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<SEC-DOCUMENT>0001193125-09-218769.txt : 20091030
<SEC-HEADER>0001193125-09-218769.hdr.sgml : 20091030
<ACCEPTANCE-DATETIME>20091030151114
ACCESSION NUMBER:		0001193125-09-218769
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20091027
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20091030
DATE AS OF CHANGE:		20091030

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			VASCO DATA SECURITY INTERNATIONAL INC
		CENTRAL INDEX KEY:			0001044777
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373]
		IRS NUMBER:				364169320
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-24389
		FILM NUMBER:		091147855

	BUSINESS ADDRESS:	
		STREET 1:		1901 SOUTH MYERS ROAD
		STREET 2:		SUITE 210
		CITY:			OAKBROOK TERRACE
		STATE:			IL
		ZIP:			60181
		BUSINESS PHONE:		6309328844

	MAIL ADDRESS:	
		STREET 1:		1919 S HIGHLAND AVE
		STREET 2:		STE 118 C
		CITY:			LOMBARD
		STATE:			IL
		ZIP:			60148
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>d8k.htm
<DESCRIPTION>FORM 8-K
<TEXT>
<HTML><HEAD>
<TITLE>Form 8-K</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:3px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>SECURITIES AND EXCHANGE COMMISSION
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>WASHINGTON, D.C. 20549 </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P
STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>FORM 8-K </B>
</FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P
STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>CURRENT REPORT </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman"
SIZE="3"><B>PURSUANT TO SECTION 13 OR 15(d) OF </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>THE SECURITIES EXCHANGE ACT OF 1934 </B></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Date of Report (Date of earliest event reported): October&nbsp;27, 2009 </B></FONT></P> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:6px;margin-bottom:0px"
ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="6"><B>VASCO Data Security International, Inc. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(Exact name
of registrant as specified in charter) </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P
STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="34%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="32%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="32%"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Delaware</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>000-24389</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>36-4169320</B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(State or other jurisdiction</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px"
ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>of incorporation)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(Commission File Number)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(IRS Employer</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>Identification No.)</B></FONT></P></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>1901 South Meyers Road, Suite 210 </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Oakbrook Terrace, Illinois 60181 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>(Address of principal executive offices) (Zip Code) </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Registrant&#146;s
telephone number, including area code: (630)&nbsp;932-8844 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>N/A </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(Former name or former address, if changed since last report) </B></FONT></P> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.
below): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) </FONT></TD></TR></TABLE> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) </FONT></TD></TR></TABLE> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) </FONT></TD></TR></TABLE> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) </FONT></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ITEM&nbsp;2.02</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Results of Operations and Financial Condition </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">The information contained in this Form 8-K shall not be deemed &#147;filed&#148; for purposes of Section&nbsp;18 of the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;), or incorporated by reference in any filing
under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">On October&nbsp;27, 2009, VASCO Data Security International, Inc. (&#147;VASCO&#148;) issued a press release providing a financial update for the third quarter and nine months ended September&nbsp;30, 2009. The full text of the press
release is attached as Exhibit 99.1 to this Current Report on Form 8-K. On October&nbsp;27, 2009, VASCO held a conference call with investors to discuss VASCO&#146;s earnings and results of operations for the third quarter and nine months ended
September&nbsp;30, 2009. A prepared script of the conference call is furnished as Exhibit 99.2 to this Current Report on Form 8-K. A transcript of the conference call is furnished as Exhibit 99.3 to this Current Report on Form 8-K. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The press release and the comments by VASCO during the conference call contained a non-GAAP financial measure within the meaning of the Securities and
Exchange Commission&#146;s Regulation G.&nbsp;For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a registrant&#146;s historical or future financial performance, financial position or cash flows that excludes
amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of
cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The press release contained a reference to EBITDA and provided a reconciliation of EBITDA to net income. EBITDA, which is earnings before interest, taxes,
depreciation and amortization, is computed by adding back net interest expense, income tax expense, depreciation expense, and amortization expense to net income as reported. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2 </FONT></P>


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<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ITEM&nbsp;9.01</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Financial Statements and Exhibits </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d)
Exhibits. The following Exhibits are furnished herewith: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD WIDTH="92%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:28pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit<BR>Number</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="border-bottom:1px solid #000000;width:39pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Description</B></FONT></P></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">99.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Press release, dated October 27, 2009.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">99.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Prepared script of October 27, 2009 Earnings Conference Call.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">99.3</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Transcript of October 27, 2009 Earnings Conference Call.</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">3 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>SIGNATURE </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0">

<TR>
<TD WIDTH="42%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="14%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="42%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Date: October&nbsp;29, 2009</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">VASCO Data Security International, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">/<SMALL>S</SMALL>/&nbsp;&nbsp;&nbsp;&nbsp;C<SMALL>LIFFORD</SMALL> K.
B<SMALL>OWN&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Clifford K. Bown</B></FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Chief Financial Officer</B></FONT></TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">4 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>EXHIBIT INDEX </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The following Exhibits are furnished herewith: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD WIDTH="92%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:25pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit<BR>No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="border-bottom:1px solid #000000;width:39pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Description</B></FONT></P></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">99.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Press release, dated October 27, 2009</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">99.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Prepared script of October 27, 2009 Earnings Conference Call.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">99.3</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Transcript of October 27, 2009 Earnings Conference Call.</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">5 </FONT></P>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>dex991.htm
<DESCRIPTION>PRESS RELEASE DATED OCTOBER 27, 2009
<TEXT>
<HTML><HEAD>
<TITLE>Press release dated October 27, 2009</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">EXHIBIT 99.1</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"> </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">VASCO Reports Results for Third Quarter and First Nine Months of 2009 </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Revenue for the third quarter 2009 was $22.1 million, a decrease of 44% compared to the third quarter 2008; Operating income for the third quarter 2009
was $2.0 million, a decrease of 83% compared to the third quarter 2008. Financial results for the period ended September&nbsp;30, 2009 to be discussed on conference call today at 10:00 a.m. E.D.T. </B></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">OAKBROOK TERRACE, IL, and ZURICH, Switzerland, October&nbsp;27, 2009 - VASCO Data Security International, Inc. (Nasdaq: VDSI) (www.vasco.com), today
reported financial results for the third quarter and nine months ended September&nbsp;30, 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Revenue for the third quarter of 2009
decreased 44% to $22.1 million from $39.7 million in the third quarter of 2008, and for the first nine months of 2009, decreased 33% to $69.8 from $104.0 million for the first nine months of 2008. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Net income for the third quarter of 2009 was $1.5 million, or $0.04 per diluted share, a decrease of $7.6 million, or 83%, from $9.1 million, or $0.24 per
diluted share, for the third quarter of 2008. Net income for the first nine months of 2009 was $7.0 million, or $0.18 per diluted share, a decrease of $14.5 million, or 67%, from $21.5 million, or $0.56 per diluted share, for the comparable period
in 2008. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Other Financial Highlights: </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Gross profit was $15.4 million and $48.8 million for the third quarter and first nine months of 2009, respectively, both 70% of revenue, for their
respective periods. Gross profit was $27.8 million or 70% of revenue for the third quarter of 2008 and $73.3 million, or 70% of revenue, for the first nine months of 2008. </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Operating expenses for the third quarter and first nine months of 2009 were $13.4 million and $40.8 million, respectively, a decrease of 18% from $16.4
million reported for the third quarter of 2008 and a decrease of 13% from $47.0 million reported for the first nine months of 2008. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Operating expenses for the third quarter of 2009 included $0.5 million of expenses related to stock-based incentives. For the first nine months of 2009, operating expenses reflected a benefit of $0.8
million related to stock-based incentives, including the reversal in the first quarter of 2009 of $2.0 million of long-term performance-based incentive award reserves that had been accrued at 12/31/08. Operating expenses for the third quarter and
first nine months of 2008 included $0.8 million and $2.3 million, respectively, of expense related to stock-based incentives. </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Operating income for the third quarter and first nine months of 2009 was $2.0 million and $8.0 million, respectively, a decrease of $9.5 million, or
83%, from $11.4 million reported for the third quarter of 2008 and a decrease of $18.3 million, or 70%, from $26.3 million reported for the first nine months of 2008. Operating income, as a percentage of revenue, for the third quarter and first nine
months of 2009 was 9% and 12%, respectively, compared to 29% and 25% for the comparable periods in 2008. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Earnings before interest, taxes, depreciation and amortization (EBITDA) was $3.3 million and $11.9 million for the third quarter and first nine months
of 2009, respectively, a decrease of 71% from $11.5 million reported for the third quarter of 2008 and a decrease of 58% from $28.4 million reported for the first nine months of 2008. </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Net cash balances, cash balances less borrowing under VASCO&#146;s line of credit, at September&nbsp;30, 2009 totaled $71.2 million compared to $67.6
million and $57.7 million at June&nbsp;30, 2009 and December&nbsp;31, 2008, respectively. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">1 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Operational and Other Highlights: </B></FONT></P> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">VASCO won 350 new customers in Q3 2009 (56 new banks and 294 new enterprise security customers). For the first nine months of 2009, VASCO won 1,057 new
customers (151 banks and 906 enterprise security customers). Although management considers the number of new customers as an indicator of the momentum of our business and effectiveness of our distribution channel, the number of new customers is not
indicative of future revenue. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">VASCO&#146;s PKI-based DIGIPASS CertiID and DIGIPASS Key 1 become IdenTrust compliant. </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">VASCO launches a new version of aXsGUARD Identifier with LAPD synchronization allowing the aXsGUARD Identifier user database to be synchronized with
multiple LDAP directories. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">VASCO expands its consulting services offering to support a growing demand for expertise and sharing of best practices in implementing strong
authentication in e-banking and beyond. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;The results for the third quarter of 2009 reflected the current challenging
economic environment and the lower levels of activity that are due to the normal seasonal trends, including the holiday schedules in Europe,&#148; stated T. Kendall Hunt, Chairman&nbsp;&amp; CEO. &#147;As expected, our revenues from both the banking
and enterprise and application security markets were lower than in the third quarter of 2008, which incidentally, was the best quarter in our history. Also, as expected, we were able to remain profitable while maintaining our previous investments in
infrastructure that are needed to support future growth. Looking forward, we believe that the financial, economic and regulatory environments that have had a large negative affect on our banking customers is improving. As always, we will continue to
focus on our most productive markets, be selective in making new investments and maintain our focus on containing our costs and, as a result, expect to be profitable throughout 2009.&#148; </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#145;The results for the third quarter continued the trends that we have seen since the middle of the fourth quarter of 2008 with our banking customers
continuing to order small quantities to meet their short-term needs. We are, however, seeing an increase in activity from customers in the banking market and expect the volume of orders to increase in the fourth quarter,&#148; said Jan Valcke,
VASCO&#146;s President and COO. &#147;While the banks are still not placing large, twelve-month purchase orders, it does appear that they are developing and implementing longer-term plans. We also continue to be encouraged by the progress being made
in the enterprise and application security markets and, with the expected improvement in the banking market, we are planning to increase our investment in sales and marketing to ensure that prospective customers are aware of our strong product
offering.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Cliff Bown, Executive Vice President and CFO added, &#147;During the third quarter of 2009, our cash and working capital
balances increased 5% and 4%, respectively, from our balances at June&nbsp;30, 2009. At September&nbsp;30, 2009 our net cash balance was $71.2 million and we had $83.3 million of working capital. Days sales outstanding in net accounts receivable at
September&nbsp;30, 2009 increased to 85 days from 65 days at June&nbsp;30, 2009 and 79 days at December&nbsp;31, 2008. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Conference Call
Details </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">In conjunction with this announcement, VASCO Data Security International, Inc. will host a conference call today, October&nbsp;27,
2009, at 10:00 a.m. EDT - 15:00h CET. During the Conference Call, Mr.&nbsp;Ken Hunt, CEO, Mr.&nbsp;Jan Valcke, President and COO, and Mr.&nbsp;Cliff Bown, CFO, will discuss VASCO&#146;s Results for the Third Quarter and First Nine Months Ended
September&nbsp;30, 2009. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">To participate in this Conference Call, please dial one of the following numbers: </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">USA/Canada: +1 800-734-8507 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">International: +1
212-231-2903 </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">And mention VASCO to be connected to the Conference Call. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The Conference Call is also available in listen-only mode on www.vasco.com. Please log on 15 minutes before the start of the Conference Call in order to download and install any necessary software. The
