as a one-time termination benefit.
In light of the fact that you initiated at least one restructuring
event during each year beginning 2002, explain how these events
meet
the definition of a one-time termination benefit. Refer to
paragraph
8 of SFAS 146. In this regard, explain how you evaluated whether
these benefits should be subject to SFAS 112. See FSP 146-1.
5. We note your disclosures regarding the restructuring expenses
incurred during fiscal years 2003 through 2005. In this regard,
tell
us whether management considers these events to be a trend that
will
have, or is reasonably likely to have, a material impact on the
company`s future operating results. See SAB Topic 5(P)(4). Note
that one of the principal objectives of MD&A is to provide
information about the quality and potential variability of a
company`s earnings and cash flow, so that readers can ascertain
the
likelihood that past performance is indicative of future
performance.
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. Please submit
all
correspondence and supplemental materials on EDGAR as required by
Rule 101 of Regulation S-T. You may wish to provide us with
marked
copies of any amendment to expedite our review. Please furnish a
cover letter with any amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing any amendment and your
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Jason Niethamer at 202-551-3855 or me at 202-
551-3730 if you have questions regarding the above comments.
Sincerely,
Stephen Krikorian
Accounting Branch Chief
Ben Barnes
ActivCard Corp.
January 31, 2006
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