Room 4561
June 16, 2006
Kenneth D. Denman
Chairman and Chief Executive Officer
iPass, Inc.
3800 Bridge Parkway
Redwood Shores, CA 94065
Re: iPass, Inc.
Form 10-K for Fiscal Year Ended December 31, 2005
Filed March 16, 2006
Form 10-Q for the Quarterly Period Ended March 31, 2006
Filed May 10, 2006
Form 8-K Filed May 9, 2006
File no. 0-50327
Dear Mr. Denman:
We have reviewed the above referenced filings and have the
following comments. Please note that we have limited our review
to
the matters addressed in the comments below. Where indicated, we
think you should revise your document in response to these
comments.
If you disagree, we will consider your explanation as to why our
comment is inapplicable or a revision is unnecessary. Please be
as
detailed as necessary in your explanation. In some of our
comments,
we may ask you to provide us with supplemental information so we
may
better understand your disclosure. After reviewing this
information,
we may or may not raise additional comments.
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 December 31, 2005
Consolidated Statement of Operations, page 41
1. We note that you offer license products and services to you
customers. Tell us how you considered Rule 5-03(b)(1) and (2) of
Regulation S-X to separately disclose product and service revenue
and
their respective costs.
Form 10-Q for the Quarterly Period Ended March 31, 2006
Note 6. Business Combinations, page 14
2. We note your disclosures relating to the Company`s acquisition
of
GoRemote and related purchase price allocation to the fair value
of
assets and liabilities acquired. Explain the following as it
relates
to this acquisition and purchase price allocation:
* The factors that contributed to a purchase price that resulted
in
the recognition of approximately $62 million of goodwill;
* The methods and assumptions used to identify value and determine
the useful lives of intangible assets. Specifically address the
intangible assets recorded by the Company in connection with the
acquisition and the Company`s consideration of paragraph A14 of
SFAS
141 (leases; etc.);
* How the Company considered EITF 04-1 in accounting for pre-
existing
relationships with GoRemote;
* The methods and assumptions used to determine the allocation of
goodwill recorded to reporting units.
We may have further comment based on your response.
Item 4. Controls and Procedures
Disclosure Controls and Procedures, page 30
3. We note your definition of "disclosure controls and procedures"
included in your disclosure is significantly more limited than
what
is called for under Rule 13a-15(e) of the Exchange Act. The rule
requires, among other matters, that the disclosure controls and
procedures be designed to ensure that information required to be
disclosed in the reports that you file or submit under the
Exchange
Act is accumulated and communicated to your management, including
your chief executive officer and chief financial officer, to allow
timely decisions regarding required disclosure. Tell us whether
your
disclosure controls and procedures for the relevant periods met
all
of the requirements of this section. Additionally, tell us how
you
intend to comply with this requirement by including this statement
in
your controls and procedures section of your subsequent periodic
reports.
Limitations of Disclosure Controls and Procedures and Internal
Control Over Financial Reporting, page 31
4. We note your disclosure regarding the limitations on the
effectiveness of controls, including your statement that "a
control
system, no matter how well conceived and operated, can provide
only
reasonable, but not absolute, assurance that the objectives of the
internal control system are met." This disclosure should be
presented prior to your conclusions on the effectiveness of your
disclosure controls and procedures and internal control over
financial reporting. Additionally, if you continue to include a
discussion of the limitations on the effectiveness of controls,
your
conclusions should state clearly, if true, that your disclosure
controls and procedures and internal controls over financial
reporting are designed to provide reasonable assurance of
achieving
their objectives and that your principal executive offer and
principal financial officer concluded that these controls are
effective at that reasonable assurance level. Alternatively,
remove
the reference to the level of assurance of your disclosure
controls
and procedures and internal controls over financial reporting.
Please refer to Section II.F.4 of Management`s Reports on Internal
Control Over Financial Reporting and Certification of Disclosure
in
Exchange Act Periodic Reports, SEC Release No. 33-8238, available
at
our website at http://www.sec.gov/rules/final/33-8238.htm. Tell
us
how you intend to comply with this release.
Form 8-K Filed May 9, 2006
5. We note your use of non-GAAP measures under Item 9.01 of the
Form
8-K noted above which excludes a number of recurring items. Tell
us
how you considered Question 8 of Frequently Asked Questions
Regarding
the Use of Non-GAAP Financial Measures to include the following
disclosures for each of your non-GAAP measures (i.e. non-GAAP net
income and non-GAAP diluted net income per share):
* the economic substance behind management`s decision to use such
a
measure;
* the material limitations associated with use of the non-GAAP
financial measure as compared to the use of the most directly
comparable GAAP financial measure;
* the manner in which management compensates for these limitations
when using the non-GAAP financial measure; and
* the substantive reasons why management believes the non-GAAP
financial measure provides useful information to investors.
In this regard, we believe you should further enhance your
disclosures to comply with Item 10(e)(1)(i)(C) and (D) of
Regulation S-K and Question 8 of the related FAQ to
demonstrate
the usefulness of your non-GAAP financial measures which
excludes
a number of recurring items, especially since these measures
appear
to be used to evaluate performance. Your current disclosures
regarding the reasons for presenting these non-GAAP measures
appear overly broad considering that companies and investors
may
differ as to which items warrant adjustment and what constitutes
core operating results.
As appropriate, please amend your filing and 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 reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed 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 Kari Jin, Staff Accountant, at (202) 551-
3481,
Tom Ferraro, Senior Staff Accountant at (202) 551-3225 or me at
(202)
551-3730 if you have questions regarding these comments.
Sincerely,
Kathleen Collins
Accounting Branch Chief
Mr. Kenneth D. Denman
iPass Inc.
June 16, 2006
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