recorded version of the Conference Call will be available on the VASCO website 24 hours a day. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">3 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>VASCO Data Security International, Inc. </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>(in thousands, except per share data) </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(unaudited) </B></FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="71%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="5" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Three months ended<BR>September&nbsp;30,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="5" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Nine months ended<BR>September&nbsp;30,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Net revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22,126</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">39,705</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">69,759</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">104,042</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Cost of goods sold</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,736</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">11,866</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20,959</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">30,761</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">15,390</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">27,839</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">48,800</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">73,281</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Operating costs:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sales and marketing</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,767</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">8,878</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21,860</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">25,615</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Research and development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,820</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,056</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">8,281</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">8,712</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">General and administrative</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,734</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4,344</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,299</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12,109</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amortization of purchased intangible assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">115</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">122</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">332</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">518</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Total operating costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">13,436</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">16,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">40,772</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">46,954</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Operating income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,954</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">11,439</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">8,028</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">26,327</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Interest income, net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">73</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">227</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">381</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">761</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Other income (expense), net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">530</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(789</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,488</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(571</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Income before income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,557</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,877</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9,897</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">26,517</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Provision for income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,035</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,754</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,870</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5,038</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,522</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9,123</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,027</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21,479</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Net income per share:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Basic</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.04</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.19</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.58</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.04</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.24</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.18</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.56</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Weighted average common shares outstanding:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Basic</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37,322</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37,173</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37,318</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37,138</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">38,154</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">38,204</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">38,085</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">38,236</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">4 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>VASCO Data Security International, Inc. </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>CONDENSED CONSOLIDATED BALANCE SHEETS </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>(in thousands, except per share data) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="80%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>September&nbsp;30,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>December&nbsp;31,<BR>2008</B></FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(unaudited)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ASSETS</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Current assets:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Cash and equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">71,230</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">57,714</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Accounts receivable, net of allowance for doubtful accounts</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20,404</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">24,951</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Inventories</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,222</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">13,376</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Prepaid expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,652</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,926</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Foreign sales tax receivable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">838</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,452</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Deferred income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">460</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">284</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Other current assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">730</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">199</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Total current assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">105,536</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">105,902</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Property and equipment, net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5,287</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4,176</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Goodwill, net of accumulated amortization</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">14,044</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">13,584</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Intangible assets, net of accumulated amortization</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,873</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,997</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Other assets, net of accumulated amortization</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,132</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,291</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Total assets</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">127,872</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">127,950</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Current liabilities:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Accounts payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,885</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,349</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Deferred revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5,719</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5,881</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Accrued wages and payroll taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5,177</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5,780</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Income taxes payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4,088</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,114</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Other accrued expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,346</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4,848</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Total current liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22,215</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">29,972</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Accrued compensation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">313</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,352</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Deferred revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">410</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">888</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Deferred tax liability</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">235</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">454</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Total liabilities</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">23,173</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">32,666</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Stockholders&#146; equity :</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Common stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Additional paid-in capital</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">67,072</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">66,700</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Accumulated income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">31,883</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">24,856</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Accumulated other comprehensive income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5,707</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,691</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Total stockholders&#146; equity</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">104,699</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">95,284</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Total liabilities and stockholders&#146; equity</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">127,872</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">127,950</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">5 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Reconciliation of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>to net income (in thousands): </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="69%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Three months ended<BR>September&nbsp;30,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Nine months ended<BR>September&nbsp;30,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(in&nbsp;thousands,&nbsp;unaudited)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(in&nbsp;thousands,&nbsp;unaudited)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">EBITDA</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,332</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">11,474</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">11,869</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">28,392</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Interest income, net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">73</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">227</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">381</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">761</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Provision for income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1,035</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1,754</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2,870</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(5,038</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Depreciation and amortization</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(848</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(824</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2,353</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2,636</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,522</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9,123</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,027</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21,479</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">EBITDA is a non-GAAP financial measure within the meaning of applicable U.S. Securities and Exchange
Commission rules and regulations. We use EBITDA as a measure of performance, a simplified tool for use in communicating our performance to investors and analysts and for comparisons to other companies within our industry. As a performance measure,
we believe that EBITDA presents a view of our operating results that is most closely related to serving our customers. By excluding interest, taxes, depreciation and amortization we are able to evaluate performance without considering decisions
that, in most cases, are not directly related to meeting our customers&#146; requirements and were either made in prior periods (e.g., depreciation and amortization), or deal with the structure or financing of the business (e.g., interest) or
reflect the application of regulations that are outside of the control of our management team (e.g., taxes). Similarly, we find that the comparison of our results to those of our competitors is facilitated when we do not need to consider the impact
of those items on our competitors&#146; results. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">EBITDA should be considered in addition to, but not as a substitute for, other measures of
financial performance reported in accordance with accounting principles generally accepted in the United States.&nbsp;While we believe that EBITDA, as defined above, is useful within the context described above, it is in fact incomplete and not a
measure that should be used to evaluate our full performance or our prospects. Such an evaluation needs to consider all of the complexities associated with our business including, but not limited to, how past actions are affecting current results
and how they may affect future results, how we have chosen to finance the business and how regulations and the other aforementioned items affect the final amounts that are or will be available to shareholders as a return on their investment. Net
income determined in accordance with U.S. GAAP is the most complete measure available today to evaluate all elements of our performance. Similarly, our Consolidated Statement of Cash Flows, which will be filed as part of our annual report on Form
10-K, provides the full accounting for how we have decided to use resources provided to us from our customers, lenders and shareholders. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">6 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>About VASCO</B>: VASCO is a leading supplier of strong authentication and e-signature solutions and
services specializing in Internet Security applications and transactions. VASCO has positioned itself as global software company for Internet Security serving a customer base of approximately 9,000 companies in more than 100 countries, including
almost 1,300 international financial institutions. VASCO&#146;s prime markets are the financial sector, enterprise security, e-commerce and e-government. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Forward Looking Statements </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Statements made in this news release that relate to future
plans, events or performances are forward-looking statements. Any statement containing words such as &#147;believes,&#148; &#147;anticipates,&#148; &#147;plans,&#148; &#147;expects,&#148; &#147;intend,&#148; &#147;mean,&#148; and similar words, is
forward-looking, and these statements involve risks and uncertainties and are based on current expectations. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Reference is made to the VASCO&#146;s public filings with the U.S. Securities and Exchange Commission for further information regarding VASCO and its
operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">This&nbsp;document&nbsp;may contain trademarks of VASCO Data Security International, Inc. and its subsidiaries, including VASCO,
the VASCO &#147;V&#148; design, DIGIPASS, VACMAN, aXs GUARD and IDENTIKEY. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">For more information contact: </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jochem Binst, +32 2 609 97 00, jbinst@vasco.com </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">7 </FONT></P>

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<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>dex992.htm
<DESCRIPTION>PREPARED SCRIPT OF OCTOBER 27, 2009 EARNINGS CONFERENCE CALL
<TEXT>
<HTML><HEAD>
<TITLE>Prepared script of October 27, 2009 Earnings Conference Call</TITLE>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">EXHIBIT 99.2</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"> </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Earnings Conference Call October&nbsp;27, 2009 </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Comments by Ken Hunt: </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Good morning
everyone. For those listening in from Europe, good afternoon, and from Asia, good evening. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">My name is Ken Hunt, and I am the Chairman,
Founder&nbsp;&amp; CEO of VASCO Data Security International, Inc. On the call with me today are Jan Valcke, our President&nbsp;&amp; Chief Operating Officer, and Cliff Bown our EVP and Chief Financial Officer. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Before we begin the conference call, I need to brief all of you on &#147;Forward Looking Statements.&#148; </FONT></P> <P
STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Forward Looking Statements </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>STATEMENTS
MADE IN THIS CONFERENCE CALL THAT RELATE TO FUTURE PLANS, EVENTS OR PERFORMANCES ARE FORWARD-LOOKING STATEMENTS. ANY STATEMENT CONTAINING WORDS SUCH AS &#147;BELIEVES,&#148; &#147;ANTICIPATES,&#148; &#147;PLANS,&#148; &#147;EXPECTS,&#148; AND
SIMILAR WORDS, IS FORWARD-LOOKING, AND THESE STATEMENTS INVOLVE RISKS AND UNCERTAINTIES AND ARE BASED ON CURRENT EXPECTATIONS. CONSEQUENTLY, ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE EXPECTATIONS EXPRESSED IN THESE FORWARD-LOOKING STATEMENTS.
I DIRECT YOUR ATTENTION TO THE COMPANY&#146;S FILINGS WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION FOR A DISCUSSION OF SUCH RISKS AND UNCERTAINTIES IN THIS REGARD. </B></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>General Comments &#150; Ken Hunt </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Today, we are going to review the results for the 3rd
quarter of 2009. As always, we will host a question and answer session after the conclusion of management&#146;s prepared remarks. If possible, I would like to budget one hour total for this conference call. If you can limit your questions to one or
two, it would be appreciated. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">1 </FONT></P>


<p Style='page-break-before:always'>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Despite today&#146;s challenging economic climate, VASCO is pleased to report that the first three quarters
of 2009 were all profitable quarters. As previously announced, we expect to be profitable throughout 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Revenues for Q3 were $22.1
million, a decrease of 44% compared to 3rd quarter 2008, which, incidentally, was the best quarter in our Company&#146;s history. Q3 2009 was our 27th consecutive positive quarter in terms of operating income. Our gross profit for the quarter was
approximately 70% of revenue and our operating income was approximately 9% of revenue. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">During the quarter, we sold an additional 350 new
accounts, including 56 new banks, and 294 new enterprise security customers. This compares to the third quarter a year ago in which we sold 365 new accounts, including 62 banks and 303 enterprise security customers. We now have over 9,000 customers,
including almost 1,350 banks in more than 100 countries. Although management considers the number of new customers as an indicator of the momentum of our business and effectiveness of our distribution channel, the number of new customers is not
indicative of future revenue. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px;padding-bottom:3px;"><FONT STYLE="font-family:Times New Roman" SIZE="2">The results of the third quarter were in line with our expectations discussed during the Q2
2009 conference call. The 3</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">rd</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"> quarter, as expected, was
weaker than the 2</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">nd</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"> quarter, due to seasonality and the
economic headwinds we have been experiencing over the last four quarters. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">I am very pleased to report that during the third quarter of 2009,
our cash and working capital balances increased 5% and 4%, respectively. At September&nbsp;30, 2009 our net cash balance was $71.2 million and we had $83.3 million of working capital. This strong cash balance gives us the flexibility to manage our
business intelligently and to look for investments that will fuel future growth. This does not mean, however, that we will start spending money without thoughtful consideration. We will look carefully where we need to invest in both short and
longer-term opportunities. Accordingly, we are in the process of adding additional sales staff where opportunities for growth are promising. However, we will continue to maintain our general cost containment programs due to these challenging market
conditions. With our strong fundamentals, including a healthy cash position, no debt and 27 consecutive profitable quarters, we are better equipped than many to weather this economic storm. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lately, there have been encouraging words about the economy. On September&nbsp;16, 2009, after a speech at the Brookings Institution in Washington D. C.,
Federal Reserve Chairman Ben Bernanke observed that the recession was most likely over. This came just after the Commerce Department reported that retail sales had climbed 2.7% in August. Likewise, there have been many publically reporting companies
that have offered a more optimistic view of the economy and its affect on their results. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">VASCO also believes that the financial decline abated during Q3, and we expect our volume of orders to
increase during the fourth quarter. We continue to see an increase in RFP&#146;s (Requests for Proposals) for new projects and an improvement in our weighted forecast for existing customers. These are all signs that the financial crisis has bottomed
out and that VASCO&#146;s business model is holding up in these difficult times. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Looking forward, we believe that the financial, economic and
regulatory environments that have had a large negative effect on our banking customers are improving. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Introduce Jan Valcke:
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">At this time I would like to introduce Jan Valcke, VASCO&#146;s President and Chief Operating Officer. Jan. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Thank you, Ken </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Ladies and gentlemen, </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Q3 was a profitable quarter, despite the economic situation and the seasonality that affected our results due to the July-August holiday period.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">This means that we have succeeded in being profitable throughout the first three quarters of the challenging year 2009. Our business strategy
works, in good times and in less positive times. Our business mix between Banking, Enterprise Security and Application Security gives us a high margin result, allowing us to be profitable even when our largest revenue source - the financial sector -
slowed down. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">VASCO keeps investing in its long term success. We are in the process of reinforcing our sales resources in important geographic
and vertical areas. The fact that we are profitable, have zero debt and a healthy cash position allows us to invest when other companies are forced to cut. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">When we look into our core markets, we see that our banking business has been seriously hit by the financial crisis and its consequences. We expect that crisis has reached its bottom during Q3, and that
our banking business will gradually recover over the next quarters. Ken mentioned earlier an increase in the number of RFP&#146;s for online banking projects. We have been able to win a number of these projects because of our unique business model,
the quality and breadth of our products and solutions, and our industry know-how. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">3 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our enterprise security business is surprisingly stable over the first three quarters, defying the economic
recession. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Interest in our products from the application security market is also growing. Application Security includes all consumer facing
non-banking online applications. This market could be defined as the combination of b-to-b and b-to-c ecommerce and ebusiness. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">In the past,
we had one major source of income, the banking sector. After the crisis, we expect to have steady revenue streams from Banking, Enterprise Security and Application Security. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">As you may know, VACMAN Controller is the core of our server product line. IDENTIKEY is our robust and comprehensive authentication server, which supports all authentication technologies including
VASCO&#146;s recently announced PKI product range. Our PKI-range currently consists of the CertiID software solution and the growing DIGIPASS Key product family. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Thanks to these investments in R&amp;D and development we are now competitive in mid and large enterprise opportunities that were previously out of our reach. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The proliferation of VACMAN and the growing popularity of IDENTIKEY are opening up many new opportunities for cross- and up-selling for VASCO. Thanks to
IDENTIKEY, we are now competitive in larger enterprise opportunities. In the last few quarters, IDENTIKEY has allowed us to win several competitive deals in mid sized and large enterprises. Enterprise Security authentication includes: </FONT></P> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">employee remote access </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">network security </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">web security </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">VASCO has
evolved into a true end-to-end authentication company, spanning the entire range between employee security and consumer security, based on one and unique VACMAN platform. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Consumer security, including our banking and application security markets, is tackled via our own sales force and our own competence centers. VASCO competence centers bundle all the company&#146;s
competence in one vertical market, such as online gaming. By creating competence centers, we enhance our dominance in new verticals, building upon our expertise and the skills of our people. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employee security is covered by our Enterprise Security business. As you know, VASCO tackles the Enterprise
Security market via a two-tier network of distributors and resellers. We keep investing in new products for Enterprise Security and we focus strongly on the quality of our channel. Our SEAL training academy does a tremendous job in training and
certifying our channel partners&#146; engineers, by creating authorized training centers and much more. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">I conclude, ladies and gentlemen, by
acknowledging that the three first quarters of 2009 were not the easiest in the company&#146;s history. Nevertheless, all three quarters were profitable. I am convinced that, when the economy picks up again, the skills of our people, our investments
in best-of-breed products and services, and the right business strategy and execution will make VASCO even stronger than before. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Thank you.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Introduce Cliff Bown: </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">At
this time I would like to introduce Cliff Bown, VASCO&#146;s EVP and Chief Financial Officer. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Comments by Cliff Bown: </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Thanks Ken and welcome to everyone on the call. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">As noted earlier by Ken, revenues for the third quarter of 2009 were $22.1 million, a decrease of $17.6 million or 44% from the third quarter of 2008. For the first nine months, revenues were $69.8 million, a decrease of $34.2 million or
33% from the comparable period in 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The decrease in revenue for the third quarter reflected significant declines in revenues from both
the banking and enterprise and application security markets. The decrease in revenue for the first nine months reflected a significant decline in revenues from the banking market partially offset by increase in revenues from the enterprise and
application security market. Revenues from the banking market decreased 49% and 41% for the third quarter and first nine months of 2009, respectively, when compared to the same periods in 2008. Revenues from the enterprise and application security
market decreased 20% for the third quarter and increased 2% for first nine months of 2009, respectively, when compared to the same periods in 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">It should also be noted that the comparison of revenues was negatively impacted by the stronger U.S. dollar in 2009. We estimate that revenues in the third quarter and first nine months of 2009 were approximately $600 thousand and $4.3
million lower, respectively, than they would have been had the exchange rates in 2009 been the same as in 2008. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The percentage of revenue coming from the enterprise and application security market, whose average gross
margin as a percentage of revenue is generally 20 to 30 percentage points higher than the gross margins from the banking market, has increased in 2009 when compared to 2008. The distribution of our revenue in the third quarter of 2009 between our
two primary markets was approximately 75% from banking and 25% from enterprise application security. This compares to 83% from banking and 17% from enterprise application security in Q3 2008. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">For the first nine months of 2009, 73% of our revenue was from banking and 27% from enterprise and application security and compares to 82% from banking and
18% from enterprise and application security for the first nine months of 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our revenues continue to come predominately from outside of
the U.S. The geographic distribution of our revenue in the third quarter was approximately 77% from Europe, 9% from the U.S., 6% from Asia and the remaining 8% from other countries. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The geographic distribution of our revenue for the first nine months of 2009 was approximately 73% from Europe, 6% from the U.S., 9% from Asia and the remaining 12% from other countries. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Gross profit as a percentage of revenue for both the third quarter and first nine months of 2009 was approximately 70%. In 2008, gross profit as a
percentage of revenue was also 70% for both the third quarter and first nine months of the year. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">As there was no material change in the gross
profit as a percentage of revenue, there were no material changes in the underlying components driving our gross margins. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">For example, our
non-hardware revenues were between 23% and 24% of total revenue for each of the three and nine month periods in 2009 and 2008. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">While, the mix of products sold in the third quarter and first nine months of 2009 reflected an increase in
card readers sold as a percentage of total revenue when compared to the same periods in 2008, the impact of the increase in readers sold was offset by improved margins in non-reader hardware products sold. Revenues from card readers were
approximately 18% of our revenue for both the third quarter and first nine months of 2009 and compare to approximately 13% and 16%, respectively for the comparable periods in 2008. As noted on previous calls, our card reader product line has lower
margins due to competitive pricing pressures. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Operating expenses for the third quarter of 2009 were $13.4 million, a decrease of $3.0 million
or 18% from the third quarter of 2008. Operating expenses for the first nine months of 2009 were $40.8 million, a decrease of $6.2 million or 13% from the same period in 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The comparison of operating expenses in 2009 to 2008 was positively impacted by the stronger U.S. dollar in 2009. We estimate that expenses were $0.9 million and $4.3 million lower for the third quarter
and first nine months, respectively, than they would have been had the exchange rates in 2009 been the same as in 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Operating expenses
for the third quarter of 2009 included $484 thousand of expense related to stock-based incentive plans. For the first nine months of 2009, operating expenses included a benefit of $785 thousand related to stock-based incentive plans. As noted in our
the first quarter conference call, we reversed of approximately $2.0 million of accruals that had been established in prior years for long-term, incentive-based compensation plans where it is no longer likely that the performance targets will be
met. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Stock-based incentive plan expenses in the third quarter and first nine months of 2008 were $811 thousand and $2,284,000, respectively.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">For the third quarter, including the benefit of currency, operating expenses decreased by $2.1 million, or 24% in sales and marketing,
decreased by $236,000 or 8% in research and development, and decreased by $610,000 or 14% in general and administrative when compared to the third quarter in 2008. The decrease in the sales and marketing expense primarily reflected the benefit of
the change in exchange rates, lower compensation expenses, lower marketing expense and lower travel expense. The decrease in research and development expense primarily reflected the benefit of the change in exchange rates partially offset by an
increase in average headcount. The decrease in the general and administrative expense primarily reflected the benefit of the change in exchange rates, lower recruiting expenses, lower insurance expense and professional fees partially offset by an
increase in depreciation expense and an increase in average headcount. As a result of our investment in new staff throughout 2008, our average total headcount in the third quarter of 2009 was 16 persons, or 6%, higher than the average headcount in
the third quarter of 2008. The increase in average headcount included an increase of 12 persons in R&amp;D and 4 persons in general and administrative staff. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">For the first nine months of 2009, operating expenses decreased by $3.8 million, or 15% in sales and
marketing, $431,000 or 5% in research and development, and $1.8 million or 15% in general and administrative when compared to the same period in 2008. In addition to the reasons noted for the changes in the third quarter, the decreases in expense
for the first nine months reflected the benefit from the reduction in stock-based incentive plan compensation expense noted previously. In addition, the reduction in expense was partially offset by an increase in our average headcount in all areas.
Our average headcount for the first nine months of 2009 was 15 persons, or 10%, higher in sales, marketing and operations staff; 16 persons, or 21% higher in R&amp;D staff; and 10 persons, or 26% higher in general and administrative staff.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Operating income for the third quarter of 2009 was $2.0 million, a decrease of $9.5 million or 83% from the $11.4 million reported in the
third quarter of 2008. For the first nine months, operating income was $8.0 million in 2009, a decrease of $18.3 million or 70% from the $26.3 million reported in 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Operating income as a percent of revenue, or operating margin, was 8.8% for the third quarter and 11.5% for the first nine months of 2009. In 2008, our operating margins were 28.8% for the quarter and
25.3% for the first nine months. While we have benefited from our cost containment actions, the decrease in operating margin reflects the fact that we have continued to maintain the investments we made in our infrastructure in 2008 that will be
needed to support future growth. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Company reported income tax expense of $1.0 million for the third quarter and $2.9 million for the first
nine months of 2009. The effective tax rate was 40% and 29% for the third quarter and first nine months of 2009, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px;padding-bottom:3px;"><FONT STYLE="font-family:Times New Roman"
SIZE="2">For 2008, the Company reported income tax expense of $1.8 million for the third quarter and $5.0 million for the first nine months. The effective tax rate reported in 2008 was 16% for the third quarter and 19% the nine month period ended
September&nbsp;30</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">th</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2">. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The effective rates for both 2009 and 2008 reflect our estimate of our full-year tax rate at the end of the
third quarter in each period. In both periods, adjustments were made in the third quarter to reflect the change in estimate for the full-year tax rate. The increase in the tax rate in 2009 compared to 2008 is primarily attributable to reduction in
pretax profits. Under our current structure, our effective rate will be very sensitive to the level of pretax income. As pretax income increases, we expect the effective rate to decline. As pretax income decreases, the effective rate will increase.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Earnings before interest, taxes, depreciation, and amortization (EBITDA or operating cash flow if you will) was $3.3 million for the third
quarter and $11.9 million for the first nine months of 2009. EBITDA was $8.1 million or 71% lower in the third quarter and $16.5 million or 58% lower than in the first nine months of 2008. The reduction in EBITDA primarily reflects the reduction in
earnings. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The makeup of our workforce as of September&nbsp;30, 2009 was 294 people worldwide with 156 in sales, marketing and customer
support, 93 in research and development and 45 in general and administrative. As noted previously, the average headcount for the third quarter of 2009 was 16 persons or 6% higher than the average headcount for the third quarter of 2008. The average
headcount for the first nine months of 2009 was 41 persons or 16% higher than the average headcount for the same period in 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our strong
cash and working capital balances continued to increase during the third quarter of 2009. As of September&nbsp;30, 2009, our net cash balance, which is defined as total cash less bank borrowings, was $71.2 million, an increase of $3.6 million, or 5%
from $67.6 million at June&nbsp;30, 2009 and an increase of $13.5 million, or 23%, from $57.7 million at December&nbsp;31, 2008. As of September&nbsp;30, 2009, our working capital balance was $83.3 million, an increase of $3.4 million, or 4% from
$79.9 million at June&nbsp;30, 2009 and an increase of $7.4 million, or 10%, from $75.9 million at December&nbsp;31, 2008. We had no debt outstanding during the quarter. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">During the quarter our Days Sales Outstanding in accounts receivable increased to 85 days as of September&nbsp;30, 2009 from 65 days at June&nbsp;30, 2009 and from 79 days at December&nbsp;31, 2008. The
increase in DSO was primarily related to the timing of when sales were made in the quarter. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Thank you for your attention. I would now like to
turn the meeting back to Ken. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Ken Hunt Final Remarks: </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Summing up, we expect to be profitable for the full year 2009 through focus and execution. We will continue to invest in our marketing activities, our people and our infrastructure while containing our
costs. In light of the continued uncertainty in the market, VASCO will continue to temporarily discontinue providing annual guidance. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">At this
time we will open the call for your questions. Operator? </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Ladies and gentlemen, thank you for your attendance today. I look forward to your
participation in our next Earnings Conference Call for Q4, 2009. As always, you can rely on VASCO&#146;s people to do their very best! </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<DESCRIPTION>TRANSCRIPT OF OCTOBER 27, 2009 EARNINGS CONFERENCE CALL
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<TITLE>Transcript of October 27, 2009 Earnings Conference Call</TITLE>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">EXHIBIT 99.3</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"> </FONT></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">C O R P O R A T E&nbsp;&nbsp; P A R T I
C I P A N T S</FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"> </FONT></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Ken Hunt </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>VASCO Data Security International - Chairman, Founder and CEO </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Jan Valcke </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>VASCO Data Security International - President and COO </I></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Cliff Bown </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>VASCO Data Security
International - EVP and CFO </I></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">C O N F E R E N C E&nbsp;&nbsp;C A L L&nbsp;&nbsp;P A R T I C I P
A N T S</FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"> </FONT></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Brian Freed </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Morgan Keegan&nbsp;&amp; Co., Inc. - Analyst </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2"><B>Joe Maxa </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Dougherty&nbsp;&amp; Company - Analyst </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Andrew Abrams </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Avian Securities - Analyst </I></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Daniel Ives </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>FBR Capital Markets -
Analyst </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Scott Zeller </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2"><I>Needham&nbsp;&amp; Company - Analyst </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Ignatius Njoku </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>Jefferies&nbsp;&amp; Company, Inc. - Analyst </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Martin Yokosawa </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Tory Asset Management - Analyst </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Rob
Owens </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Pacific Crest Securities - Analyst </I></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">P R E S E N T A T I O N</FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"> </FONT></B></FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Ladies and gentlemen, thank you very much for standing by and welcome to the
Vasco Data Security International, Inc. Q3 earnings conference call. During this presentation, all participants are in a listen-only mode. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">Afterwards, we will conduct a question-and-answer session (Operator Instructions). It is now my pleasure to turn the conference over to Ken Hunt, VASCO Data Security International, Inc. Please go ahead, sir. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt</B><B><I> - VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Good morning, everyone. For those listening in from Europe, good afternoon; and from Asia, good evening. My name is Ken Hunt and I&#146;m the Chairman, Founder and CEO of VASCO Data Security
International, Inc. On the call with me today are January Valcke, our President and Chief Operating Officer; and Cliff Bown, our EVP and Chief Financial Officer. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Before we begin the conference call, I need to brief all of you on forward-looking statements. Statements made in this conference call that relate to future plans, events or performances are
forward-looking statements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Any statement containing words such as believes, anticipates, plans, expects, and similar words is
forward-looking and these statements involve risks and uncertainties and are based on current expectations. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements. I direct your
attention to the Company&#146;s filings with the US Securities and Exchange Commission for a discussion of such risks and uncertainties in this regard. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Today we&#146;re going to review the results for the third quarter of 2009. As always, we will host a
question-and-answer session after the conclusion of management&#146;s prepared remarks. If possible, I would like to budget one hour total for this conference call. If you can limit your questions to one or two, it would be appreciated. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Despite today&#146;s challenging economic climate, VASCO is pleased to report that the first three quarters of 2009 were all profitable quarters. As
previously announced, we expect to be profitable throughout 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Revenues for Q3 were $22.1 million, a decrease of 44% compared to third
quarter 2008 which incidentally was the best quarter in our Company&#146;s history. Q3 2009 was our 27th consecutive positive quarter in terms of operating income. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Our gross profit for the quarter was approximately 70% of revenue and our operating income was approximately 9% of revenue. During the quarter, we sold an additional 350 new accounts, including 56 new
banks and 294 new enterprise security customers. This compares to the third quarter a year ago in which we sold 365 new accounts, including 62 banks and 303 enterprises security customers. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">We now have over 9000 customers, including almost 1350 banks in more than 100 countries. Although management considers the number of new customers as an
indicator of the momentum of our business and effectiveness of our distribution channel, the number of new customers is not indicative of future revenue. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The results of third quarter were in line with our expectations discussed during the Q2 2009 conference call. The third quarter as expected was weaker than the second quarter due to seasonality and the
economic headwinds we&#146;ve been experiencing over the last four quarters. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">I&#146;m very pleased to report that during the third quarter of
2009, our cash and working capital balances increased 5% and 4%, respectively. At September&nbsp;30, 2009 our net cash balance was $71.2 million and we had $83.3 million of working capital. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">This strong cash balance gives us the flexibility to manage our business intelligently and to look for investments that will fuel future growth. This does
not mean, however, that we will start spending money without thoughtful consideration. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will look carefully where we need to invest in both
short and longer-term opportunities. Accordingly, we&#146;re in the process of adding additional sales staff where opportunities for growth are promising. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">However, we will continue to make maintain our general cost containment programs due to these challenging market conditions. With our strong fundamentals, including a healthy cash position, no debt, and
27 consecutive profitable quarters; we&#146;re better equipped than many to weather this economic storm. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lately there have been encouraging
words about the economy. On September&nbsp;16, 2009 after his speech at the Brookings Institution in Washington, DC; Federal Reserve Chairman, Ben Bernanke, observed that the recession was most likely over. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">This came just after the Commerce Department reported that retail sales had climbed 2.7% in August. Likewise there&#146;ve been many publicly reporting
companies that have offered a more optimistic view of the economy and its effect on their results. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">VASCO also believes that the financial
decline abated during Q3 and we expect our volume of orders to increase during the fourth quarter. We continue to see an increase in RFPs, that&#146;s request for proposals, for new projects and an improvement in our own weighted forecast for
existing customers. These are all signs that the financial crisis has bottomed out and that VASCO&#146;s business model is holding up in these difficult times. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Looking forward, we believe that the financial, economic and regulatory environments that have had a large negative effect on our banking customers are improving. At this time, I would like to introduce
Jan Valcke, VASCO&#146;s President and Chief Operating Officer. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2"><B><I></I></B><B>Jan Valcke</B><B><I> - VASCO Data Security International - President and COO </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Thank you, Ken. Ladies and
gentlemen, the third quarter was a profitable quarter despite the economic situation and the seasonality that affected our results due to the July/August holiday period. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">This means that we have succeeded in being profitable through the first three quarters of the challenging year 2009. Our business strategy works in good times and in less positive times. Our business mix
between banking, enterprise security, and application security gives us a high-margin result, allowing us to be profitable even when our largest revenue source, the financial sector, slowed down. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">VASCO keeps investing in its long-term success. We are in the process of reinforcing our sales resources in important geographic and vertical areas. The
fact that we are profitable, have zero debt and a healthy cash position allows us to invest when other companies are forced to cut. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">When we
look into our core markets, we see that our banking business has been seriously hit by the financial crisis and its consequences. We expect that crisis has reached its bottom during the third quarter and that our banking business will gradually
recover over the next quarter. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Ken mentioned earlier an increase in the number of RFPs for online banking projects. We have been able to win
a number of these projects because of our unique business model, the quality and breadth of our products and solutions and our industry know-how. Our enterprise security business is surprisingly stable over the first three quarters, defying the
economic recession. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Interest in our products for the application security market is also growing. Application security includes all
customer-facing, non-banking online applications. This market could be defined as the combination of B2B and B2C e-commerce and e-business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">In the past, we had one major source of income, the banking sector. After the crisis, we expect to have steady revenue streams from banking, enterprise security and application security. As you may know, VACMAN Controller is the core of our
server product line. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Identikey is our robust and comprehensive authentication server which supports all authentication technologies,
including VASCO&#146;s recently announced PKI product range. Our PKI range currently consists of the CertiID software solution and the growing DIGIPASS Key product family. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Thanks to these investments in R&amp;D, we are now competitive in mid and large enterprise opportunities that were previously out of our reach. The proliferation of VACMAN and the growing popularity of
Identikey are opening up many opportunities for cross and up-selling for VASCO. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Thanks to Identikey, we are now competitive in large
enterprise opportunities. In the last few quarters, Identikey has allowed us to win several competitive deals in mid-sized and large enterprises. Enterprise security authentication includes employee remote access, network security and Web security.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">VASCO has evolved into a true end-to-end authentication company, spanning the entire range between employee security and consumer security,
based [on one unique] VACMAN platform. Consumer security, including our banking and application security markets, is tackled via our own sales force and our own competence centers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">VASCO competence centers bundle all the Company&#146;s competence in one vertical market such as online gaming. By creating competence centers, we enhance our dominance in new verticals, building upon our
expertise and the skills of our people. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employee security is covered by our enterprise security business. As you know, VASCO tackles the
enterprise security market via a two-tier metric of distributors and resellers. We keep investing in new products for enterprise security and we focus [sternly] on the quality of our channel. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our SEAL training academy does a tremendous job in training and certifying our channel partners&#146; engineers by creating authorized training centers and
much more. I conclude, ladies and gentlemen, by acknowledging that the three first quarters of 2009 were not the easiest in the Company&#146;s history. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Nevertheless all three quarters were profitable and I am convinced that when the economy picks up again; the skills of our people, our investment in best-of-breed products and services and the right
business strategy and execution will make VASCO even stronger than before. Thank you. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2"><B><I></I></B><B>Ken Hunt</B><B><I> - VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Thank you, Jan. At this
time, I would like to introduce Cliff Bown, VASCO&#146;s EVP and Chief Financial Officer. Cliff? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Cliff Bown</B><B><I> - VASCO Data
Security International - EVP and CFO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Thanks, Ken, and welcome to everyone on the call. As noted earlier by Ken, revenues for the third
quarter of 2009 were $22.1 million, a decrease of $17.6 million or 44% from the third quarter of 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">For the first nine months, revenues
were $69.8 million, a decrease of $34.2 million or 33% from the comparable period in 2008. The decrease in revenue for the third quarter reflected significant declines in revenues from both the banking and enterprise and application security
markets. The decrease in revenue for the first nine months reflected a significant decline in revenues for the banking market, partially offset by an increase in revenues from enterprise and application securities market. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Revenues for the banking market decreased 49% and 41% for the third quarter and first nine months of 2009 respectively when compared to the same periods in
2008. Revenues from the enterprise and application security market decreased 20% for the third quarter and increased 2% for the first nine months of 2009 respectively when compared to the same periods in 2008. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">It should be noted that the comparison of revenues was negatively impacted by the stronger US dollar in 2009. We estimate that revenues in the third quarter
and first nine months of 2009 were approximately $600,000 and $4.3 million lower respectively than they would have been had the exchange rates in 2009 been the same as in 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The percentage of revenue coming from the enterprise and application security market whose average gross margin as a percentage of revenue is generally 20 to 30 percentage points higher than the gross
margin from the banking market has increased in 2009 when compared to 2008. The distribution of our revenue in the third quarter of 2009 between our two primary markets was approximately 75% from banking and 25% from enterprise application security.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">This compares to 83% from banking and 17% from enterprise and application security in Q3 of 2008. For the first nine months of 2009, 73% of
our revenue was from banking and 27% was enterprise and application security and compares to 82% from banking and 18% from enterprise and application security for the first nine months of 2008. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our revenues continued to come predominantly from outside the United States. The geographic distribution of our revenues in the third quarter was
approximately 77% from Europe, 9% from the United States, 6% from Asia and the remaining 8% from other countries. The geographic distribution of our revenue for the first nine months of 2009 was approximately 73% from Europe, 6% from the United
States, 9% from Asia, and the remaining 12% from other countries. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Gross profit as a percentage of revenue for both the third quarter and
first nine months of 2009 was approximately 70%. In 2008, gross profit as a percentage of revenue was also 70% for both the third quarter and first nine months of the year. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">As there were no material changes in the gross profit as a percentage of revenue, there were no material changes in the underlying components driving our gross margins. For example, our non-hardware
revenues were between 23% and 24% of total revenue for each of the three and nine-month periods in 2009 and 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">While the mix of products
sold in the third quarter and first nine months of 2009 reflected an increase in card readers sold as a percentage of total revenue when compared to the same periods in 2008, the impact of the increase in readers sold was offset by improved margins
and non-reader hardware products sold. Revenues from card readers were approximately 18% of our revenue for both third quarter and first nine months of 2009 and compared to approximately 13% and 16% respectively for the comparable periods in 2008.
As noted on previous calls, our card reader product line has lower margins due to competitive pricing pressures. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Operating expenses for the
third quarter of 2009 were $13.4 million, a decrease of $3 million or 18% from the third quarter of 2008. Operating expenses for the first nine months of 2009 were $40.8 million, a decrease of $6.2 million or 13% from the same period in 2008.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The comparison of operating expenses in 2009 to 2008 was positively impacted by the stronger US dollar in 2009. We estimate that expenses
were $900,000 and $4.3 million lower for the third quarter and first 9 months respectively than they would have been had the exchange rates in 2009 been the same as in 2008. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Operating expenses for the third quarter of 2009 included $484,000 of expense related to stock based
incentive plans. For the first nine months of 2009, operating expenses included a benefit of $785,000 related to stock-based incentive plans. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">As noted in our first quarter conference call, we reversed approximately $2 million of accruals that had been established in prior years for our long-term incentive-based compensation plan where it is no longer likely that the performance
targets will be met. Stock-based incentive plans expenses in the third quarter and first nine months of 2008 were $811,000 and $2,284,000, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">For the third quarter, including the benefit of currency, operating expenses decreased by $2.1 million or 24% in sales and marketing, decreased by $236,000 or 8% in research and development, and decreased
by $610,000 or 14% in G&amp;A when compared to the third quarter of 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The decrease in sales and marketing expense primarily reflected the
benefit of the change in exchange rates, lower compensation expenses, lower marketing expenses and lower travel expenses. The decrease in research and development expense primarily reflected the benefit of the exchange rates, partially offset by an
increase in average headcount. The decrease in general and administrative expenses primarily reflected the benefit in exchange rates, lower recruiting expenses, lower insurance expenses, lower professional fees, partially offset by an increase in
depreciation expense and an increase in average headcount. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">As a result of our investment in new staff throughout 2008, our average total
headcount in the third quarter of 2000 was 16 persons or 6% higher than the average headcount in the third quarter of 2008. The increase in average headcount included an increase of 12 persons in research and development and four persons in general
and administrative staff. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">For the first nine months of 2009, operating expenses decreased by $3.8 million or 15% in sales and marketing,
$431,000 or 5% in research and development and $1.8 million or 15% in general and administrative when compared to the same period in 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">In
addition (inaudible) the reasons noted for the changes in the third quarter, the decreases in expense for the first nine months reflected the benefit from the reduction in stock-based incentive compensation plan expense as previously noted. In
addition, the reduction in expense was partially offset by an increase in our average headcount in all areas. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our average headcount for the
first nine months of 2009 was 15 persons or 10% higher in sales and marketing and operations staff, 16 persons or 21% higher in R&amp;D staff and 10 persons or 26% higher in general and administrative staff. Operating income for the third quarter of
2009 was $2 million, a decrease of $9.5 million or 83% from the $11.4 million reported for the third quarter of 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">For the first nine
months, operating income was $8 million in 2009, a decrease of $18.3 million or 70% from the $26.3 million reported in 2008. Operating income as a percent of revenue or operating margin was 8.8% in the third quarter and 11.5% for the first nine
months of 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">In 2008, our operating margins were 28.8% for the quarter and 25.3% for the first nine months. While we have benefited from
our cost containment actions, the decrease in operating margin reflects the fact that we have continued to maintain our investments that we made in our infrastructure in 2008 that will be needed to support future growth. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Company reported income tax expense $1 million for the third quarter and $2.9 million for the first nine months of 2009. The effective tax rate was 40%
and 29% for the third quarter and first nine months of 2009 respectively. For 2008, the Company reported income tax expense of $1.8 million for the third quarter and $5 million for the first nine months. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The effective tax rate reported for 2008 was 16% for the third quarter and 19% for the nine-month period ended September&nbsp;30. The effective tax rates
for both 2009 and 2008 reflect our estimate of the full-year tax rate at the end of the third quarter in each period. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">In both periods,
adjustments were made in the third quarter to reflect the change in estimate for the full-year tax rate. The increase in the tax rate in 2009 compared to 2008 is primarily attributable to a reduction in pre-tax profit. Under our current structure,
our effective rate will be very sensitive to the level of pre-tax income. As pre-tax income increases, we expect the effective rate to decline; and as pre-tax income decreases, the effective rate will increase. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Earnings before interest, taxes, depreciation and amortization, EBITDA or operating cash flow if you will, was $3.3 million for the third quarter and $11.9
million for the first nine months of 2009. EBITDA was $8.1 million or 71% lower in the third quarter and $16.5 million or 58% lower for the first nine months than in the first nine months of 2008. The reduction in EBITDA primarily reflects the
reduction in earnings. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The makeup of our work force as of September&nbsp;30, 2009 was 294 people worldwide with 156 in sales,
marketing and customer support; 93 in research and development and 45 in general and administrative. As noted previously, the average headcount for the third quarter was 16 persons or 6% higher than the average headcount for the third quarter of
2008 and the average headcount for the first nine months of 2009 was 41 persons or 16% higher than the average headcount in the same period of 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">Our strong cash and working capital balances continued to increase during the third quarter of 2009. As of September&nbsp;30, 2009 our net cash balance which is defined as total cash less bank borrowings was $71.2 million, an increase of
$3.6 million or 5% from $67.6 million at June&nbsp;30, 2009; an increase of $13.5 million or 23% from $57.7 million at December&nbsp;31, 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">As of September&nbsp;30, 2009 our working capital balance was $83.3 million, an increase of $3.4 million or 4% from $79.9 million at June&nbsp;30, 2009 and an increase of $7.4 million or 10% from $75.9 million at December&nbsp;31, 2008. We
had no debt outstanding during the quarter. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">During the quarter, our day sales outstanding and accounts receivable increased to 85 days as of
September&nbsp;30, 2009 from 65 days at June&nbsp;30, 2009 and from 79 days at December&nbsp;31, 2008. The increase in DSO was primarily related to the timing of when sales were made in the quarter. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Thank you very much for your attention. I would now like to turn the meeting back to Ken. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Thank you, Cliff. Summing up, we expect to be profitable for the full year 2009 through focus and execution. We will continue to invest in our marketing activities, our people and our infrastructure while
containing our costs. In light of the continued uncertainty in the market, VASCO will continue to temporarily discontinue providing annual guidance. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">At this time, we will open the call for your questions. Operator? </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><FONT STYLE="font-family:ARIAL" SIZE="2">QUESTION AND ANSWER</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"> </FONT></B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">(Operator Instructions) Brian
Freed, Morgan Keegan. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Brian Freed </B><B>-</B><B><I> Morgan Keegan&nbsp;&amp; Co., Inc. - Analyst </I></B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Real quick, when you look at your customers, can you talk about where you think in the recovery cycle a stepped-up investment in strong authentication comes?
Particularly with your product, do you see them conserving more of an infrastructure function or a marketing function? Just kind of wanting to understand where you guys would play in the recovery cycle. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt</B> <B><I>- VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Jan, would you like to address that question. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Jan Valcke </B><B>-</B><B><I> VASCO
Data Security International - President and COO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">I&#146;m sorry (inaudible) the line was so bad. Could you maybe repeat the question?
</FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B> <B><I>VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Brian, do you mind repeating the question? </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Brian Freed </B><B>-</B><B><I>
Morgan Keegan&nbsp;&amp; Co., Inc. - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sure, at what point in an economic recovery scenario do you see authentication coming
into play? I&#146;m just trying to understand if you think it is a leading function or somewhat of a lagging function? </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Jan Valcke </B><B>-</B><B><I> VASCO
Data Security International - President and COO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Yes, thank you for repeating that. So basically in the enterprise security, which we
could define as security for employees, we see an increasing demand to secure business applications &#151; business applications, the ERP system, Salesforce.com and so on. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">So there we have developed a model that with one DIGIPASS, you can secure all your business applications, remote access; again, all those applications that those employees are using. That has been very
successful. It&#146;s thanks to the Identikey that we can now also tackle very large enterprises with that offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">So we see in detail an
increase. On the other hand, we also saw an increase in all those applications, gaming being one of it. Gaming has certainly not been hurt by the economical crisis but there are also other sources, security, distributors that are securing their
transactions with their customers. So in these both areas, we see really an increase in demand and also in execution. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO
Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Brian, I think it&#146;s also the fact that as the banks are coming out of
this economic issue or problem, they&#146;re starting to think more about rethinking their online banking projects and it&#146;s one of the reasons we are noticing more RFPs. These RFPs are consistent with supporting online banking applications
where strong authentication is required. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Brian Freed </B><B>-</B><B><I> Morgan Keegan&nbsp;&amp; Co., Inc. - Analyst </I></B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Okay, and you know on that same vein, can you talk a little bit more about the increases you&#146;re seeing in RFPs, if it&#146;s a particular vertical or
application? I think you hinted at it on the banking side but could you give a little more color? </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">7 </FONT></P>


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 <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2"><B><I></I></B><B>Ken Hunt </B><B><I></I></B><B>-</B><B><I> VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">Sure, Jan? </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Jan Valcke </B><B>-</B><B><I> VASCO Data Security International - President and COO </I></B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Well basically the crease in RFPs are in the banking industry. You need to see that a lot of businesses coming in without an RFP just on a purchase order.
It&#146;s only the large corporate and banks certainly that more and more are working to RFPs. So it is really in the banking industry. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO
Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">And there&#146;s another issue. There for a while we really weren&#146;t
seeing any large contracts, the volume purchase orders we call them, and that has picked up as well. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Brian Freed </B><B>-</B><B><I>
Morgan Keegan&nbsp;&amp; Co., Inc. - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Did you see the pickup in Q3 or are you seeing it subsequent in Q3? </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We saw it in Q3. We&#146;re actually starting to build some backlog for 2010. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Brian Freed </B><B>-</B><B><I>
Morgan Keegan&nbsp;&amp; Co., Inc. - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Good deal. Thanks. I&#146;ll cede the floor. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Joe Maxa, Dougherty. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Joe Maxa </B>-<B><I> Dougherty&nbsp;&amp; Company - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Ken, talking
about the increased RFPs &#151; and it sounds like you&#146;re expecting Q4 to be, based on the language, up sequentially. No guidance, but can you give us an idea how Q4 is shaping up so far versus Q3 and then how backend it typically is, how
backend loaded the quarter typically is? </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B>-<B><I> VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">In terms of the month of October this year compared to the month of October last year, we are up. I won&#146;t give you a percentage but we are up very
nicely. Jan, do you have any thing else you would like to add there? </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Jan Valcke </B>-<B><I> VASCO Data
Security International - President and COO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Well you see, without giving the real numbers, we see basically a decrease in order intake
during the last months. And since September, the order intake is picking up again very strongly, I should say. And we see also continuation in October. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">And I should add
one more thing. You remember when we were giving guidance, we would go into a quarter and we would talk about backlog. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">We could always rely
on a certain percentage of additional revenue coming in to add to that backlog. And it wasn&#146;t a huge number. Because the banks particularly are ordering in smaller quantities and more often, we find that we enter a quarter with not nearly as
much firm backlog but is created during the quarter. So in terms of loading, it&#146;s probably mid and later in the quarter that the revenues come in and are accounted for. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Joe Maxa </B><B>-</B><B><I> Dougherty&nbsp;&amp; Company - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">All
right, let me ask on the operating expense side. Q3 numbers sequentially were down pretty significantly a couple million dollars. Can you just address how you got those to that level from Q2? </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Cliff? </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Cliff Bown </B><B>-</B><B><I> VASCO Data Security International - EVP and CFO </I></B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Most of those dollars you would see are in the sales and marketing area and we have a very large portion of our staff in sales and marketing in the European
region. That being their heavier holiday period, there was a lot more focus on those people taking their vacations during that time period. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">So we didn&#146;t have their salary expenses. Also with revenues down, there were lower commission expenses, lower sales bonuses paid during the quarter, lower travel expenses and lower marketing expenses, tradeshows and those kinds of
things within the sales and marketing group. So Jan and his team really cut back in Q3 on those activities given both the holiday schedule and the economic environment. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Joe Maxa </B><B>-</B><B><I> Dougherty&nbsp;&amp; Company - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">So
the Q2 level is more of a normal level to think about? </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Cliff Bown </B><B>-</B> <B><I>VASCO Data Security International - EVP and CFO </I></B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">I would expect so, yes. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Joe Maxa </B><B>-</B><B><I>
Dougherty&nbsp;&amp; Company - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Last for me, the gross margins. If you&#146;re banking is picking up, we should expect gross
margins to tick down? </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Cliff Bown </B><B>-</B><B><I> VASCO Data Security International - EVP and CFO </I></B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">I would expect them to be under pressure, yes, and tick down a little bit if the percentage of revenue coming from the banking versus enterprise security
increases again. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Andrew Abrams, Avian Securities.
</FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Andrew Abrams </B><B>-</B><B><I> Avian Securities - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Can you talk
a little bit about the enterprise business and what you are seeing there? That business hasn&#146;t been affected I guess to the extent that the banking business has. Are you seeing any signs of life from the enterprise side specifically or is it
kind of just dead as it has been for the last couple of quarters? </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B> <B><I>VASCO
Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jan, again, address that please. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2"><B><I></I></B><B>Jan Valcke -</B><B><I> VASCO Data Security International - President and COO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Yes, we see &#151; first of all
if you look at the numbers, the percentages, you will see that the US is picking up. Again, the US has a large part of its business coming from enterprise security and application security. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">So, we can say that has two reasons. The first of all is the introduction of a new suite of products with the Identikey which gives us openings to larger
enterprises. And secondly, it&#146;s also that the economic climate is getting better. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">I expect that we see that also in the trends, that
that trend will continue outside US also. So primarily first of all, our new product range that makes it sure that we can go to larger enterprises and also the economic climate is getting better and better for that market. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Daniel Ives, FBR Capital Markets. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Daniel Ives </B>-<B><I> FBR Capital Markets - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Just a quick
question. In regard to just deal sizes, when you (inaudible) your RFPs and there&#146;s new existing customers, I mean if you think about that trend, is it to continuing to increase sequentially and maybe even year over year? </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In terms of deal size, Daniel? </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Daniel Ives </B><B>-</B><B><I> FBR
Capital Markets - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Yes, just in terms of the potential deal sizes on the RFP, the potential revenue implications. Are you
starting to see the bigger deals (multiple speakers) on the RFP both within the installed base but also in the new customers if you just think about it sequentially? </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I>
VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Yes, I would say that in terms of the existing customers, for the most
part they&#146;re still operating as they have for the last three or four quarters and that&#146;s smaller orders but much more often. In terms of the size of the RFPs, Jan, would you like to comment about that? </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Jan Valcke </B><B>-</B><B><I> VASCO Data Security International - President and COO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The RFPs are coming from prospects. So not so much from our existing customer base and the deals can be seen as large. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Scott Zeller, Needham&nbsp;&amp; Co. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Scott Zeller </B><B>-</B><B><I>
Needham&nbsp;&amp; Company - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Could you tell us if in the new deal activity you are seeing with RFPs if the makeup of the
technology that the larger banks are looking at has changed? For instance, is there movement towards soft key and away from token based authentication? </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Well, we have
always had an attitude of offering a wide variety of products and we have had what amounts to the soft token available for three years. So we have been ready for market acceptance or adoption for a long time. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Certainly as the phones become more intelligent and you are basically downloading a little application to the phone, it is going to become more popular and
we&#146;re planning for it and we are seeing it. Our business for soft tokens or tokens that go onto a BlackBerry or an iPhone or any kind of intelligent phone, those revenues are up rather dramatically and we expect them to continue. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">I have said this before and I will continue to maintain this position unless I see something dramatically change, we think that in many cases, the customers
do like a personalized calculator called the DIGIPASS. And we have always manufactured for our larger customers, banks and now gaming companies, the DIGIPASS model that they choose. We manufacture it in their corporate color and with their logo and
they actually use it as a brand for whatever application they are offering. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Andrew Abrams </B><B>-</B><B><I>
Avian Securities - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">It sounds like you would characterize the typical large customer though as still being hardware focused.
</FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Certainly on the banking side, as an example with the man in the middle attacks, a simple one-time password is not sufficient. And so in many of the banks applications, the banks buy our product that has
a keypad on the calculator so that they can generate an electronic signature. That same functionality in terms of software can be made available through a soft token, a DIGIPASS soft token on a cell phone. Again it does one-time password and it also
generates a signature based upon the instructions that are being sent to the banks so that if it&#146;s intercepted, if those instructions are intercepted in the Internet and modified in any way, the bank on the other end will not be able to
generate a signature that matches the user&#146;s signature. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Andrew Abrams </B><B>-</B><B><I> Avian Securities - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Okay and two quick ones then. Any 10% customers in the quarter and could you give us some guidance on the tax rate, just rough guidance even? </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Cliff Bown </B><B>-</B><B><I> VASCO Data Security International - EVP and CFO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">Yes, there were no 10% customers in either the quarter or on a year-to-date basis in 2009. The percentage of revenue coming from that top 10 group of customers continues to decline. In Q3 it was 39% this year versus about 53% last year.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">On a year-to-date basis, 36% this year versus 46% last year. In terms of the tax rate, the best guidance I can give you is look at the
year-to-date full year or year-to-date effective tax rate because that&#146;s our best estimate of the full-year effective tax rate. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">That tax
rate will be sensitive to continued changes in the fourth quarter&#146;s earnings. If earnings are higher than we expected in the fourth quarter, we&#146;ve got the potential for that tax rate to come down a bit. If earnings are lower than we
currently expect, the tax rate has the potential to go up a bit. But 29% is our best estimate for the full year as we stand here today. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Martin Yokosawa, Tory Asset Management. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Martin Yokosawa </B><B>-</B><B><I>
Tory Asset Management - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Glad to see that things are picking up. Could you tell me &#151; people are talking about double dip
recession. Would you see would cause a double dip in the banks, the continuation of increasing order size or just the business climate in general? In particular, I'm worried about the Eastern Bloc banks and the effect on the Western banks.
</FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">So, Martin, your question is should we expect a temporary uptick with the banks and then a downtick, is that your question? </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;
</FONT></P>
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 <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2"><B><I></I></B><B>Martin Yokosawa </B><B>-</B><B><I> Tory Asset Management - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">What would cause it, I guess? What do you
see would cause it? Again, one of the worries that I am hearing from this side of the pond is that some Western European banks have some undisclosed holdings in Eastern European banks that are having some difficulties and then I just hope it
doesn&#146;t slow things down going forward. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jan, would you like to comment about that? You are closer to that. I know that I saw last night that ING was being broken up into a smaller bank. I think
that&#146;s probably longer-term healthy for that bank and maybe other banks will follow suit. As far as issues in Eastern European banking community, I&#146;m not aware of it. Jan, have you heard anything? </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Jan Valcke </B><B>-</B><B><I> VASCO Data Security International - President and COO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Okay, well we need to make of course the difference here between the European Community countries, where the European Community has stated that the local states, the local countries could help the local
banks and afterwards that the European community would justify that help in the banks. Basically, to what does it come down regarding our business is that European Community is saying bankers, please go back to your core business to banking loans,
savings and so on. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">And basically I think that&#146;s good news for VASCO because that means that their focus is growing. I will not say
(inaudible) because it is already there &#151; is going to increase static accounts to more electronic banking accounts. They go back really to their core business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Now what do we see is that probably there will be some banks becoming largest in niche markets and mainly that&#146;s probably the banks that did not receive help from their states. It will not become
huge bank, it will just become large banks in a niche market, whatever that may be. And secondly, we see general banks that were large and operating several countries, when they have received help of the European Community that they need to go back
to their core business to split insurances with the banking business and so on. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">But basically, I don&#146;t think that will hurt our
business. Contrarily, I think that will help our business because they need to go back to their core business, being a traditional banker and that means for us increasing electronic accounts. In Eastern Europe, there are &#151; traditionally there
was an enormous peak in the banking industry the last years. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">There has been some seriously downsizing in those Eastern banks. But again, what
do we see again? We see again that those banks are investing seriously in electronic banking programs, that they are increasing because it&#146;s a matter of cost savings. You may not forget that the crisis is basically good for our business because
the bank is going to need to invest in much more automatization. I&#146;m not aware that banks will have financial difficulties that they could not purchase any more our products or that they would go bankrupt. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Ignatius Njoku, Jefferies&nbsp;&amp; Co. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ignatius Njoku </B><B>-</B><B><I> Jefferies&nbsp;&amp; Company, Inc. - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">First can you talk about what you are seeing from the emerging markets? Are you seeing any strength in any particular country? </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO
Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jan, would you like to address that, please? </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Jan Valcke </B><B>-</B><B><I> VASCO Data Security International - President and COO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Yes, we see in this emerging markets, there a lot of emerging markets (inaudible) we have in the traditional term of economical (inaudible) Brazil, Russia India and China. We see that this emerging
markets has been the last quarter much more cautious, even in some of those countries who are not really &#151; like China, not hurt by the economical crisis, not hurt by the financial crisis. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">We see that they were very cautious, that they delayed. But see also now and that&#146;s one of the things
that we see in the increase of our RFPs, that probably those markets will increase their investment in electronic banking in the next quarters and years. Then you have the smaller emerging markets and I believe there again, we will see an increase
in investments in electronic banking projects. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">(Operator Instructions) Rob Owens,
Pacific Crest. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Rob Owens -</B> <B><I>Pacific Crest Securities - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Can you just give us a sense or some color around what the pricing delta is between a soft token and a hard token right now? </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Well as you know, Rob, our pricing has always been based upon volumes, volume pricing. And there&#146;s a lot of elasticity even in the physical hard token, the DIGIPASS hard token, in terms of the price
per unit if you&#146;re selling 50 versus the price per unit if you are selling 500,000. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The same holds true for the soft token. We price it
based upon the volumes. It is less expensive than a hard token and it&#146;s almost all margin. So I would say the best way to think of it is it&#146;s driven by the number of units that a customer will commit to over a period of time. </FONT></P>
<P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Rob Owens </B><B>-</B><B><I> Pacific Crest Securities - Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">I
understand but if we took a comparable number of units, is there any 10, 20%, 30% typical discount between a hard token and a soft token? </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO
Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">I don&#146;t know that there is a particular percentage, no. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Jan Valcke </B><B>-</B><B><I> VASCO Data Security International - President and COO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Maybe I can give you some answer, if you permit. Basically our price is based on a user license price on the VATMAN controller/Identikey/Identifier. So let&#146;s say that more and more of our margins are
at the infrastructure side. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Now at the client side with what we call DIGIPASS, you really need to see DIGIPASS as an e-signature software
product, a software product. Once it is embedded in our own hardware platform, then we can call it a token. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Secondly it can be on a mobile
telephone, it can be software and so on and so on. So basically on the DIGIPASS side where we have it differentiated between hardware and software, you really need to see margin-wise basically we make more or less the same money on a software-based
[divide] as on a hardware-based [divide]. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Gentleman, it appears that there
are no further questions from our audience. Mr.&nbsp;Hunt, I&#146;ll return the presentation to you once again. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><B>Ken Hunt </B><B>-</B><B><I> VASCO
Data Security International - Chairman, Founder and CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">All right, well thanks everybody for participating. Thank you for your
attendance today. I look forward to your participation in the next earnings conference call for Q4 2009. Thanks to the VASCO people worldwide for their continued hard work and their efforts. We appreciate it very much. Good day, everybody.
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Thank you, Mr.&nbsp;Hunt. Ladies and gentlemen, that does conclude the conference call for today. We thank you all
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